KT Cloud, the cloud and data center affiliate of KT Group, posted top-line growth last year. Fueled by rising demand for artificial intelligence (AI) and cloud services, both revenue and operating profit increased, but fees paid that function as usage charges for external services and infrastructure—such as using Microsoft (MS) Azure—also rose by nearly 50% in a year. As business expansion combining in-house data centers with global clouds gets into full swing, analysts say managing external collaboration expenses is emerging as a swing factor for future results.
According to the industry on the 25th, KT Cloud's fees paid came to 500.3 billion won last year, up about 50% from 335.1 billion won a year earlier. Fees paid accounted for 53.7% of KT Cloud's total operating expense (931.2 billion won) last year. Fees paid are expenses the company pays for work, services, or rights it entrusts to external vendors or affiliates. Rather than internal labor costs or electricity bills, they are closer to money spent on external services, infrastructure, manpower, and systems.
KT Cloud's revenue last year was 997.5 billion won, up 27.4% from 783.2 billion won a year earlier. The increase in revenue was 214.3 billion won. Over the same period, the increase in fees paid was 165.2 billion won, equivalent to 77% of the revenue increase. In other words, a significant portion of the revenue gained through top-line growth occurred alongside an increase in expenses for external services, operations, and technology usage. Over the same period, operating profit was 66.3 billion won, up 25.7% from 52.7 billion won a year earlier.
The burden of electricity costs, typically considered a core expense in the data center business, was relatively limited. KT Cloud's utilities expense last year was 130.4 billion won, up just 3.3% from the previous year. Utilities expense refers to public charges such as water, electricity, gas, and heating.
Collaboration with MS is cited as a factor behind the increase in external collaboration expenses. KT Cloud signed a purchase contract that includes a minimum-commitment clause totaling 1.365 trillion won for using MS Azure for 60 months from Oct. 2024 to Sep. 2029. On a simple average, that is 273.0 billion won per year.
A minimum commitment is a contract structure that pre-agrees to a certain amount of service usage over a set period. If the committed volume is sufficiently consolidated into customer revenue, it can form a foundation for business expansion, but if increased usage does not translate into high-margin enterprise AI and cloud revenue, it can become an expense burden.
However, it is hard to conclude that the entire increase in fees paid stems from the MS Azure contract expenses. Fees paid can broadly include not only MS but also external operations, technical support, system usage, and affiliate service expenses. Even so, given that fees paid surged right after the large minimum commitment with MS was signed, analysts say the cost of global cloud collaboration has emerged as a swing factor for KT Cloud's results.
A cloud industry official said, "For KT Cloud as well, given it is difficult to handle the surging demand for AI infrastructure with in-house data centers alone, combining with a global cloud is close to an inevitable choice," adding, "The issue is the quality of growth." The official added, "The more the Hybrid Cloud business with MS expands, the more likely external cloud usage will increase," and said, "If these expenses are not sufficiently passed on to corporations through customer revenue and high value-added services, the expense burden could grow alongside revenue expansion."
Another cloud industry official said, "While a combination of in-house infrastructure and global cloud partnerships can serve as a springboard for revenue growth, what matters is filling the minimum-commitment volume with high-margin customer demand," adding, "For KT Cloud's AI alliance to lead to improved results, it needs to go beyond simple resale or infrastructure use and raise the added value of enterprise AI and cloud."
KT Cloud said the increase in fees paid was an expense rise that appeared alongside revenue growth during business expansion based on its MS Azure partnership. The company said, "We expect the pace of increase in fees paid to ease starting in 2026," adding, "We are continuing proactive investments, including securing specialized talent for developing next-generation cloud platforms and preempting the AI cloud market."