KOSPIIT & Software035720

Kakao

₩33,400▼ 0.45%2026-10-02 close

Market Cap

₩14.8T

Turnover

₩38.1B

Volume

1.2M

Shares out.

440M

PER

46.3×

PBR

1.4×

EPS

₩782

Dividend Yield

0.21%

PER, EPS, PBR and BPS are calculated in-house from the last 4 quarters (2025Q3–2026Q2) · Dividend yield is based on ₩75 per share · Prices as of the 2026-10-02 close

Report overview

Record Operating Profit Meets a Split-Up Test

Kakao posted its highest-ever quarterly operating profit on the back of TalkBiz and platform-other growth, while simultaneously carrying volatile owner-attributable net income and a structural variable in the spin-off scheduled for January 2027.

1
For 2025, revenue reached 8.10 trillion won and operating profit 732.0 billion won, lifting the operating margin to 9.0% and moving away from the 5-6% margin range of 2023-2024.
2
Operating profit of 277.0 billion won in 2Q26 was the highest among the disclosed quarters, and the company stated that both revenue and operating profit were record quarterly highs.
3
Growth is platform-led: 2Q26 platform revenue rose 17% to 1,230.3 billion won, while content revenue grew just 1% to 868.2 billion won.
4
Even as operating profit expanded, owner-attributable net income swung sharply, at 33.5 billion won in 4Q25 and 16.3 billion won in 2Q26.
5
In August 2026 the board approved a spin-off into Kakao AI (0.36) and Kakao X (0.64), with an extraordinary shareholder meeting in December and relisting scheduled for January 2027.

Business structure

Kakao's operations split broadly into platform and content, with the platform side further divided into KakaoTalk-based TalkBiz and platform-other, which includes mobility and payments. In 2Q26 platform revenue rose 17% year on year to 1,230.3 billion won, of which TalkBiz grew 12% to 643.2 billion won.

Within TalkBiz, advertising and subscription revenue increased 14% to 399.9 billion won, with business messaging up 20% on financial-sector advertiser demand and KakaoTalk display advertising up 28%.

Combined commerce transaction value from Gift and Talk Deal reached 2.7 trillion won, up 9%, as self-purchase volume within Gift jumped 39%, taking commerce revenue to 243.2 billion won.

Platform-other revenue, which includes mobility and payments, rose 22% to 587.0 billion won, helped by the core mobility business and last-mile logistics, while the payments unit benefited from financial revenue and growth in payment and platform services.

By contrast, content revenue grew only 1% to 868.2 billion won, comprising music at 558.4 billion won (up 8%), media at 99.1 billion won (up 5%) and story at 210.7 billion won. Portfolio pruning is ongoing. The number of affiliates fell by 55, from 147 in May 2023 to 92 in June 2026.

Management described the divestments of Kakao Healthcare, Kakao Games and the Daum portal as rebalancing steps in which Kakao remains involved as a second-largest or partial shareholder.

Competition overlaps with domestic search and commerce platforms as well as global big tech advertising and AI services, and the closed loop that channels messenger traffic into advertising, commerce and payments is both Kakao's differentiator and its point of regulatory exposure.

Earnings trend

Quarterly revenue · Operating profit

₩2T₩185.9B25Q2₩2.1T₩208B25Q3₩2.1T₩232.7B25Q4₩1.9T₩211.4B26Q1₩2.1T₩277B26Q2

RevenueOperating profit

Annual revenue · Operating profit

₩6.8T₩569.4B2022₩7.6T₩460.9B2023₩7.9T₩460.2B2024₩8.1T₩732B2025

RevenueOperating profit

Quarterly results · Last 5 quarters
Quarter	Revenue	Operating profit	Op. margin
2025Q2	₩2T	₩185.9B	9.2%
2025Q3	₩2.1T	₩208B	10.0%
2025Q4	₩2.1T	₩232.7B	11.0%
2026Q1	₩1.9T	₩211.4B	10.9%
2026Q2	₩2.1T	₩277B	13.2%

Annual results
Year	Revenue	Operating profit	Net income (parent)	Op. margin	ROE	Debt-to-equity
2022	₩6.8T	₩569.4B	₩1.4T	8.4%	13.6%	69.9%
2023	₩7.6T	₩460.9B	-₩1T	6.1%	−10.4%	81.7%
2024	₩7.9T	₩460.2B	₩55.3B	5.8%	0.5%	84.8%
2025	₩8.1T	₩732B	₩491.5B	9.0%	4.4%	82.5%

Consolidated basis (financial statements including subsidiaries) · Final figures from DART filings · Net income attributable to owners of the parent · Data as of 2026-09-04

Earnings analysis

The annual trend shows a clear margin-recovery phase. Revenue rose steadily from 6.80 trillion won in 2022 to 7.56 trillion in 2023, 7.87 trillion in 2024 and 8.10 trillion in 2025.

