Positive EBITDA reached two quarters ahead of schedule; positive cash flow from operations; record revenue growth of 35%; gross margins reach 49%

BEIJING, CHINA, July 17, 2002 - SOHU.COM (Nasdaq: SOHU), China's leading online media, communications and commerce company, today reported results for the second quarter ended June 30, 2002.

Business Highlights
· Positive EBITDA (Earnings before interest, tax, depreciation and amortisation) achieved, two quarters ahead of guidance
· Positive cash flow from operations for the first six months of 2002
· Revenues soar by 35% quarter-to-quarter and 113% year-on-year to US$ 6.13 million beating company guidance of US$ 5.1 million
· Gross margins jump from 36% to 49% quarter-to-quarter
· US GAAP net loss narrowed to US$ 870,000 from the first quarter's US$2.2 million, a record 61% sequential and 89% year-on-year improvement
· Advertising revenues, representing 55% of total revenues, jump by 34% quarter-to-quarter to US$3.36 million, a 51% increase year-on-year
· Non-advertising revenues grow quarter-to-quarter by 37% and 324% year-on-year to US$ 2.76 million through sustained conversion of SOHU's user base into consumers

"We are delighted that six months ahead of schedule, SOHU delivered its key financial milestone for 2002 with our first ever EBITDA positive quarter. We surpassed our goals with unprecedented business results. Alone among our peers, for the eighth consecutive reporting period, SOHU has attained double-digit quarterly sequential revenue growth, proving that our business model of diversified and balanced revenue from online advertising and consumer business is a sustainable growth strategy. This historic quarter underscores SOHU's outstanding ability to translate the potential of the dynamic Chinese Internet market into positive returns," said Charles Zhang, CEO and President of SOHU.COM.

SOHU reported record revenues of US$6.13 million for its second quarter ended June 30, 2002, a quarterly sequential increase of 35% over the US$4.5 million booked in Q1 2002 and 113% year-on-year. Gross margins improved to an unprecedented high of 49%, up from 36% in the previous quarter. US GAAP (Generally Accepted Accounting Principles) net loss totaled US$870,000 or US$0.02 per share for the second quarter of 2002, a narrowing of 61% from US$2.2 million in the first quarter and 89% year-on-year. Business Results
With SOHU's revenues from advertising and consumer business growing at a robust pace in the second quarter, the Company is quickly realizing its goal of building a sustainable and diversified business model on two strong pillars: a steadfast home-market corporate advertising base and a massive, paying user population.
For the second quarter of 2002, SOHU's advertising revenues at US$3.36 million were up 34% from US$ 2.51 million in Q1 2002, beating company guidance by US$0.56 million. Advertising revenue gross margins reached an unprecedented high of 56%, up from 42% in the first quarter.

The World Cup was instrumental in strengthening the base of online advertising, allowing SOHU to reach all-time high advertising revenues. SOHU continues to reap the benefits of educating Chinese companies about the value of online advertising. Domestic advertising clients provided an 81% share of advertising revenue. For the first time, SOHU's ten largest advertisers during the quarter consisted only of domestic companies. New categories such as financial services, automobiles, fashion and sporting goods were added to SOHU's clientele, reflecting the widening appeal of online advertising on the SOHU website. Advertisers included leading companies such as IT company TCL, beverage company Ye Shu, financial institutions Fujian Development Bank and China Industry and Commerce Bank, and electronics manufacturer Amoisonic. International companies accounted for 19% of ad revenues, among them P&G, Volkswagen and Intel.

Advertising revenues were further boosted by the success of SOHU.NET, a marketing platform for small and medium sized enterprises (SME) that represent a new segment of corporate advertisers. SOHU.NET provides its clients cost-effective and efficient ways to conduct business online, market their product and reach targeted audiences. "The tremendous support SOHU has received from our corporate advertisers combined with the strong implementation of SOHU.NET gives us confidence that the online advertising industry in China has been elevated to a higher level that can be maintained," explained Victor Koo, COO of SOHU.

SOHU's business strategy of monetizing its vast user base continued to pay off, with non-advertising revenues contributing 45% of total revenues in Q2 2002. Non-advertising revenues consisting mainly of e-subscriptions (short messaging and premium services) and e-commerce sales, have become a sustainable and recurring source of revenue, growing 37% from the prior quarter's US$2.02 million to US$2.76 million in Q2 2002. Non-advertising revenue gross margins reached a record high of 42%, up from 28% in the first quarter.

"Building a successful business in the Chinese Internet industry no longer relies exclusively on the online advertising market. Via both PC and wireless devices SOHU's users have become customers for paid services. For our short messaging products we targeting an already huge and still expanding market of 160 million mobile phone users. For our SOHU E-Store we are targeting 60 million current Internet users in a developing market. In Q3 of this year we will further expand our consumer businesses with the official launch of SOHUStock.com, an online securities trading web site, and our latest venture SOHU Online, an all-in-one platform for Internet access and content," explained Charles Zhang.

SOHU remains committed to profitability through revenue growth and controlled spending. Operating expenses excluding amortisation of intangibles in Q2 2002 were 10% lower than in Q2 2001, while revenues have soared 113% in the same period.

The Q2 2002 US GAAP net loss was reduced 61% sequentially from Q1 2002 to US$870,000, which represented an 89% year-on-year improvement from a net loss of US$7.6 million in Q2 of 2001. EBITDA (Earnings before interest, tax, depreciation and amortisation) for Q2 2002 was positive US$77,000 as compared to negative US$1.3 million in Q1, 2002 and negative US$3.1 million in Q2 2001. In the first six months ending June 30, 2002 the cash flow from operations was US$35,000, as compared to negative US$ 6.3 million in the corresponding period of 2001.

