Kakao shattered profit records in the second quarter and declared its platform business had returned to a structural growth path, boosting confidence that the company can outperform its full-year targets while laying the groundwork for an AI-driven future.

Consolidated revenue reached KRW 2,099.1 billion, a 9% increase from a year earlier and 8% higher sequentially. Operating profit leapt 36% year-on-year to KRW 277 billion, lifting the operating margin to 13% – three percentage points above the prior year’s level. This marked the first time since 2022 that the company recorded double-digit top-line expansion on a consolidated basis.

Metric (KRW billions)Q2 2025Q2 2026YoY ChangeRevenue1,926.02,099.1+9%Operating Profit203.7277.0+36%Operating Margin10%13%+3ppPlatform Revenue1,052.01,230.1+17%Content Revenue860.5868.1+1%Net Income (continuing)—199.0—

However, consolidated net income slumped to only KRW 18.1 billion. The distortion was caused by a one-time loss from discontinued operations linked to governance simplification and a related income tax charge. Excluding those items, profit before tax from continuing operations stood at KRW 364 billion, and net income from continuing operations was KRW 199 billion, highlighting the underlying health of the business.

Platform Takes the Lead

Platform revenue was the clear highlight, growing 17% year-on-year to KRW 1,230.1 billion. Within that, TalkBiz – the company’s core messaging-based advertising and commerce engine – delivered revenue of KRW 643.1 billion, up 12%. Advertising and subscription revenue reached a quarterly record of KRW 400.1 billion, rising 14% as financial advertisers ramped up business messages and feed-based display ads gained traction.

CFO Jaden Shin noted a structural shift in ad revenue: “Excluding BizBoard, display ad revenue grew threefold year-on-year and now accounts for 45% of total DA revenue. The pivot from a BizBoard-centric structure to feed-based advertising is well underway.”

Commerce revenue advanced 10% to KRW 243.1 billion, despite a sequential dip following Lunar New Year. TalkGift self-purchase GMV jumped 39% and now represents around 20% of total TalkGift GMV, a sign that everyday shopping habits are forming inside KakaoTalk. KakaoPay also posted record quarterly revenue and operating profit, thanks to robust securities trading activity.

In contrast, content revenue inched up just 1% to KRW 868.1 billion. Story revenue plunged 16% as Piccoma’s yen-denominated sales fell 9% in a weakening Japanese manga market. Music revenue grew 8%, bolstered by concerts and merchandise from artists such as aespa and NCT Wish.

Agentic AI Vision Takes Shape

CEO Shina Chung used the call to detail an AI strategy centered on what she called the “intention economy,” where AI agents understand user intent and complete real-world actions. She announced an agent-to-agent (A2A) partnership with Coupang Eats that will allow KakaoTalk users to order food and pay without leaving a chatroom.

“This is not a simple API connection,” Chung said. “We must redesign the full service architecture and align roles, businesses models, and operating standards. Delivery is the ideal vertical to prove agentic AI’s utility because it has high frequency and low user involvement.”

The partnership had been anticipated a quarter earlier, leading analysts to press on the delay. Chung responded that the process requires unprecedented coordination and that the companies are in detailed discussions, aiming for a launch “in the near future.”

Kakao is also building out its AI ecosystem through Play MCP, which has attracted more than 3,400 tools and processes over 100,000 calls daily. The company’s on-device model, Kanana 2.1.3B, has been open-sourced and is already handling tasks like conversation summarization and call summaries. ChatGPT for Kakao has amassed 13 million cumulative subscribers, with average daily messages per user exceeding six and daily time spent nearing eight minutes. Over 80% of user feedback for Kanana inside KakaoTalk is positive, and retention has improved to approximately 80% from 70% shortly after launch.

Chung expects the monthly active user base for AI services within KakaoTalk to surpass 10 million by the end of 2026. Monetization is slated to begin meaningfully in 2027, with AI-related revenue targeted to reach a double-digit percentage of total TalkBiz revenue by 2028.

Profit Discipline and No AI Infrastructure Bets

Profit growth was not merely a revenue story. Operating expenses rose only 6% year-on-year, with labor costs up just 2% and outsourcing/infrastructure costs increasing only 2% despite AI investment. Marketing spending jumped 22%, driven by Piccoma and KakaoPay, but remained at 5% of revenue.

CFO Jaden Shin emphasized that the Q2 performance establishes a new baseline, not a one-time peak. “Governance reforms and the divestiture of non-core businesses reduced the loss burden, allowing core platform profits to flow through to the consolidated level,” he said. “Starting from Q3, the full effect of these changes will be reflected, and we have little doubt we will outperform our initial targets of over 10% revenue growth and 10% operating margin.”

When asked about the booming AI infrastructure market, CEO Chung was unequivocal: Kakao will not invest in data centers or GPU cloud. “We reviewed the entire AI value chain and concluded that B2C AI services – where Kakao has a unique ability to embed experiences into daily life – offer the best risk-adjusted returns. Large-scale infrastructure capex would create a heavy financial burden with uncertain ROI given rapid hardware cycles and competitive supply.”

The decision marks a stark contrast to some peers and reflects Kakao’s strategy to focus on models and services that can turn AI into a daily habit for its 10-million-plus users.

Q&A in Brief

Goldman Sachs’ Eric Cha asked about the delayed AI partnership. Chung explained the need to design full user flows and align business terms, calling the work “unprecedented globally.”
NH Investment’s Jaemin Ahn questioned the durability of margins. CFO Shin said the core business growth is ample to fund AI investments and that standalone operating margin, which hit 18%, should significantly exceed 20% by 2028.
HSBC’s Joon Yoon Kim pressed on ad growth sustainability. Chung reaffirmed double-digit guidance for H2 and 2026, citing growth in business messages, feed-based ads, and an eventual move into search advertising, leveraging AI-powered user intent signals.

With its core platform firing on all cylinders and an ambitious AI roadmap anchored in daily user habits, Kakao enters the second half with strong momentum and a clear differentiation in how it plans to capitalize on the agentic AI era.