Though Sohu's (SOHU) US$23.73 million Q1 2005 revenue exceeded the company's guidance, it was a decline compared to revenues of US$24.07 million for the fourth quarter ended December 31, 2004, and US$25.94 million for the first quarter ended March 31, 2004.

Gross margin of 68% in Q1 2005 was unchanged from the previous quarter and slightly up from 67% in Q1 2004.

Net income for the first quarter of 2005 was US$5.71 million or US$0.15 per fully diluted share. This compares to net income of US$6.50 million or US$0.17 per fully diluted share for the fourth quarter of 2004 and US$10.93 million or US$0.27 per fully diluted share for the first quarter of 2004.

Sohu's advertising revenue for the first quarter of 2005 totaled US$14.86 million, a 35% year-on-year improvement and 6% decline quarter-on-quarter. Advertising revenue, consisting of US$12.13 million in brand advertising and US$2.73 million in sponsored search, accounted for 63% of total revenues in the first quarter of 2005. Advertising gross margin was 76%, compared to 80% in Q4 2004 and 75% in Q1 2004.

Charles Zhang, Chairman and CEO of Sohu said, "Despite seasonal weakness in online advertising due to the Chinese New Year holidays in February, advertising and sponsored search sales performed strongly relative to our expectations. Wireless business has turned the corner with quarterly sequential revenue growth exceeding our expectations, indicating that we have left last year's transitional and regulatory issues behind us. As a result, we believe Sohu's first quarter results put us on firm ground for a good business year. I am particularly pleased to note that quarter-on-quarter sponsored search revenue achieved some growth while search traffic doubled."