Kakao logged a 52-week low despite record results. After posting the biggest results since its founding last year and again delivering the strongest first-quarter results on record this year, the stock fell to 32,250 won intraday on the 26th. While the KOSPI has been marching to a record high, Kakao's share price has moved in the opposite direction.
What disappointed the market is not current results but future growth. Profit has improved through expense efficiency and streamlining of affiliates, but it is uncertain whether the overwhelming user touchpoints of KakaoTalk can be translated back into revenue growth. Management is pushing an artificial intelligence (AI) pivot and a KakaoTalk overhaul, but has yet to prove results, while the union is putting compensation issues such as bonuses front and center. From investors' perspective, the internal energy at Kakao may appear more focused on "how to split the profit" than "how to grow again." As a result, cynicism is emerging in the market that "neither management nor the union seems interested in future growth."
◇ Growth premium disappears despite record results
According to the industry on the 29th, the Kakao labor union held a "Logout Day" that day. Union members at five companies — Kakao, Kakao Pay, Kakao Enterprise, DK Techin, and XLGAMES — used annual leave or took the day off to stop work for a day. Following the first strike since the company's founding on the 10th, additional collective action has made labor-management conflict another variable weighing on the stock.
Kakao's results themselves are strong. Kakao posted revenue of 8.0991 trillion won and operating profit of 732 billion won last year. Both revenue and operating profit were the largest since its founding. It then delivered record results in the first quarter of this year as well. First-quarter revenue was 1.9421 trillion won, up 11% from a year earlier, and operating profit rose 66% year over year to 211.4 billion won. As expense efficiency and affiliate rationalization took effect, profitability clearly improved.
But the market is looking at the "quality of earnings." Many see Kakao's profit improvement as driven more by cost-cutting and restructuring effects than by structural growth in its core business. Tightening the belt to lift margins is positive, but that alone is not enough to regain a growth-stock premium. What investors want is confidence that the company can earn more again, not merely spend less.
At one time, Kakao was a flagship growth stock in the domestic market. In June 2021, its market capitalization topped 70 trillion won, ranking it around third on the KOSPI by market cap. But its current market value has shrunk to the mid-14 trillion won range, and its market-cap ranking has fallen outside the top 50. This is not because Kakao cannot make money, but because confidence has weakened over whether it can once again grow rapidly.
◇ "AI and KakaoTalk overhaul must now be proven in the numbers"
Kakao's lofty past valuation started with KakaoTalk. On the back of an overwhelming user base as the national messenger, expectations that it could expand into finance, mobility, content, and commerce pushed the stock higher. Now, however, a large user base alone is not enough to command a high valuation. It has become more important how much platform dominance can actually be converted into revenue and profit growth.
Kakao's proposed solution is AI. Kakao has said it will expand AI features centered on KakaoTalk and create new growth engines through its own AI models and partnerships with external big tech. If AI is combined with KakaoTalk, there are expectations it can boost ad efficiency, raise commerce conversion rates, and increase usage of content and local services.
This is where distrust of management in the market is growing. The AI and KakaoTalk overhaul is a task Kakao must solve to be valued again as a growth stock. But so far there is only directional strategy, and the concrete path to revenue growth is not sufficiently visible. If management talks about future growth but fails to present monetization metrics the market can accept, investors will find it difficult to value Kakao as a growth stock.
An IT industry official said, "It needs to be verified whether AI features actually increase user dwell time, lift ad unit prices and click-through rates, and lead to growth in commerce transaction value," adding, "Announcements and partnerships are not enough. If management cannot present monetization metrics, investors will find it difficult to value Kakao as a growth stock."
◇ Labor conflict fuels doubts about execution
Union moves are also a burden on the market. It is hard to say that raising issues with bonuses and the compensation system directly shakes results. If the company made a profit, it is natural for members to demand rewards. But Kakao now faces a more urgent question. Beyond profits created by expense cuts, it must prove it can grow again.
In this context, if the union puts bonuses and compensation ahead of future growth strategy, investors are likely to see it as an execution risk during a transition. If management cannot show evidence of growth while the union foregrounds distribution issues, the market's assessment will inevitably turn cold.
In the end, Kakao's paradox is clear. The company has posted record results, but the market has yet to see Kakao's next growth formula. Kakao must prove that an AI pivot based on KakaoTalk actually leads to improved user experience and expanded profitability. At the same time, it needs to manage labor conflict and restore the organization's execution power. It is not enough to be earning well now. What it will earn more with going forward, and how quickly it can execute, are the key variables that will determine the direction of Kakao's stock.