'AI Beneficiary Stocks' Naver and Kakao... Q2 Performance

[Financial News] With expectations of benefiting from government policies related to industries such as artificial intelligence (AI) revival and won stablecoin, Naver and Kakao have emerged as 'AI representative stocks', and the industry is keen to see if this will be reflected in their performance. However, in the second quarter, the two companies are expected to continue to show differences, with high expectations for AI services to be released in the second half of the year. 
According to the consensus of financial information company FnGuide on the 14th, Naver's consolidated sales for the second quarter are expected to rise by 11.27% year-on-year to 2.9046 trillion won, and operating profit is expected to increase by 12.29% to 530.8 billion won. The strong performance driver is the commerce sector.  The 'Naver Plus Store', which was separately launched in March, is expected to record a commerce sales growth of over 15.0% year-on-year by driving subscriber expansion through aggressive promotions and membership benefits. In addition, balanced growth is expected in sectors such as search platform, fintech, and enterprise.
Expectations for AI services have also increased. Recently, Naver is transitioning to an AI technology-based system by applying its own large language model (LLM) 'HyperCLOVA X' to the search and recommendation system across its services. In addition, it plans to secure a competitive edge in the global market with its 'Sovereign AI' strategy as a vertical (specialized) service. For example, the 'Line Works' service, a business tool tailored to the Japanese industrial structure by Naver Cloud, has recorded the No. 1 market share in Japan for seven consecutive years, achieving an annual recurring revenue (ARR) of 16 billion yen (approximately 150 billion won) as of this month. Naver Cloud plans to further enhance the Line Works service by integrating AI technology. 
Kim Dong-woo, a researcher at Kyobo Securities, said in a recent report, "The strengthening of membership and the launch of a shopping-centric AI agent within the year are expected to benefit from domestic recovery," adding, "If selected as a government-led project operator and policy investment support is attracted, the speed of executing the company's AI strategy and external expansion is expected to accelerate."
Kakao is also expected to reduce the decline in performance thanks to its AI strategy. According to FnGuide, the second quarter sales are expected to decrease by 2.8% year-on-year to 1.9051 trillion won, and operating profit is expected to decrease by 5.12% to 127.1 billion won. Platform sector sales are expected to reach 1.0281 trillion won, with 'Talk Biz' (advertising) growing by more than 8.0% year-on-year. Although some sectors such as mobility are showing signs of recovery, content sales such as webtoons and music are continuing to decline by 13.8% year-on-year.
The industry expects both companies to seek performance improvement through the advancement of AI services in the second half of the year. Naver plans to strengthen its commerce business through collaboration with Market Kurly, focusing on fresh food and early morning delivery, and aims for the lock-in effect of Naver Plus membership through various partnerships. The launch of a shopping agent based on AI technology is also scheduled within the year, which is expected to create a synergy effect.
Kakao is accelerating its transition to an 'AI Super App'. Jeong Shin-ah, CEO of Kakao, mentioned the AI business blueprint in an interview with Forbes Asia on the 9th. CEO Jeong said, "We are preparing a major overhaul so that AI can permeate various services of KakaoTalk," and announced the launch of various services based on AI agents. The success of the officially launched AI service 'Kanana' is also of interest. Jeong Ho-yoon, a researcher at Korea Investment & Securities, said, "By revamping the Discovery Tab of KakaoTalk, adding new advertising inventories, and launching AI agent and other AI-based solutions, we will enhance service quality."
wongood@fnnews.com Joo Won-kyu Reporter