Naver, 1Q Revenue 1.5 Trillion Won... Operating Profit Down 1% Due to 'Stock Option Impact' (Update)

Hansung-sook, CEO of Naver

[Asia Economy Reporter Buaeri] Naver posted mid-1 trillion KRW in sales in the first quarter as its commerce, fintech, content, and cloud sectors all grew. However, operating profit slightly decreased due to increased labor costs.

Naver announced on the 29th that its first-quarter sales reached 1.4991 trillion KRW, and operating profit was 288.8 billion KRW. This represents a 29.8% increase in sales year-on-year and a 1% decrease in operating profit.

The slight decline in operating profit was due to increased stock compensation costs, such as stock options granted to employees. However, EBITDA, which reflects actual cash-generating ability, reached a record high of 440.6 billion KRW, a 23.7% increase compared to the previous year.

Net profit for the period was 15.3145 trillion KRW following the completion of the management integration between Line and Z Holdings on the 1st of last month. The company explained that this figure reflects the accounting disposal gain of the Line group, i.e., the 'Line valuation,' and does not involve actual cash inflows or outflows.

By sector, search platform sales, including advertising, recorded 752.7 billion KRW, up 16.8% year-on-year. This was the result of new advertiser inflows, expanded ad space, and improved matching technology, which enhanced the platform. In particular, performance-based advertising (charging advertisers based on the number of clicks) continued to expand, leading to a 46.4% increase in display ad sales compared to the previous year.

Commerce sector sales rose 40.3% year-on-year to 324.4 billion KRW. A Naver official explained, "This growth was achieved through various support measures for small and medium-sized enterprises (SMEs)." Naver Smart Store expanded to 450,000 stores, and Brand Store to 320. The transaction volume of 'Shopping Live' more than doubled compared to six months ago.

The fintech sector recorded 209.5 billion KRW, accelerating payment growth through expanded external partnerships. This represents a 52.2% increase year-on-year. Naver Pay's payment volume grew 56% year-on-year to 8.4 trillion KRW. Naver Financial plans to focus on expanding its fintech portfolio for thin-file customers (people with limited financial history) by starting beta testing of a post-payment service.

The content business, including webtoons, Snow, and V Live, also showed strong growth. Content sales reached 130.8 billion KRW, a 40% increase year-on-year. In particular, webtoon sales grew 43% year-on-year, driven by increased user loyalty to webtoon content and a higher conversion rate to paying users. Naver plans to complete the acquisition of Wattpad, the world's largest web novel platform based in Canada, within the first half of the year and focus on creating a global intellectual property (IP) creation ecosystem.

The cloud sector recorded sales of 81.7 billion KRW, a 71.1% increase year-on-year. Especially, sales in the public sector increased more than tenfold, driving a 168% growth in cloud platform sales compared to the previous year.

Naver plans to further strengthen its global business capabilities through investments in talent and collaborations with other companies. Han Seong-sook, CEO of Naver, said, "In the first quarter, all new business areas showed significant growth alongside steady growth in the search platform. There were also meaningful investments and cooperation results such as the acquisition of Wattpad, equity swaps with Shinsegae and Emart, and the management integration of Line and Z Holdings. Securing top talent is also important to accelerate business growth globally, so we will also focus on establishing an advanced compensation system."