Naver soars while Kakao stumbles as market bets on AI monetization

Shares of Naver and Kakao, South Korea's two leading IT companies, moved in sharply opposite directions last month even as both posted record first-quarter earnings. The market looked past current results to focus on future growth prospects, rewarding Naver for its expanding AI business while punishing Kakao over labor tensions and concerns about delayed AI monetization.

Korea Exchange data show Naver's share price rose 10.92 percent in May while Kakao's fell 11.31 percent, pushing the gap between the two stocks beyond 22 percentage points. The divergence continued Monday. Naver surged 37,500 won, or 16.03 percent, to close at 271,500 won, while Kakao edged up just 750 won, or 1.79 percent, to finish at 42,700 won.

Both companies delivered strong first-quarter results. Naver posted consolidated sales of 3.2411 trillion won and operating profit of 541.8 billion won for the January-March period — up 16.3 percent and 7.2 percent, respectively, from a year earlier and the highest quarterly figures in the company's history. Kakao also set a first-quarter record, reporting consolidated sales of 1.9421 trillion won and operating profit of 211.4 billion won, with sales rising 11 percent and operating profit surging 66 percent year on year.

Yet the market proved more sensitive to the visibility of future growth drivers and organizational stability than to the earnings themselves.

Naver has drawn investor attention on the back of growing expectations for its AI business. Anticipation has built around a planned meeting between Naver Chairman Lee Hae-jin and Nvidia CEO Jensen Huang on June 5, with investors watching for signs of deeper AI cooperation. The two previously met in Gyeongju last October and agreed to jointly develop an industrial physical AI platform.

A push into defense has emerged as another catalyst. Naver Cloud, a Naver subsidiary, established a dedicated task force Monday focused on AI transformation for the defense sector, to be led directly by CEO Kim Yu-won, who oversees the company's AI operations. The market is watching whether Naver can follow a growth path similar to that of U.S. data analytics firm Palantir, which built its business by securing the Pentagon and U.S. intelligence agencies as key customers.

The fact that Naver's AI investments are already generating revenue has also drawn positive assessments. "Naver is deepening the links between AI search, shopping and its advertising platform to build out its monetization structure," said Lee Seung-hun, an analyst at IBK Investment Securities. "Its B2B AI business in the public, financial and manufacturing sectors — built on the HyperCLOVA X large language model — is entering a phase of meaningful revenue generation."

Kakao, by contrast, has seen investor sentiment cool as labor tensions have come to the fore. The company is facing its first-ever strike threat since its founding, with wage and collective bargaining negotiations stalled. The union has announced a large-scale rally of approximately 1,200 members for June 10. The conflict appears to be spreading across the group, as unions at key affiliates — including Kakao Pay, Kakao Enterprise, DK TechIn and XL Games — have also secured the right to take industrial action.

Investors are watching whether a prolonged internal dispute could slow Kakao's business momentum. In an intensifying AI race, a drawn-out labor conflict risks weighing on execution speed and organizational efficiency. Kakao CEO Jeong Shin-a acknowledged the situation in a recent internal notice, saying she was "sincerely sorry for not being able to quickly resolve the various concerns and uncertainties."

The prospect that Kakao's AI monetization could lag behind Naver's is also seen as a headwind. "Kakao's 'Kanana in KakaoTalk' is set to be enhanced through integration with the Kakao ecosystem — including mobility and pay services — but it is currently still in the stage of refining the AI agent," said Kim Hye-young, an analyst at Daol Investment Securities. "Full-scale monetization is unlikely before 2027."

"Both companies posted solid earnings, but the market is currently placing a higher premium on future growth stories than on present results," a securities industry official said. "Naver stands out because its AI business is entering the monetization phase, while Kakao's AI strategy is acknowledged as sound but still has to prove itself."