Naver, Kakao shares fell roughly 10%, 12% in October
Naver seen posting record sales but lower profit; Kakao faces revenue slowdown
Cost control and AI business models seen as key to any share price rebound
Investor sentiment is swinging between hope and disappointment ahead of third-quarter earnings reports from Naver and Kakao. Shares of both companies fell roughly 10% and 12%, respectively, over the course of October. Analysts say prospects of revenue growth or improved profitability alone are unlikely to reverse the slide. What investors want to know is whether AI investment is translating into real sales and profit — and whether the companies can absorb rising costs.
According to Korea Exchange and financial investment industry data, Naver's share price fell 9.9% from 191,200 won ($143) on Oct. 1 to 172,300 won on Oct. 30. Kakao dropped 12.4% over the same period, from 33,600 won to 29,450 won. With both stocks weakening ahead of their earnings releases, frustration is growing among investors who doubt that top-line growth or profit improvement alone will be enough to spark a rebound.
Naver is expected to extend its revenue growth streak in the third quarter, but operating profit is forecast to decline. A consensus of brokerage estimates compiled over the past three months puts Naver's third-quarter consolidated sales at 3.51 trillion won, up 12.0% from a year earlier — which, if realized, would mark a sixth consecutive quarter of record quarterly sales. Operating profit, however, is seen falling 12.8% year-on-year to 497.6 billion won.
The key question is how well Naver has kept a lid on AI infrastructure and marketing costs while sustaining growth in advertising and commerce. Brokerages warn that if advertising and commerce growth falls short of expectations and cost pressures mount, rising sales may not translate into better profits. Some securities firms have recently trimmed their target prices for Naver while still citing AI data center and cloud operations as medium- to long-term growth drivers — though analysts note it will take time before those businesses make a meaningful contribution to earnings.
Kakao faces the unusual combination of a revenue decline and an operating profit increase in the same quarter. The consensus puts third-quarter sales at 2.05 trillion won, down 1.8% from a year earlier, while operating profit is seen rising 19.4% to 248.2 billion won. Compared with the second quarter, however, both sales and operating profit are expected to fall — by 2.4% and 10.4%, respectively. Investors are watching whether platform profitability continues to improve and whether KakaoTalk-based AI services can move beyond user growth to generate actual revenue.
Kakao's share price reflects a mix of AI optimism and disappointment. Brokerages have recently cut their target prices, citing a slowdown in KakaoTalk advertising and commerce growth and uncertainty over when AI agent services will begin generating revenue. Analysts argue that launching AI services is not enough — the company needs to show a clear path from user growth to advertising, subscription and transaction revenue.
How the shares perform going forward will depend not just on the earnings numbers but on the business outlook each company presents. For Naver, a drop in operating profit despite record sales could reignite concerns about cost burdens. For Kakao, even a confirmed rise in operating profit may not be enough to drive a rebound if revenue recovery and AI monetization plans remain vague. On the other hand, if cost growth shows signs of stabilizing and AI business models and timelines become more concrete, the recent share price declines could attract bargain hunters. That scenario, however, hinges on how the market responds to the actual results and management commentary.
Kakao is scheduled to report third-quarter earnings Thursday, and Naver on Nov. 12. Investors will be scrutinizing not only sales and operating profit but also advertising and commerce growth rates, AI-related costs and each company's plans for monetizing its services.
attom@heraldcorp.com
