Lotte Innovate

Lotte Innovate is an ICT services company that has grown on the back of system integration (SI) and system management (SM) businesses for Lotte Group affiliates.

Of the KRW 555.7 billion in consolidated revenue in H1 2026, about KRW 343.3 billion, or 61.8% of the total, came from group affiliates including Lotte Corporation, Lotte Shopping, Lotte Hotel, Lotte Chilsung Beverage, and Lotte Global Logistics.

An expanding SM segment appears to have contributed to recent profitability improvement.

On the new-business front, the company is expanding data center design-build-operate (DBO) and outsourced operation services for external clients, leveraging two decades of experience running four proprietary data centers in Seoul, Yongin, and Daejeon, with contracts secured from Egis Asset Management and Cam Square, among others.

EV fast-charging subsidiary EVSIS holds the top domestic market share position in fast chargers, while metaverse subsidiary Calibus is expanding hyper-realistic 3D content and immersive commerce services in partnership with Lotte ON and Lotte Himart.

The company applies its generative AI platform 'iMember' as a group-wide AI transformation (AX) tool while also developing physical AI technology to serve as the 'brain' of humanoid robots.

Competitively, it contends with conglomerate-affiliated IT service firms such as Samsung SDS, LG CNS, and SK C&C for both internal group volume and external data center/AX contracts. Global operations are centered on Vietnam and Indonesia.

Annual revenue fluctuated in the KRW 1.05-1.20 trillion range, while profit trends were more volatile.

In 2023, revenue reached KRW 1,196.7 billion with operating profit of KRW 56.9 billion (operating margin 4.8%) and owner's net income of KRW 42.0 billion, the peak year among the four years reviewed, but in 2024 revenue slipped slightly to KRW 1,180.4 billion while operating profit fell sharply to KRW 25.7 billion (margin 2.2%).

In 2025, revenue declined modestly to KRW 1,169.8 billion, yet operating profit recovered to KRW 31.4 billion (margin 2.7%); however, owner's net income actually fell to KRW 9.9 billion from KRW 12.8 billion the prior year, diverging from the operating-line trend.

On a quarterly basis, Q4 2025 posted revenue of KRW 326.8 billion and operating profit of KRW 9.8 billion, yet owner's net income swung to a loss of KRW 3.2 billion, likely reflecting non-operating items.

Net income then improved for two consecutive quarters, with operating profit of KRW 9.7 billion and net income of KRW 6.0 billion in Q1 2026, followed by operating profit of KRW 12.4 billion and net income of KRW 9.6 billion in Q2 2026, bringing the trailing four-quarter (Q3 2025-Q2 2026) owner's net income total to about KRW 17.3 billion.

This trend is attributed to reducing low-margin orders and expanding relatively stable SM-segment business, consistent with the 47.6% year-over-year increase in H1 2026 consolidated operating profit.

On the cash flow side, 2025 operating cash flow rose sharply to KRW 92.4 billion from KRW 51.1 billion in 2024, indicating strengthened cash generation alongside earnings improvement.

Data center demand is expanding rapidly amid the spread of AI and cloud computing, with the government also expanding investment by fostering AI data centers as core infrastructure through major national projects.

However, as financial investors such as asset managers and private equity funds increasingly develop data centers as investment assets while outsourcing design, construction, and operation to specialized operators, competition for DBO contracts has intensified in parallel.

The EV charging infrastructure market has recently seen slowing sales due to battery technology advances and falling raw material costs, but demand recovery is expected with new model launches, and companies continue to invest in infrastructure improvement and R&D.

The metaverse industry has seen slower commercialization than initially expected, with a shift toward content-commerce hybrid models becoming evident.

Across the conglomerate-affiliated IT services sector generally, companies with high dependence on internal group revenue tend to face valuation discounts, making expansion of external business a common challenge.

The physical AI and humanoid robotics field remains in an early commercialization stage, and it will likely take time before industrial field applications become substantial.

The company has set a goal of generating about 30% of total revenue from the data center DBO business by 2028, which would equate to roughly KRW 350.9 billion based on 2025 revenue.

Building on existing DBO contracts such as the Hanam data center with Egis Asset Management (KRW 15 billion) and the Yongin data center with Korea Alternative Investment Asset Management (KRW 69.5 billion), the company has added the 40MW Ansan data center operation contract to its reference base.

Through a joint research project on thermal management technology for data center carbon neutrality with an Ajou University-led consortium, the company aims to secure high-efficiency cooling technology targeting a power usage effectiveness (PUE) of 1.2 or below over approximately the next five years.

The target of raising new-business revenue share to 20% by 2028 remains distant, with the figure standing at only 11.4% as of 2025, requiring substantial growth to reach the goal.

EVSIS entered the North American EV charging infrastructure market by establishing a US subsidiary in 2024, and this business faces a February 2027 deadline to meet 'qualified IPO' conditions tied to a contract with STIC Alternative Investment.

Calibus is expanding immersive commerce collaboration with Lotte ON and Lotte Himart, while a decision on whether to continue the business will be made after reviewing performance through the third quarter.

Development of the generative AI platform 'iMember' as the brain for humanoid robots is underway, with longer-term plans to extend applications into retail, logistics, and facility management.