Kakao recorded its highest first-quarter revenue and operating profit. Structural growth in its platform business drove the results. Chief Executive Jeong Shin-a (정신아) presented a blueprint to shift KakaoTalk into an agentic AI platform, building on the performance.

Kakao said on Wednesday first-quarter revenue on a consolidated basis rose 11 percent from a year earlier to 1.94 trillion won, while operating profit jumped 66 percent to 211.4 billion won. Consolidated revenue posted a double-digit growth rate for the first time in 8 quarters since the first quarter of 2024. Operating margin was 11 percent, improving by about 4 percentage points from a year earlier.

Chief Financial Officer Shin Jong-hwan (신종환) explained on the earnings conference call that the first quarter typically tends to have low profitability as a seasonal off-peak period. He said this time, efficiency efforts focused on core businesses were reflected in results, and structural profitability improvement that goes beyond seasonal patterns has begun in earnest.

First-quarter platform revenue rose 16 percent from a year earlier to 1.18 trillion won. Revenue from its core Talk Biz business rose 9 percent to 608.6 billion won. Within that, advertising revenue grew 16 percent to 338.4 billion won. Business messaging rose 27 percent as message volumes increased mainly among financial advertisers and product diversification expanded how advertisers use the service. Talk display advertising also grew 10 percent, helped by an expansion of feed-type ad inventory, increased use of video and image-focused creatives, and new inflows of small and mid-sized commerce advertisers.

Jeong said the share of display advertising products excluding Bizboard in ad revenue expanded from the 10 percent range in the first quarter of last year to about 30 percent in the first quarter of this year. She said the advertising revenue structure is shifting to a more diversified one.

First-quarter combined gross transaction value for Talk Biz commerce was 2.9 trillion won, up 10 percent from a year earlier. Helped by the Kakao Shopping Festa held in March, Talk Store gross transaction value rose 18 percent and self-purchase transaction value within Gift Giving climbed 53 percent. Mobility recorded double-digit revenue growth for a third consecutive quarter, and Pay surpassed 300.0 billion won in quarterly revenue for the first time as payment, finance and platform services expanded. First-quarter content revenue rose 5 percent to 759.4 billion won. Music revenue rose 11 percent to 484.6 billion won on strong album sales by key artists and a wider scale of global performances, and media revenue rose 23 percent to 92.4 billion won.

◆ Declares shift to agentic AI platform; to pursue technology, services and partnerships in parallel

Jeong on Wednesday formalised the shift to an agentic AI platform and disclosed details of its technology readiness.

Kakao is preparing to unveil its 150B-scale Kanana 2.5 model, following its previously disclosed Kanana 2.

Jeong said Kanana 2.5 was developed from scratch and optimised for an agent AI platform, and delivers the best performance among domestic and overseas LLMs of similar parameter size. She said its parameter count is less than 10 percent of top global models, but it shows better performance in execution-focused areas such as planning and function calls.

Through its independently developed Kanana tokenizer, it confirmed effects of reducing training costs by up to 40 percent and improving inference speed by up to 60 percent compared with before.

On the services side, Kanana in KakaoTalk завершила a closed beta test on iOS in March and has also launched on Android. Jeong said user retention has held at about 70 percent, similar to the CBT. Monitoring results for April showed the share of users giving positive feedback on first messages was about 70 percent, while positive evaluations of AI response quality were about 80 percent. Download-enabled users of the Kanana model are expected to reach 31 million by year-end.

ChatGPT for Kakao surpassed 11 million cumulative subscribers, and monthly active users nearly doubled from the previous quarter. Monthly outbound messages per person also more than doubled. Kanana Search, introduced last month, saw a meaningful rise in activity based on queries among target users compared with existing shop search, despite being in its third week after launch.

On partnerships, Kakao has been running early agent-commerce experiments since April by linking Kanana in KakaoTalk with its Gift Giving service, and it plans to start experiments linking with external commerce partners within this month.

Jeong said it will make it possible to experience an early version of agent commerce linked with major vertical partners before the next quarterly results announcement. She said users will be able to make decisions quickly within conversations, while partners will establish a synergy structure by securing high-intent purchase traffic through a new channel.

She also presented a goal to shift commerce ad inventory to an open structure in the second half and, by year-end, raise the monthly share of ad revenue relative to commerce gross transaction value to about four times the level at the start of the year.

◆ Profit structure improves through affiliate reshuffle; second-quarter profit improvement limited

Portfolio reshuffling also continued. The number of consolidated subsidiaries is currently 93, and it will fall to about 87 when procedures to exclude Kakao Games from consolidation are completed.

Shin said the combined operating loss in 2025 from entities excluded from consolidation, including healthcare and games, was about 100.0 billion won. He said 2026 will be a period when the effects of portfolio efficiency are fully reflected.

Still, some cost factors exist in the second quarter. From May, charging franchise fees for taxi cruising operations is banned, which is expected to affect mobility revenue. Higher marketing costs are also expected for Piccoma's 10th anniversary event.

Shin said profit improvement in the second quarter will be limited due to the impact of a temporary expansion of marketing, despite steady revenue growth. He stressed that, on a full-year basis, it is fully possible to achieve the financial guidance presented at the start of the year. Kakao has set a target for more than 10 percent annual consolidated revenue growth this year and an operating margin of 10 percent.

Kakao's first-quarter results reflect growth in platform businesses such as Talk Biz advertising and commerce and Pay, along with efficiency efforts focused on core businesses. In the second half, a key point to watch is whether it can expand, at the actual service stage, an agent experience that continues from discovery and recommendations to payments within KakaoTalk.