The landscape of the IT services "big three" is being reshaped into Samsung SDS, LG CNS, and Hyundai AutoEver. SK AX (formerly SK C&C), which had long been No. 3, has fallen to fourth as its results were overtaken by Hyundai AutoEver over the past two years. On a cumulative basis through the third quarter this year, Hyundai AutoEver and SK AX show a revenue gap of more than 1 trillion won, putting Hyundai AutoEver on track to solidify its position at No. 3.
According to the Financial Supervisory Service's electronic disclosure system on the 27th, Hyundai AutoEver's cumulative revenue for the first to third quarters of this year was 2.9293 trillion won, nearing 3 trillion won. That was up 14.7% from a year earlier. Cumulative operating profit rose 17.8% over the same period to 178.8 billion won. Given that the fourth quarter is typically peak season for the system integration (SI) industry, some expect Hyundai AutoEver's annual revenue to surpass 4 trillion won for the first time since its founding.
SK AX's cumulative third-quarter revenue was 1.8987 trillion won and operating profit was 141.4 billion won, up 4.8% and 49.3%, respectively, from a year earlier. Looking only at revenue over the same period, the gap with Hyundai AutoEver exceeds 1 trillion won. Unless there is an upset in the fourth quarter this year, Hyundai AutoEver is expected to lead SK AX in annual revenue by more than 1 trillion won.
Industry leader Samsung SDS posted cumulative third-quarter revenue of 10.393 trillion won and operating profit of 731 billion won, while No. 2 LG CNS recorded revenue of 4.1939 trillion won and operating profit of 339.9 billion won over the same period.
IT services corporations are pursuing top-line growth this year by ramping up AX (AI transition) build-out projects, leveraging the broader shift toward artificial intelligence (AI). Helped by public and private AX demand, major players are delivering steady results. Because these corporations are IT services affiliates of large conglomerates, the share of internal transactions is relatively high, ranging from at least 60% to as much as 95%. As internal AX demand rises within major manufacturing-centered groups such as Samsung, Hyundai Motor, LG, and SK, analysts say IT services corporations have secured stable revenue sources.
However, there are differences in growth speed by company in the process. In particular, Hyundai AutoEver has grown rapidly over the past two years as it has emerged as a core affiliate responsible for digital transformation under Hyundai Motor Group's software-defined vehicle (SDV) strategy. Formed in Apr. 2021 through the merger of Hyundai AutoEver, Hyundai MnSoft, and Hyundai Autron, IT affiliates of Hyundai Motor Group, Hyundai AutoEver has posted a compound annual revenue growth rate of 24% over the past four years. Results are rising quickly as it executes high value-added projects such as building the next-generation ERP (enterprise resource planning) system for Hyundai Motor in North America, constructing the Yeoju smart logistics system for Maersk, supplying cloud services to group affiliates, and developing complete vehicle sales systems.
The market expects Hyundai AutoEver's results to gain momentum for the time being as its role stands out in Hyundai Motor Group's strategy to expand infrastructure for AI and Robotics. In particular, after Hyundai Motor Group Chair Chung Eui-sun met Nvidia CEO Jensen Huang last month and pledged cooperation to "advance physical AI," expectations grew that this would benefit Hyundai AutoEver, sending the company's share price surging more than 10% intraday.
Unlike Hyundai Motor Group, which four years ago consolidated its software capabilities under the group, launched Hyundai AutoEver through a merger, and cultivated it as a digital transformation affiliate, SK AX has faced a narrower scope for maneuver since being absorbed into SK Inc. in 2015, and as SK Group moved later to reorganize its business around AI, analysts say it has not grown as fast as Hyundai AutoEver.
In May this year, SK AX changed its name from SK C&C to SK AX for the first time in 27 years and declared it would leap forward as an "AI-centered corporations." This is part of a rebalancing (business restructuring) strategy being promoted company-wide under the leadership of SK Group Chair Chey Tae-won, aiming to enhance efficiency and value across the group by focusing on semiconductors and AI, the core businesses of the future. Along with this, at the end of last month SK AX appointed Kim Wan-jong, who had led the cloud institutional sector since the SK C&C days, as the new president and chief customer officer (CCO). SK AX said, "Through this presidential appointment, we will strengthen our role in shifting the business structures and revenue models of major domestic industries to AX-centric," adding that Kim is the right person to lead that trend.
SK AX is also improving results, centered on next-generation system builds and AX projects it has carried out in the public and financial sectors, and it is expected to win AX orders from SK Group affiliates going forward. But the market believes it will be difficult to narrow the revenue gap that has already opened up between Hyundai AutoEver and SK AX in a short period of time. An IT services industry official said, "Unlike Hyundai AutoEver, which is growing fast by winning Hyundai Motor Group projects one after another, SK AX is only now expanding its AX business in earnest, so it appears it will take time for results to become visible."
Going forward, SK AX plans to advance industry-specific AX models and further increase the share of high value-added businesses by integrating AI and cloud capabilities.