At June 30, 2002, SOHU's cash and marketable debt securities balance was US$41.4 million.

"Over the past 12 months through solid execution, SOHU has made tremendous financial progress resulting in us delivering positive EBITDA well ahead of plan. Our intelligent spending combined with strong revenue growth resulted in an impressive US$1.4 million improvement in EBITDA from the previous quarter and a US$ 3.1 million EBITDA improvement from a year ago, providing us visibility to achieve full year profitability in 2003," commented Derek Palaschuk, Chief Financial Officer of SOHU.COM.

Strategic Initiatives
SOHU's strategic initiatives for 2002 aim to further expand the consumer business that the Company has developed successfully since early 2001.

SOHUStock.com
Online securities trading services will be available on the web site SOHUStock.com in the third quarter. In April 2002, SOHU teamed up with Guolian Securities Ltd. to provide online securities trading services and other value-added financial services, targeting the high growth financial sector in its early stage of development. By becoming the only portal in China to offer these financial services, SOHU has taken a logical next step in its consumer business strategy, further differentiating the SOHU brand from the competition.

SOHU Online
SOHU launched its online Internet Service Provider services in early Q3 and offers bundled Internet access and content to its users in Beijing. This initiative, aimed at expanding SOHU's paying subscriber base, will further deepen the customer relationship with online users. An all-in-one destination for Chinese Internet users, SOHU Online (SOL) offers a personalized browser free of advertising, with a faster and more secure connection, and comprehensive interactive information and communications.
"The consumer business development is the central tenet of our corporate strategy for 2002. Our core assets are our more than 50 million registered users and their trust in the SOHU brand. SOHU's proven ability in converting users into customers, as evidenced yet again this quarter by the strong performance of SOHU's consumer business, adds to our compelling track record of success," said Charles Zhang.

Management Promotions
The Company also announced today the promotion of three members of its senior management team. Jianjun Wang, formerly Director of SOHU.NET, has been promoted to Vice President, SOHU.NET. Jinmei He, formerly Director of SOHU Online, has been promoted to Vice President, SOHU Online. Kevin Li, previously Director of Media Operations, has assumed the position of Vice President, Media Operations and Government Relations.

Business Outlook
SOHU is confident that it can sustain its revenue growth momentum and controlled spending to maintain positive EBITDA in the second half of 2002. The company maintains its guidance to achieve full year profitability in fiscal 2003.

For the third quarter of 2002, SOHU provides guidance as follows. SOHU expects total revenues for Q3 2002 to be US$6.7 million, with advertising revenues of US$3.3 million and non-advertising revenues of US$3.4 million. Gross margins in Q3 2002 are estimated to be similar to Q2 2002. EBITDA for the third quarter is expected to be unchanged from Q2. Third quarter US GAAP net loss is estimated to be not more than US$900,000 ($0.03 per share). Third quarter capital expenditures are expected to be US$1.2 million.

"We have shortened the path to profitability during the just concluded quarter. For SOHU, this achievement validates maintaining the commitment to our current strategic direction. Now more than ever, we believe that we have the edge over the competition not only in our brand and user base leadership, but also in our financial discipline and commitment to profitability," concluded Charles Zhang.

Safe Harbor Statement
This company's announcement contains forward-looking statements. It is currently expected the Business Outlook will not be updated until the release of SOHU's next quarterly earnings announcement; however, SOHU reserves the right to update its Business Outlook at any time for any reason. We may also make written or oral forward-looking statements in our periodic reports to the Securities and Exchange commission on forms 10-K, 10-Q, 8-K, etc., in our annual report to shareholders, in our proxy statements, in our offering circulars and prospectuses, in press releases and other written materials and in oral statements made by our officers, directors or employees to third parties. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. These statements are based on current plans, estimates and projections, and therefore you should not place undue reliance on them.

Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, SOHU's historical and future losses, limited operating history, uncertain regulatory landscape in the People's Republic of China, fluctuations in quarterly operating results, and the company's reliance on online advertising sales, e-commerce and e-subscriptions (mainly short messaging) for a significant portion of its revenues. Further information regarding these and other risks is included in SOHU's prospectus, 10K, 10Q and in its other filings with the Securities and Exchange Commission.

Conference Call
Live web cast of Q2 conference call on July 17, 2002, at 9:00 AM Hong Kong time (or 9:00 PM EST on July 16 in the United States) will be broadcast at
http://www.sohu.com/about/English/conference.html
Conference call dial-in details: TELEPHONE: from Beijing: 10-800-852-0607; from Hong Kong: (852) 2258-4002 or from within U.S.A.: (1-800) 365-8460; PASSCODE: 1528284, LEADER: Caroline Straathof.

About SOHU.com
SOHU.com is the leading Internet portal in Mainland China with current daily page views exceeding 12 million. It provides navigation/search, news, sports, business and finance, real estate channel, entertainment, chat, email and e-commerce activities for a solid and wide base of visitors. Dr. Charles Zhang founded SOHU.com in 1997. Its investors include Intel, Dow Jones, IDG, the Morningside China Group, PCCW, Legend and Hikari. Its content partners include CNET, DOW Jones and dozens of local media organizations in China.

For further information:
Dahlia Wei
SOHU Investor Relations and Communications
Tel: +86 10 6272 6598
E-mail: ir@sohu-inc.com
http://www.sohu.com/about/English/