Chinese Internet portal Sohu.com yesterday said revenue for the fourth quarter rose by 27 per cent year-on-year and 8 per cent quarter-on-quarter to US$30.50 million.
This strong growth beat previous expectations and drove up the firm's stock on the US NASDAQ exchange by almost 10 per cent.
This means the firm recorded a rise in revenue of 5 per cent for the whole of last year, although profit fell by nearly US$6 million.
Net profits in the fourth quarter reached US$8.9 million, or 23 US cents per diluted share, beating a previous estimate of 19-22 US cents a share.
"Our solid fourth quarter financial results, which have exceeded guidance during a seasonally weak quarter, demonstrate the strength and momentum in our business," said Charles Zhang, chairman and chief executive officer of the Beijing-based firm.
Sohu's advertising revenue, which is one of the biggest in the business, rose by 28 per cent compared to the same period of 2004 to US$20.30 million, boosted by the increasing popularity of Sohu's websites.
Zhang said in a conference call that Sohu's portal had "significantly" narrowed the gap between it and the top Chinese Internet portal Sina.com, which is also listed on the NASDAQ.
According to Internet traffic monitoring websites, the number of people clicking onto Sohu.com last month was 87 per cent of those who favour Sina, up from 72 per cent last September.
Sohu's non-advertising revenue amounted to US$10.2 million, with a 7 per cent growth over the third quarter. This is mainly because of its wireless messaging business.
The company's multimedia messaging service was suspended by the country's dominant mobile operator China Mobile in 2004, a move that dealt a heavy blow to Sohu's wireless business.
The service was resumed in August last year and, since then, Sohu's wireless services, such as ring tone downloads, have been improved.
Sohu's total 2005 revenue was US$108.3 million, but net profits fell to US$29.8 million from US$35.60 million.
The company received US$2.4 million from other income sources, including US$1.2 million from the repurchase of its convertible bonds and US$1.2 million from tax exemption and refunds.
Jim Sun, an Internet analyst with London-based Evolution Securities, said Sohu's performance was reasonable.
"The momentum is quite good and continuous, especially with the boost in advertising from Sohu's sponsorship of the Beijing Olympic Games in 2008," he said.
The firm became an official sponsor in November and is responsible for building and running the official website for the organizing committee.
But Sun said Sohu's marketing expenses have also grown quickly.
Sohu's Zhang expected revenue for this quarter to be between US$28 million and US$30 million, with advertising revenue between US$19-20 million. Non-advertising revenue is expected to be between US$9-10 million.
The diluted earnings per share are estimated to be between 14 and 16 US cents.
Sohu's major competitors, Sina and NetEase, are expected to report their financial results later this month.