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An interesting situation between Sohu.com (NASDAQ:SOHU) and Sina (NASDAQ:SINA) the past few quarters. Despite having far better financial growth and metrics, Sohu has lagged Sina because the latter owns Weibo. Must be frustrating.

This morning Sohu.com reported another excellent quarter of 36% revenue growth, and a non- GAAP EPS up 27% to $1.21. Of course if your income is rising slower than your revenue, expenses are surging - in this case 43% on a non GAAP basis. Doesn't seem to be a problem at Amazon.com (NASDAQ:AMZN) which reported lower earnings year over year but still gets rewarded by investors for "growing at all costs." Other companies are not as fortunate.

  • The increases in both GAAP and non-GAAP operating expenses were mainly due to increases in both headcount and average compensation and higher expenses associated with marketing activities in the second quarter of 2011.

Its two main business lines - gaming (51% of sales) and ads (34% of sales) both grew well, at 31% and 27%, respectively. Its search engine, Sogou, while less than 10% of sales, is growing rapidly at 252% year over year growth.

Even with an increase in guidance for Q3, the stock - after opening flattish - was being bludgeoned, but was coming in nicely to support. Generally companies who have nice earnings but are still punished are attractive purchases as they pull back to support (of course assuming the general market does not implode).

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Disclosure: No position.

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Source: Sohu.com Hit Hard Despite Solid Earnings Report