Operating profit compressed from 569.4 billion won in 2022 (8.4% margin) to 460.9 billion in 2023 (6.1%) and 460.2 billion in 2024 (5.8%), before rebounding to 732.0 billion won in 2025 (9.0%).

Owner-attributable net income swung from a loss of 1,012.6 billion won in 2023 to a profit of 55.3 billion won in 2024 and 491.5 billion won in 2025, confirming a shift from loss to profit.

Quarterly data show the margin improvement has been sequential: operating profit went from 185.9 billion won in 2Q25 (revenue 2,028.3 billion won) to 208.0 billion in 3Q25, 232.7 billion in 4Q25, 211.4 billion in 1Q26 and 277.0 billion in 2Q26, with the 2Q26 operating margin reaching the low teens.

The company stated that 2Q26 operating profit rose 36% year on year, that the operating margin improved by about 3 percentage points to 13%, and that operating expenses rose 6% to 1,821.4 billion won; the gap between the disclosed absolute figures and the company's growth rates appears to reflect restated comparison bases after portfolio changes such as the Daum portal and the games unit, and the absolute amounts in this report follow confirmed filings.

Below the operating line, however, results are uneven. Owner-attributable net income fell from 161.2 billion won in 2Q25 to 124.9 billion in 3Q25 and 33.5 billion in 4Q25, recovered to 171.7 billion in 1Q26, then came in at just 16.3 billion won in 2Q26 despite record operating profit.

On the balance sheet, non-controlling interests of 3,948.7 billion won within total equity of 15,224.9 billion won at end-2025 mean a meaningful share of consolidated earnings sits outside the owners' portion, and the debt-to-equity ratio rose from 69.9% in 2022 to 82.5% in 2025.

Cash generation held up, however, with operating cash flow of 1,404.8 billion won in 2025 versus 1,250.5 billion won in 2024.

Industry analysis

The competitive axis of Korea's internet platform industry is shifting from search and commerce toward AI agents.

Kakao has chosen to layer AI onto KakaoTalk traffic rather than compete on infrastructure spending, and unlike rivals pouring capital into large AI data centers, it emphasizes differentiation through daily-life AI services built on a 50-million-user base. Traffic metrics have expanded.

According to the company, cumulative sign-ups for ChatGPT for Kakao reached 13 million as of end-June 2026, after passing 2 million in November 2025, 8 million in February 2026 and 11 million in May.

Kanana in KakaoTalk, an on-device service that reads conversational context and proactively suggests places or products, saw its revisit rate rise from around 70% in March 2026 to 80% as of end-June. On models and infrastructure, a two-track strategy is in place.

Kakao has outlined cooperation with Google on next-generation devices and AI form factors, and with OpenAI on KakaoTalk-based consumer AI services. Doubts about core technology remain, however.

Some industry observers argue that Kakao has fallen behind in foundational AI technology and that Kanana arrived late, with global big tech and domestic rivals having already secured ecosystem positions.

On the demand side, results continue to hinge on financial-sector advertiser appetite and on pricing and inventory efficiency in display advertising.

Outlook

The single biggest variable to track is the governance restructuring.

On August 21, 2026, Kakao's board approved a spin-off into Kakao AI (new entity) and Kakao X (surviving entity), with a split ratio based on book net assets of 0.36 for Kakao AI and 0.64 for Kakao X, and existing shareholders receiving shares in both.

The company said it plans to complete the split on January 1, 2027 after an extraordinary shareholder meeting on December 17, with Kakao AI relisting and Kakao X changing its listing on January 27. Targets were disclosed alongside.

Kakao AI targets revenue of more than 6 trillion won by 2030 and Kakao X more than 10 trillion won from its main businesses, with Kakao X holding 2.3 trillion won in resources and an investment mandate spanning techfin, content and mobility.

For shareholder returns, Kakao AI plans to allocate 20-35% of free cash flow through 2026 (7% as cash dividends and the remainder as buybacks and cancellations), and from 2027 to adopt a new three-year policy that would lift the payout ratio from 30% to as much as 40% if free cash flow grows 50% year on year. Monetization paths are also becoming more concrete. Kakao has declared a transition to an "intent economy,

Valuation

PER

46.3×

PBR

1.4×

ROE

3.1%

EPS

₩782

BPS

₩26,596

Dividend per share

₩75

Owner-attributable net income over the four most recent quarters (3Q25 through 2Q26) was 346.4 billion won, which contrasts with the improving operating profit trend over the same period.

