Kakao (035720) Q2 2024 earnings summary

Executive summary

• Q2 2024 consolidated revenue reached KRW 2,005 billion, up 4% year-over-year and 0.8% sequentially, with operating profit at KRW 134 billion, a 19% increase year-over-year and 11% quarter-over-quarter; net profit rose 59% year-over-year to KRW 87 billion.

• Business messaging, advertising, and gifting/commerce on KakaoTalk continued to grow despite macroeconomic and competitive headwinds.

• Monthly active users in Korea increased by 725K year-over-year, reaching 48.9 million, with high engagement.

• Financial restructuring improved profit contributions from Kakao Entertainment and Kakao Enterprise, though offset by weak new game releases and increased marketing in Japan.

• Core business focus is on KakaoTalk and AI, with new branding ad products and personalized commerce initiatives planned for the second half.

Financial highlights

• Q2 consolidated revenue: KRW 2.005 trillion (up 4% YOY, 0.8% QOQ); operating profit: KRW 134 billion (up 19% YOY, 11% QOQ); net profit: KRW 87 billion (up 59% YOY).

• Platform revenue: KRW 955 billion (up 10% YOY, flat QOQ); content revenue: KRW 1,050 billion (flat YOY, up 2% QOQ).

• TalkBiz revenue: KRW 514 billion (up 7% YOY, down 2% QOQ); ad revenue: KRW 307 billion (up 9% YOY, 10% QOQ).

• Commerce GMV: KRW 2.4 trillion (up 6% YOY); luxury brand GMV up 12% YOY.

• Cash and cash equivalents as of June 30, 2024: KRW 5,909,067 million.

Outlook and guidance

• Talk Biz expected to maintain solid growth in business messaging and gifting, despite ad market seasonality in Q3.

• Continued investment in AI, data centers, and server networks to support future growth.

• Content profit contribution from Kakao Entertainment to improve; Kakao Games to remain impacted by lack of new releases.

• Labor and marketing costs to remain stable; CapEx and infrastructure costs to rise in H2 due to AI and data center investments.

• Operating loss in Kakao Enterprise expected to improve; healthcare losses may widen.