Naver and Kakao are forecast to post their best-ever second-quarter results, but neither is celebrating. Their share prices have remained weak. Naver, after hitting a 52-week high last month, turned lower and set a new 52-week low again on July 9. Kakao is expected to post a 19.7 percent rise in operating profit, but broker target prices have been cut in succession. While earnings outlooks are solid, the lack of AI business results confirmed in numbers for the second half is weighing on the stocks.

According to consensus data from financial information provider FnGuide on July 10, Naver's second-quarter revenue is tallied at 3.3562 trillion won and operating profit at 570.1 billion won. That is up 15.1 percent and 9.3 percent, respectively, from a year earlier. Kakao's second-quarter revenue is forecast at 2.0482 trillion won and operating profit at 222.6 billion won. Revenue is seen up 1 percent and operating profit up 19.7 percent. If realised, both companies would post their highest-ever second-quarter revenue and operating profit.

Naver resets 52-week low about a month after 52-week high

Naver shares have been volatile over the past month or so. On June 1, they rose as high as 304,000 won intraday to set a 52-week high, then turned lower. On June 26, they fell to 190,300 won intraday, setting a 52-week low. The decline continued into this month. On July 9, the shares slid to 184,000 won intraday, setting another 52-week low, and closed at 184,400 won. That means the stock lowered its trough twice within about a month of the high.

The sharp rise was driven by expectations of AI infrastructure cooperation with Nvidia. But those expectations also became a factor behind the stock adjustment. After Naver on June 8 made official that it would enter the 'AI Factory' business in cooperation with Nvidia, perceptions spread that the timing of meaningful earnings contributions could be pushed out longer than expected. The shares gave back a significant part of the gains.

KB Securities analyst Ji-eun Lee (이지은) said the current share price reflects a 12-month forward price-to-earnings ratio of 14 and "only concerns about a slowdown in the core business growth, with new business value effectively barely priced in."

Still, brokerages view the second-quarter performance of the core business itself as steady. Meritz Securities analyst Hyo-jin Lee (이효진) said second-quarter trends across all divisions are similar to the first quarter. She also analysed that transaction volumes rose sharply in June as new membership subscribers to streaming platform Chzzk, who joined to watch the World Cup, flowed into commerce, and as the company secured inventory in advance for the 'Samsung Electronics Appreciation Festival.'

The effect of a Smart Store commission hike reflected since June last year is beginning to be fully reflected in the base from this quarter, so the commerce division's revenue growth rate itself is expected to slow somewhat from the first quarter. Partner fees tied to securing World Cup broadcasting rights, depreciation expenses from expanded GPU investment and marketing costs from expanded commerce promotions are also expected to overlap, slightly lowering operating profit margins from a year earlier.

For that reason, some in the brokerage industry say the core business results are steady but the stock has entered an undervalued range. DB Securities analyst Eun-jung Shin (신은정) said Naver has "come down again to an unburdensome price," and assessed a P/E around 17.4 as an attractive zone.

The key is when and at what scale AI Factory partners and customers are disclosed. Lee said that if partner and customer disclosures and contract signings continue, the stock is likely to respond flexibly even to small momentum.

Some also see the recent share-price decline as excessive. NH Investment & Securities analyst Jae-min Ahn (안재민) said after the announcement of a 1 GW data centre investment the stock has "entered an excessive decline phase," adding that "if data-centre-related revenue occurs after 2027, the positive impact will be greater than concerns." He estimated the value of the 1 GW data centre at around 13 trillion won and maintained a buy rating and a target price of 320,000 won.

Kakao: Why target prices fell despite a 19.7 percent rise in operating profit

Kakao's operating profit growth rate of 19.7 percent stands out compared with revenue growth of 1 percent. Advertising revenue in Talk Biz is expected to rise at a double-digit rate on peak-season effects and growth in targeted business messages, while commerce is seen sustaining transaction volume growth due to Family Month promotions. Strong results in the securities segment are expected to support Pay, and Mobility is expected to show steady growth. Companywide profit improvement also reflects a reduced impact from consolidating some subsidiaries with relatively low profitability.

Based on earnings forecasts alone, it is hard to interpret the outlook negatively, but the shares were weak. On June 26, they fell to 32,250 won intraday, setting a 52-week low. Brokerages set lower target prices in succession. DB Securities cut its target to 57,000 won from 69,000 won, while KB Securities set 57,000 won. BNK Investment & Securities cut to 61,000 won from 70,000 won, Hanwha Investment & Securities cut to 62,000 won from 70,000 won, and Korea Investment & Securities cut to 60,000 won from 70,000 won. Ahead of the earnings release, major brokerages lowered their expectations one after another.

A common concern behind the cuts is that an AI profit model has yet to be confirmed. Korea Investment & Securities analyst Ho-yoon Jung (정호윤) lowered the target price by 14.3 percent from the prior level, saying he adjusted down the value of KakaoTalk "to reflect the decline in peer company valuations." He said Kakao's valuation has fallen to around a P/E of 19 based on 2026 earnings estimates, and added that as the view of the internet industry as a low-growth domestic play has become mainstream, the company needs to show the possibility of monetisation through AI to break through.

Shin said 'GPT in Kakao' is estimated to have accumulated about 11 million users, but traffic indicators and external partner connections do not yet appear to be activated. She said the company needs to find an AI breakthrough in the second half centred on Kanana in Talk.

BNK Investment & Securities analyst Jong-won Lee (이종원) also said more empirical data is needed on monetisation of AI and commerce to re-rate the valuation. The company has secured the 'quantity' of users, but the evidence of 'quality' showing whether those users spend money is still insufficient.

Ultimately, AI must be proven in numbers in the second half

Both Naver and Kakao are putting AI forward as their second-half bet, but their approaches differ. Naver uses AI as a tool to enhance the competitiveness of existing core businesses such as search and commerce. In its 'AI Briefing' that summarises search results, cost-per-click advertising is scheduled to be introduced from mid-July, and advertising will also be added in the fourth quarter to its conversational search service, 'AI Tab.'

Daol Investment & Securities analyst Hye-young Kim (김혜영) said AI Briefing coverage is currently in the high-20 percent range and the goal is to reach 40 percent by the end of 2026. She said if revenue growth through AI is confirmed, a valuation re-rating could also be possible.

Kakao is accelerating efforts to turn its messenger itself into an AI agent platform. Following the recent official launch of its AI assistant, 'Kanana in KakaoTalk,' the company is preparing 'Kanana Search' to replace sharp (#) search and AI agent commerce linking gifting and reservations.

Yuanta Securities analyst Chang-young Lee (이창영) cited Kakao's ability to use user data from its own services such as shopping, maps, pay, mobility, music and webtoons, along with monthly active users of about 50 million, as a strength. He said the key, however, is whether user activity leads to higher ad unit prices, higher commerce conversion rates and growth in Pay transaction volumes for that potential to translate into actual profits.

The second-half focus is expected to be on AI performance rather than the second-quarter earnings table. LS Securities analyst Yu-jin Sun (선유진) said on Naver's AI Factory business that a contract with a single customer for the initial 200 MW build is "estimated to be in the final stage." She said if the contract is confirmed and the customer is disclosed, the feasibility of the medium- to long-term 1 GW-scale business will become more visible.

Hanwha Investment & Securities analyst So-hye Kim (김소혜) said of Kakao that gradual re-rating would appear as even part of the monetisation potential of AI agents is confirmed.