Record earnings, but Kakao shareholders cry foul as share price stalls near W40,000

Kakao's share price has failed to recover the 40,000 won ($28) mark, drifting sideways despite the company posting record-breaking earnings.

While rivals including Naver and other tech firms have been putting concrete shape to their AI strategies, doubts about Kakao's direction continue to grow. Even as the company delivered all-time high quarterly results driven by its Talk Business segment, shareholders have been venting frustration, saying they have been burned again.

Kakao disclosed second-quarter sales of 2.1 trillion won and operating profit of 277 billion won — the highest quarterly sales in the company's history.

The platform segment posted sales of 1.23 trillion won, underpinned by strong growth in Talk Biz (648.3 billion won) and Talk Biz advertising and subscriptions (399.9 billion won). Revenue from other platform businesses, including mobility and pay services, came to 587 billion won.

Even so, the share price has yet to reclaim the 40,000 won level. After peaking at 173,000 won in 2021, the stock closed Friday at 39,900 won. Shareholders have flooded online forums with comments such as "fooled again," "should have gotten out" and "pathetic."

Industry analysts say Kakao's share price ultimately hinges on AI. Despite sharp revenue growth in Talk Biz and improving profitability at subsidiaries, they argue the AI business is what matters most.

Naver Chairman Lee Hae-jin has broken a long silence with a flurry of high-profile moves, including a partnership with Nvidia, while Kakao Future Initiatives Center head Kim Bum-soo remains effectively sidelined by ongoing legal risk.

The contrast is particularly stark: Naver has been rolling out major AI initiatives in rapid succession, while Kakao's AI plans have yet to take concrete form.

On Friday, Naver CEO Choi Su-yeon told an earnings conference call that the company plans to bring a 55-megawatt global AI factory online in the first half of next year, scaling up to 200 megawatts by 2028 and eventually to the gigawatt level. The strategy is to capture sovereign AI infrastructure demand across the Asia-Pacific, European and Middle Eastern markets.

At an earlier conference call, Kakao CEO Jeong Shin-a signaled a partnership with Coupang Eats and pledged to expand Kakao's "AI ecosystem." But industry observers say even that effort trails Naver, which is already collaborating with a range of platforms through its Naver membership program.

"Earnings improvement in the core business is positive, but what can lift the growth rate and price-to-earnings ratio is the agent story," said Kang Seok-woo, a senior researcher at Shinhan Investment. "The share price depends on AI performance, as the launch of agents and the expansion of partner services could begin generating real revenue from next year."

Kim Dong-woo, an analyst at Kyobo Securities, said profit growth would continue even before AI monetization kicks in, thanks to the trimming of non-core businesses and platform revenue gains. "However, to drive a meaningful share price rally, the company needs to overcome the perception that expectations for AI monetization remain low," he added.