Naver ramps AI datacenter investments while Kakao trims capex amid shifting profitability outlook for Korean cloud platforms.
Naver and Kakao, South Korea's two dominant platform companies, are each poised to post record earnings in the second quarter, yet their trajectories diverge sharply. While Naver's revenue surges despite flat profits—weighed down by massive capital investments—Kakao is achieving higher margins through cost-cutting and restructuring, even as growth drivers remain uncertain.
**Naver's Aggressive Bets on AI, Commerce, and Infrastructure**
Samsung Securities forecasts Naver's second-quarter revenue at 3.3834 trillion Korean won, up 16.1% year-over-year, but operating profit will grow only 1.4% to 529.1 billion won. The profit stagnation reflects heavy spending on new growth initiatives: AI chip purchases for GPU-intensive services, subsidized delivery for Naver members, and World Cup broadcasting rights.
Yet returns are already visible. The AI-powered "AI Tab" search service, launched in June, accumulated 4 million users during its beta phase. Advertising revenue in the first quarter climbed 9.3% year-over-year, with over half of the growth attributed to AI search. Naver's domestic search market share in the first half of 2026 reached 64.28%, up 2.46 percentage points from the prior half, according to Internet Trends. The streaming platform Chzzk, powered by exclusive World Cup coverage, saw monthly active users reach 5.24 million last month—nearly double the previous month.
The most ambitious undertaking is infrastructure. Naver announced construction of "AI Factory," a gigawatt-scale data center, during NVIDIA CEO Jensen Huang's recent visit to South Korea. The company plans to expand it to 1 GW over five to six years, targeting 20 trillion won in annual new revenue. Naver is also participating in a government-led initiative to build regional AI data centers as part of three major mega-projects.
**Kakao's Restructuring Gains, but Future Growth Uncertain**
Kakao's second-quarter revenue is projected at 2.0483 trillion won—just 1.2% higher year-over-year—but operating profit is expected to surge 18.3% to 231.1 billion won. The improvement stems from divestitures and restructuring: the sale of the Daum portal and the rationalization of loss-making subsidiaries including Kakao Healthcare and Kakao Games.
However, near-term growth engines remain unclear. Kakao has launched "ChatGPT for Kakao," enabling ChatGPT access within KakaoTalk, and a location-based recommendation and reservation service powered by its own AI model, "Kanana." Neither has yielded disclosed results tied to advertising or commerce revenue. Compounding management challenges is an ongoing labor union strike that has persisted for over a month.
An unnamed banking executive cautioned: "Cost reduction alone is insufficient to drive a revaluation of corporate value. Kakao must demonstrate tangible results in its AI new businesses and digital asset sectors."