The Kakao logo is seen at the tech firm's Pangyo office in Seongnam, Gyeonggi, on Nov. 22, 2023. [YONHAP]
Information technology giant Kakao posted its strongest first quarter earnings on record on Thursday, driven by solid performances in its advertising business and key affiliates, but still faces a long road ahead in turning AI into a profitable business.
The company reported consolidated revenue of 1.94 trillion won ($1.34 billion) and an operating profit of 211.4 billion won between January and March, up 11 percent and 66 percent on year, respectively, both first quarter records.
Revenue from its advertising service, TalkBiz, rose 9 percent from a year earlier. Revenue from platform businesses including Kakao Mobility, the platform behind the Kakao T taxi-hailing app, and the mobile payment and digital wallet service Kakao Pay, increased by 30 percent.
“First quarter results were encouraging in that we achieved qualitative growth by strengthening our core competitiveness,” said Chung Shin-a, CEO of Kakao, during a conference call on Thursday.
The company has accelerated efforts this year to integrate AI services into its messenger app KakaoTalk.
In March, it launched Kanana in KakaoTalk, a service powered by its self-developed AI chatbot, Kanana, and introduced the AI search service Kanana Search in the messenger app last month. In October of last year, Kakao also introduced ChatGPT for Kakao, allowing users to access OpenAI’s generative AI service directly through the app.
“ChatGPT for Kakao has now surpassed 11 million cumulative users,” Chung announced. “We plan to introduce shopping agents this year that can understand conversational context within KakaoTalk chat rooms and make purchases on the users’ behalf.”
Kakao CEO Chung Shin-a delivers a keynote speech at the “if Kakao” developer conference held at the Kakao AI Campus in Yongin, Gyeonggi, on Sept. 23, 2025. [KAKAO]
Kakao has been restructuring its business portfolio since last year to focus more heavily on AI, selling off noncore affiliates, including Kakao Healthcare, Daum, the once-dominant internet portal that has since been rebranded as AXZ, and Kakao Games.
The number of Kakao affiliates has fallen from 147 in May 2023 to 93 currently.
“The number of affiliates will fall to 87 if the sale of Kakao Games is completed,” Shin Jong-whan, Kakao's chief financial officer, said on Thursday. “Profitability will improve as we streamline lower-performing businesses such as Kakao Healthcare and Kakao Games.”
A view of Kakao’s headquarters, known as Agit, in the Pangyo area of Seongnam, Gyeonggi. [JOONGANG ILBO]
Despite improving earnings, the market response remained muted.
Kakao shares have fallen 34.1 percent since the beginning of the year as of Wednesday, as investors fail to see tangible revenue growth generated by the company's investment in AI.
Rival Naver also reported record first quarter earnings, but its stock price has fallen more than 18 percent this year.
“Neither Naver nor Kakao has grown at the level the market expected, and neither company has presented clear indicators proving the success of their AI businesses,” Lim Hee-seok, an analyst at Mirae Asset Securities, said. “Success will likely depend on whether AI can meaningfully increase the amount of time users spend on their platforms.”
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
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