Naver and Kakao, the two pillars of Korea's IT platforms, each posted record quarterly results in the third quarter of this year. Naver opened the era of 3 trillion won in quarterly revenue on the strength of integrating artificial intelligence (AI) into search and shopping. Kakao's quarterly operating profit topped 200 billion won for the first time, powered by growth in "Talk Biz," its KakaoTalk-linked advertising and commerce business, and its financial platform Kakao Pay.
On the 5th of this month, Naver said its third-quarter revenue on a consolidation basis was 3.1381 trillion won and operating profit was 570.6 billion won, up 15.6% and 8.6%, respectively, from a year earlier. Net profit for the period came to 734.7 billion won, up 38.6% from a year earlier.
Naver's search platform, which accounts for the largest share of revenue, posted 160.2 billion won in sales, up 6.3% from a year earlier. The results were driven by improved ad efficiency using AI, such as the AI ad solution ADBoost, and the expansion of the feed service. As AI-powered personalized recommendations strengthened, average daily users of the home feed surpassed 10 million. Commerce, encompassing Naver Shopping, also saw third-quarter revenue rise 35.9% on-year to 985.5 billion won. The impact was significant from advancing personalized experiences tailored to discovery and exploration within Naver Plus Store. In addition, the Fintech and content businesses posted double-digit revenue growth from a year earlier.
Kakao said on the 7th that it posted third-quarter revenue on a consolidation basis of 2.0866 trillion won and operating profit of 208 billion won. The figures were up 8.6% and 59.4%, respectively, from a year earlier. Net profit for the period was 192.8 billion won, up 145.6% on-year.
Revenue in the platform segment that includes KakaoTalk, Gift, and Kakao Pay was tallied at 1.0598 trillion won, up 12% from a year earlier. Within the platform segment, Talk Biz revenue came to 534.4 billion won, up 7% on-year. Talk Biz ad revenue was 325.4 billion won, up 11% from a year earlier. Platform other revenue, which includes Kakao Mobility and Kakao Pay, was 452.7 billion won, up 24% on-year. Revenue in the content segment, the other pillar of Kakao's business, was 1.0267 trillion won in the third quarter, up 5% from a year earlier. Music, which includes SM Entertainment and Melon, and media, which engages in video production and management, recorded 565.2 billion won and 95.8 billion won, up 20% and 75% on-year, respectively.
◇ Annual revenue this year seen at 12 trillion won for Naver, 8 trillion won for Kakao
On a full-year basis, Naver is expected to achieve revenue in the 12 trillion won range, while Kakao is expected to reach the 8 trillion won range.
According to FnGuide, Naver is projected to post 12.0523 trillion won in revenue and 2.1989 trillion won in operating profit this year. The figures are up 12.24% and 11.1%, respectively, from a year earlier. Net profit is forecast at 2.1342 trillion won, up 10.47% from a year earlier. Lee Jun-ho, an analyst at Hana Securities, said, "Naver is proving its growth by integrating AI into advertising and commerce," and noted, "In particular, with the introduction of AI Briefing, increased content consumption across the ecosystem has been confirmed, allowing for expectations of traffic growth and ad monetization going forward." AI Briefing is a system Naver launched in March to strengthen the competitiveness of informational search, and is an AI service that uses Generative AI to not only summarize search results but also recommend and connect content. More than 30 million people are using the service.
In Kakao's case, it is projected to record 8.0482 trillion won in revenue and 642.5 billion won in operating profit this year, up 2.24% and 39.61%, respectively, from a year earlier. Kakao expects the advertising segment to grow more than 10% on-year in the fourth quarter, and also expects growth in commerce as Chuseok sales are reflected in the fourth quarter. Kakao Mobility and Pay are expected to continue revenue growth and expense efficiency. However, in the content segment, games are projected to contract due to a gap in new releases, and music is expected to see negative growth due to seasonal off-peak factors.
◇ Evolving into an AI agent platform
Both companies signaled they will go all-in on AI.
While search has been the most representative part of Naver's identity, the company now plans to evolve from a "search-centered platform" into an "AI agent platform" that understands user intent and takes actions directly. In the first quarter of next year, Naver will launch a shopping agent in the AI shopping service "Naver Plus Store," and in the second quarter it plans to unveil "AI Tab," where integrated search evolves based on AI agents. Next year, it also plans to release "Agent N for Business," an AI solution for businesses. It also fleshed out investment plans for physical AI. Kim Hee-cheul, Naver's chief financial officer (CFO), said, "This year, total infrastructure investment, including GPUs, is expected to be around 1 trillion won, and considering the expansion into new businesses such as a push into physical AI after 2026, investment in GPUs alone is expected to exceed 1 trillion won."
Kakao also made clear that the AI service the company ultimately aims to introduce is agentic AI. As part of this plan, Kakao this year launched two AI services, "Kanana in KakaoTalk" and "ChatGPT for Kakao." Chung Shin-a, Kakao's CEO, said, "We are moving past the era in which users had to find and enter an app and make complicated choices; we expect a rapid shift to a new usage pattern where services are provided and even executed through conversations with an AI agent," and added, "We will roll out various services, including 'Kanana Search,' which incorporates user context." However, Chung said future AI investments will be carried out efficiently and in a capex-light manner.