As a result, the earnings-based share multiple sits well above the upper end of the historical trading band for large domestic platform names, while the net-asset-based multiple carries only a modest premium. In other words, the indicators point in different directions, and interpretation depends on which one is used.

At its spin-off briefing, the company noted that its price-to-earnings ratio had fallen from 80 times at the 2021 peak to 21.9 times on a 2026 estimated basis.

It also stated that, based on the August 2026 average of domestic and overseas brokerage sum-of-the-parts consensus, the group's potential value exceeded its three-month average market capitalization by more than 17 trillion won.

On this point, Sun Yu-jin, analyst at LS Securities, attributed Kakao's recent discount and multiple compression mainly to delays in AI service sophistication and monetization, and assessed that the spin-off would have limited effect in immediately closing that discount.

Cash dividends are sized at a single-digit share of free cash flow, so the dividend yield runs below the market average, with returns centered on buybacks and share cancellations.

PER, EPS, PBR and BPS are all calculated in-house (the same method as Naver and Toss) · Dividend yield = cash dividend per share from DART filings (supplemented by KRX) ÷ current price · As of 2026-09-04

Bull factors

Sequential platform-led margin improvement

Operating profit rose for five consecutive quarters, from 185.9 billion won in 2Q25 to 277.0 billion won in 2Q26, while the annual operating margin improved from 5.8% in 2024 to 9.0% in 2025. The company reported a 2Q26 operating margin of 13%, up about 3 percentage points, with operating expenses rising 6%.

The key margin variable is whether cost growth continues to run below revenue growth. Management highlighted that balanced growth across TalkBiz, mobility and payments has strengthened the funding base for AI investment.

AI adoption layered on messenger traffic

Cumulative sign-ups for ChatGPT for Kakao grew from 2 million in November 2025 to 13 million as of end-June 2026. The revisit rate for Kanana in KakaoTalk also rose from around 70% in March 2026 to 80% at end-June.

Management said 30 million users actively converse in group chats daily and that AI users spend more than 50% longer in the app than non-users. Whether these traffic metrics translate into ad pricing and transaction value remains to be verified.

Simpler structure and codified return policy

The affiliate count fell from 147 in May 2023 to 92 in June 2026.

The company said that after the split both entities will regularly disclose key metrics such as revenue, profitability, investment execution and shareholder returns, along with capital allocation principles, and will expand domestic and overseas investor briefings.

Kakao X presented a policy of using 30% of subsidiary dividends and 30% of investment gains as shareholder return resources. With operating cash flow of 1,404.8 billion won in 2025, the funding base for such returns is in place.

Bear factors

Stalling growth in the content division

Content revenue in 2Q26 rose only 1% year on year to 868.2 billion won, comprising music at 558.4 billion won, media at 99.1 billion won and story at 210.7 billion won. With the platform growing 17% while content stagnated, the ceiling on group-level growth is constrained.

Content also swings quarter to quarter with IP concert schedules and production line-ups. Because content affiliates are to sit under Kakao X after the split, the yardstick for assessing their performance may change as well.

Gap between operating and net income

In 2Q26, when operating profit hit a record, owner-attributable net income was only 16.3 billion won, and it was also low at 33.5 billion won in 4Q25. Owner-attributable net income over the four most recent quarters totaled 346.4 billion won, well below the corresponding scale of operating profit.

This needs to be read alongside a capital structure in which non-controlling interests were 3,948.7 billion won of total equity of 15,224.9 billion won at end-2025, plus non-operating items. Until earnings quality stabilizes, earnings-based metrics may remain volatile.

Market and union reaction to the split

Following the announcement of the parent-level spin-off, market reaction was negative, with observers noting that although non-core affiliates had been trimmed to simplify the structure, the head office still bears the burden of managing subsidiary funding, investment and restructuring.

Some question whether splitting one listed company into two makes the corporate structure complex again. The labor union held a rally declaring joint bargaining against the split, arguing that adequate information and prior consultation on employment and working conditions were not provided.

Analysts also noted that the earlier listings of Kakao Games, Kakao Bank and Kakao Pay remain in investors' memory.

Risk factors

Regulation and approvals

Upstage's acquisition of AXZ still requires Korea Fair Trade Commission merger clearance, and the regulator has been examining potential competitive discrimination, such as whether data accumulated by Daum could be used as training data by other AI firms.

