Naver’s prolonged share-price weakness continues. One of the main reasons cited is that the money it earns from search and advertising is being used to fund AI infrastructure and cover losses at its subsidiaries. While Naver has announced a new shareholder return plan and is moving to increase its dividend payout, the market is interpreting the intent differently. The increase does not appear to reflect stronger cash generation. Rather, it looks more like an effort to shore up the stock price through a more aggressive shareholder return policy.
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According to industry sources, Naver will apply its new shareholder return plan from the 2025 year-end dividend, which is to be paid in April this year, through 2028, covering dividends based on 2027 results. Under the new plan, 25% to 35% of the average consolidated free cash flow, or FCF, over the previous two years will be returned to shareholders through either share repurchases and retirement or cash dividends. FCF is calculated by adding back non-cash charges such as depreciation to consolidated operating profit, then subtracting capital expenditures and corporate tax payments.
The dividend increase itself is clear. Naver will pay a total of 393.6 billion won, or 2,630 won per share, as its 2025 year-end dividend in April this year. That compares with 1,130 won per share for the 2024 year-end dividend paid last year and 1,205 won for 2023. Looking at cash dividends alone, the total payout rose 133.7% from a year earlier, while the dividend per share increased 132.7%.
But the increase is the result of a higher shareholder return benchmark itself. Until last year, Naver set its year-end dividend at 20% of the average consolidated FCF over the previous two years. Starting this year, that ratio has been raised by 5 to 10 percentage points, to 25% to 35%.
The capacity to expand dividends comes from Naver’s core business. Last year, the company posted 2.5197 trillion won in operating profit from its Search Platform and Commerce businesses. Its Fintech division also generated 142.7 billion won in operating profit.
However, the Content and Enterprise divisions posted operating losses of 100.1 billion won and 332.9 billion won, respectively. In effect, losses in those two businesses were absorbed by Naver’s core portal operations, centered on Search Platform and Commerce. As a result, Naver’s consolidated operating profit rose 11.6% from a year earlier to a record 2.2081 trillion won.
The problem is that those earnings do not remain intact. That is because Naver continues to spend heavily on capital expenditures, or CAPEX, to upgrade its AI infrastructure.
Last year, Naver spent 1.2347 trillion won on expanding data centers and acquiring tangible assets such as GPUs. As a result of that investment, depreciation expenses reflected on its books last year totaled 490.5 billion won. The cash that actually remains with the company after deducting such large-scale capital spending becomes free cash flow, the source of shareholder returns.
In other words, Naver’s dividend increase is not the result of stronger business performance generating more cash. The heavier its investment burden becomes, the less room it has for shareholder returns.
Kim So-hye, an analyst at Hanwha Investment & Securities, said, “Naver’s first-quarter earnings are expected to fall short of operating profit estimates despite solid growth in commerce, due to the burden of infrastructure spending,” adding, “Margin pressure from increased investment was already anticipated, but the company is now entering a phase in which that burden is becoming heavier.”
In that respect, Naver’s strategy resembles that of global Big Tech companies pouring astronomical sums into AI infrastructure. Meta, for example, spent $72.2 billion, about 108 trillion won, on capital expenditures last year. That was an 84% jump from $39.2 billion, about 58 trillion won, the previous year.
Even so, Meta generated $115.8 billion, about 173 trillion won, in net cash provided by operating activities last year. Despite stepping up capital expenditures, its free cash flow came to $43.6 billion, about 65 trillion won, down just 16% from a year earlier. In other words, it managed to preserve its cash capacity.
By contrast, Naver’s consolidated free cash flow fell by more than half, from 438 billion won in the fourth quarter of 2024 to 185 billion won in the fourth quarter of 2025. That is why similar investment expansion is being interpreted differently: for global Big Tech, it is viewed as aggressive investment, while for Naver, it is seen as a dividend increase aimed at defending its share price.
The same reasoning is seen behind the recent wave of target-price cuts for Naver by securities firms this month. From April 3 to April 6, four brokerages — NH Investment & Securities, Hanwha Investment & Securities, DB Financial Investment and Meritz Securities — all lowered their target prices for the company. NH Investment & Securities cut its target to 320,000 won from 380,000 won, Hanwha Investment & Securities to 300,000 won from 340,000 won, DB Financial Investment to 300,000 won from 346,000 won, and Meritz Securities to 330,000 won from 410,000 won. Over the same period, the average target price for Naver fell 5.09%, from 352,118 won to 334,211 won.
Lee Hyo-jin, an analyst at Meritz Securities, said, “Naver’s infrastructure costs are expected to increase 30% year on year due to the depreciation burden from computing assets such as GPUs, which began to be introduced in earnest from the fourth quarter of last year,” adding, “The company appears to need a cost-cutting plan that can offset CAPEX.”
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