Sohu.com surges as tax windfall drives record quarterly profit

Sohu.com (NASDAQ:SOHU) reported a massive jump in fourth-quarter net income, as the Chinese internet pioneer benefited from a nearly $300 million tax reversal that masked ongoing softness in its core advertising business.

The Beijing-based company posted GAAP net income of $223 million for the quarter ended Dec. 31, 2025, a dramatic reversal from the $21 million loss reported in the same period a year ago.

The surge was almost entirely due to the reversal of $285 million in previously accrued withholding income taxes related to its gaming subsidiary, Changyou.

Total revenue grew 6% year-over-year to $142 million, led by a 10% increase in online gaming sales, which reached $120 million.

Despite the bottom-line boost, the company’s traditional media business remains under pressure.

Marketing services revenue fell 10% year-over-year to $17 million, reflecting a broader slowdown in China’s brand advertising market.

However, Chairman and CEO Charles Zhang noted that advertising saw a 25% sequential recovery from the third quarter, driven by innovative content events and improved algorithms on the Sohu media platform.

The company ended 2025 with a formidable cash pile of $1.2 billion, significantly exceeding its current market capitalization.

Management has been utilizing this liquidity to support shares, repurchasing $106 million of its $150 million buyback program through early February.

Looking ahead to the first quarter of 2026, Sohu provided a cautious outlook, forecasting a net loss between $10 million and $20 million as it faces a seasonal dip in gaming activity and continued macroeconomic headwinds in the ad sector.