The review outcome and any conditions imposed could affect the deal structure and how Kakao's resulting Upstage stake is handled. A business footprint spanning advertising, commerce, payments and mobility also keeps the company permanently within the scope of platform regulation debates.

The split itself still requires procedural steps including shareholder approval, creditor protection procedures and relisting review.

AI investment and competition

Parts of the industry have argued that Kakao lags in foundational AI technology and that it is merely attaching external AI models to existing services without a distinct technological edge. Partnering with OpenAI and Google helps launch speed but brings dependence on external models and associated cost burdens.

The company said it is reviewing a strategy of combining GPUs, CPUs and TPUs rather than relying on a GPU-centric structure, and is in discussions with Google Cloud on operating CPU cloud capacity at meaningful scale. If infrastructure efficiency does not progress as planned, the margin improvement trend could be disrupted.

Monetization timing and execution

In a May 28, 2026 report, Daol Investment & Securities described this year as a transitional period for improving AI agent completeness and said monetization is expected from 2027. While monetization lags, the gap between traffic metrics and reported earnings may persist.

The Kakao X CEO nominee cited urgency about missing a critical window in the consumer AI market as a rationale for the split, but did not disclose specific investments or decisions actually delayed by the prior structure.

Per company explanations, cash holdings include roughly 1.85 trillion won of commerce customer deposits, leaving about 450 billion won of genuinely available cash, while management maintains that Kakao AI generates sufficient EBITDA of around 700 billion won a year.

What to watch next

Early November 2026 (expected)
Third-quarter 2026 results and the earnings call. Key items are whether double-digit growth continues in the platform division (TalkBiz advertising and subscription, platform-other), whether the operating margin holds near the 13% level seen in 2Q26, and whether the gap between operating profit and owner-attributable net income narrows.
December 17, 2026
An extraordinary shareholder meeting is scheduled to approve the spin-off. Whether the special resolution threshold is met, how institutional and minority shareholders vote, and how union and shareholder objections are reflected will determine the entire split timetable.
January 1 and January 27, 2027
These are the split completion date and the scheduled relisting of Kakao AI and change of listing for Kakao X. Relisting will bring the first separate disclosure of each entity's financials and operating metrics, and the planned transfer to Kakao AI of the Kakao Enterprise and KDCP shares held by Kakao X immediately after the split is another item to verify.
During 4Q 2026
The actual launch timing and scope of the agentic commerce service that completes ordering and payment inside chat rooms via the Coupang Eats partnership, together with the pace of partner expansion in commerce, reservations, travel and payments through PlayMCP, will serve as first-order indicators of monetization progress.
When the policy is announced in early 2027
The finalized terms of the new three-year shareholder return policy that Kakao AI said it will adopt from 2027, which includes raising the payout ratio from 30% to as much as 40% if free cash flow grows 50% year on year. The actual payout ratio and the split between cash dividends and share cancellations are the items to check.

Overall view

Kakao's earnings have improved on the back of its platform business. Annual operating profit rose from 460.2 billion won in 2024 (5.8% margin) to 732.0 billion won in 2025 (9.0%), while quarterly operating profit climbed for five straight quarters, from 185.9 billion won in 2Q25 to 277.0 billion won in 2Q26.

The skew in growth is clear, however: platform revenue rose 17% to 1,230.3 billion won in 2Q26, while content grew only 1% to 868.2 billion won.

Another open issue is that operating-level gains have not fully flowed through to owner-attributable net income, which totaled 346.4 billion won over the four most recent quarters and was just 16.3 billion won in 2Q26.

In addition, the spin-off at a ratio of 0.36 for Kakao AI and 0.64 for Kakao X is set for a December shareholder meeting and a January 2027 relisting, so structural events will overlap with earnings interpretation for the next several quarters.

The bull case rests on AI adoption within existing traffic and continued margin improvement through cost control; the bear case rests on content stagnation, volatile net income, delayed monetization and market caution around the split.

A sequential approach that verifies three facts is therefore warranted: whether third-quarter margins hold, the outcome of the extraordinary shareholder meeting, and the actual launch of agentic commerce. This report is for informational purposes only.

Sources

Korea Exchange (KRX) — Prices · Market Cap · Volume
FSS electronic disclosure system (DART) — Financial statements · Dividend filings

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Report written 2026-09-05 · Data as of 2026-09-04

This content is AI analysis of market data and web search results, provided for information only. It is not a solicitation or recommendation to invest. Investment decisions and their consequences are the investor's own responsibility. Data may be delayed or contain errors.