SK Networks' Samil Building [SK Networks]
SK Networks' Samil Building [SK Networks]

SK Networks saw its operating profit fall more than 40% in the second quarter even as net profit nearly doubled. A high base effect in its telecommunications business and heavier advertising spending weighed on core profitability, but rising valuations of AI investments — including stakes in Upstage and Phoenix Lab — lifted pre-tax and net profit.

SK Networks disclosed Friday that its consolidated second-quarter sales came in at 1.44 trillion won ($1.02 billion) and operating profit at 24.8 billion won, down 4.7% and 42.4%, respectively, from a year earlier.

Pre-tax profit rose 44.1% year-on-year to 37.1 billion won, while net profit for the period climbed 90.4% to 49.7 billion won.

The operating profit decline was largely driven by a base effect in the telecommunications business. Marketing costs had been trimmed in the second quarter of last year in anticipation of heightened market competition following the repeal of the Handset Distribution Act, and that adjustment created an unfavorable comparison this year. Additional advertising spending by SK Intellex tied to new product launches also weighed on the result.

The investment segment, by contrast, posted stronger gains, as rising valuations of AI startups in SK Networks' portfolio generated appraisal income.

Upstage is the most prominent example. SK Networks committed 25 billion won to Upstage's Series B round in early 2024, then added 47 billion won through a call option exercise and a further 50 billion won via a Series C investment this year, bringing its stake to 11.7%.

Upstage was the only startup selected in the first round of the government's independent AI foundation model project in January, underscoring the rising value of an AI company SK Networks backed early — gains that fed through to pre-tax profit this quarter.

Phoenix Lab's higher valuation also contributed. Phoenix Lab is an AI startup that emerged from SK Networks' early-stage incubation program and developed Chiron, a generative AI drug development solution built on retrieval-augmented generation technology.

The startup recently secured $8 million in seed funding led by Silicon Valley venture capital firm Menlo Ventures — the first company to attract outside investment from among the startups nurtured through SK Networks' incubation program.

Among business units, Walkerhill Hotels & Resorts grew operating profit on the back of occupancy rates above 70%, higher food and beverage sales, and increased bookings for meetings, incentives, conventions and exhibitions.

SK Speedmate maintained profitability through a rise in service-center visits and new accounts for its roadside assistance service. Global trading subsidiary Glowide more than doubled its operating profit year-on-year by improving inventory efficiency despite US tariffs and geopolitical uncertainty.

Incross, which became a subsidiary this year, expanded its marketing agency business, while its subsidiary Mindknock posted record search advertising sales. Data and AI firm Encoa also saw higher consulting and solutions revenue after winning large-scale projects.

SK Intellex, meanwhile, invested heavily in marketing new products. The unit cast actor Byeon Woo-seok as the brand ambassador for SK Magic water purifiers and launched the Two Water purifier and the Mega Ice ice-water purifier. The increased advertising outlay was one of the factors that dragged on consolidated operating profit in the quarter.

SK Networks' strategy of positioning itself as an AI-centered holding company is being applied across its subsidiaries as well. Incross has adopted the AI content marketing platform Stellarize and the multi-AI agent Ainova in its operations, while SK Intellex's wellness robotics brand Namux is expanding security and health-management services powered by autonomous driving and vision AI.

The company has also broadened its external AI research partnerships. SK Intellex signed an MOU with KAIST last month to jointly develop software for AI mental health and wellness services using wellness robotics, with plans to work together on pilot programs for personalized mental health management solutions and AI algorithm development.

"Even amid growing global geopolitical risk and financial market uncertainty, we have achieved diverse results across our business and investment portfolio," an SK Networks official said. "Building on a stable financial structure, we will secure the fundamental competitiveness of our businesses while supporting the AI transformation of our operations and subsidiaries as an AI-centered holding company, moving ever faster toward a future of innovation with AI."


kwater@heraldcorp.com