Naver and Kakao are expected to show diverging third-quarter results this year. Naver is set to keep double-digit revenue growth, but operating profit is likely to fall due to cost burdens from expanded investment. Kakao, meanwhile, is expected to post a slight revenue decline while operating profit is forecast to rise by double digits.

According to third-quarter consensus estimates compiled by financial information provider FnGuide on the 20th, Naver's consolidated revenue is forecast at 3.51 trillion won, up 12 percent from a year earlier, while operating profit is expected at 500 billion won, down 12.4 percent. Kakao's revenue is projected at 2.05 trillion won, down 1.8 percent, while operating profit is seen at 252.2 billion won, up 21.2 percent.

Naver: Growth continues but investment costs weigh

Naver is expected to see continued growth in key businesses such as advertising, commerce and payments, but a slowdown in growth rates alongside rising costs.

The Chuseok holiday reduced the number of business days for advertising and commerce, and base effects from last year's increase in commerce fees have begun to fade. Advertising growth is expected to slow due to the holiday impact despite growth in commerce-related ads, and commerce is also seen posting a lower revenue growth rate.

Cost burdens are also expected to rise. Marketing expenses are set to increase due to shopping promotions and the rollout of Naver Pay Connect devices, while costs will also rise due to World Cup and Asian Games broadcasting rights and higher depreciation tied to GPU investment.

Kim Dong-woo (김동우), an analyst at Kyobo Securities, estimated Naver's third-quarter operating expenses at about 3 trillion won and said shopping marketing, expanded distribution of Naver Pay Connect and sports broadcasting costs would weigh on profitability.

The brokerage industry, however, views the cost increase as investment for future business expansion. Naver is securing offline payment data through Naver Pay Connect and expanding its marketing and customer relationship management, or CRM, business into offline channels. It is also pursuing an AI factory business with Nvidia and Brookfield.

Jung Eui-hoon (정의훈), an analyst at Eugene Investment & Securities, said a significant portion of the cost increase is investment aimed at securing offline data and AI infrastructure. He assessed that key indicators such as transaction volume and payment volume would maintain a solid trend.

Kakao: Operating profit to rise by double digits despite flat revenue

Kakao is expected to see slower growth in its key businesses, but operating profit is forecast to improve as cost burdens remain relatively limited.

In Tokbiz, supply of feed-type display advertising, or DA, continues to expand, but growth is expected to slow due to seasonal weakness in advertising. Business messaging is also expected to face pressure from a high base a year earlier and the holiday impact.

Shin Eun-jung (신은정), an analyst at DB Financial Investment, expected the platform revenue growth rate, which showed stable growth in the first half, to slow slightly in the third quarter. She forecast Kakao Pay would be affected by a decline in transaction volume, Kakao Mobility by fewer taxi rides during the vacation season, and the content segment to be weaker than the first half, including SM and Piccoma.

Cost burdens, by contrast, are expected to be relatively limited. Kakao has continued restructuring its business, including classifying its gaming unit as discontinued operations starting in the first quarter this year. Analysts say factors such as the absence of large-scale spending in the third quarter under that stance are likely to contribute to improved profitability.

Kim So-hye (김소혜), an analyst at Hanwha Investment & Securities, said other expenses are expected to have no notable items and marketing costs are also unlikely to have seen large spending.

AI results key around earnings announcements

While the two companies' earnings trajectories differ, the key point going forward is how concretely they can translate results from their AI businesses.

For Naver, the task is to link AI infrastructure investment to actual customer contracts and revenue. The brokerage industry sees disclosure of AI factory customers and contract terms as necessary to make concrete judgments on future revenue and profitability.

Ahn Jae-min (안재민), an analyst at NH Investment & Securities, said Nvidia's payment for its $1 billion capital increase, scheduled for the 30th, is linked to a prerequisite for setting up a special purpose vehicle, or SPV, for Brookfield's $9 billion investment. He said this makes it highly likely Naver will clear the first hurdle in building AI infrastructure. He forecast that whether it discloses specific supply contracts with key customers would become important afterward.

Kakao unveiled an AI assistant called Kanana Space, which can be called from any screen in KakaoTalk, and a PC-based personal AI agent called Canvas at 'if(kakao)26' held on Oct. 13-14.

Kanana Space plans to expand functions from schedule management, search and conversation summaries to ordering, payment, remittance and reservations. It aims to provide the service sequentially from December to selected users and to launch it publicly in March next year.

Kakao plans to use its AI agent to link demand that previously moved from KakaoTalk conversations to external platforms to product discovery and transactions. It aims to expand that into new revenue opportunities in advertising and commerce.

Sun Yoo-jin (선유진), an analyst at LS Securities, evaluated Kakao's B2C AI strategy positively in that it can leverage the country's largest user touchpoint. She said it is necessary to confirm financial contributions after verifying actual service launch and assessing accuracy and usefulness.

Kakao is also set to hold an extraordinary general meeting of shareholders on Dec. 17 to approve a corporate split. As a result, around the third-quarter earnings announcements, Naver's AI factory customer contracts and Kakao's AI service launch and corporate split are expected to be key variables in confirming their next growth strategies.