As major South Korean IT services companies expanded their top lines on the back of artificial intelligence (AI) and cloud demand, profitability diverged sharply from one player to the next. The ability to convert AI transformation (AX) demand into actual earnings was the defining factor in first-half results.

According to consolidated semi-annual reports filed with South Korea’s Financial Supervisory Service Electronic Disclosure System (DART), LG CNS and Shinsegae I&C posted the highest operating margins in the first half of this year at approximately 7.8% each. SK AX followed at 7.3% and CJ OliveNetworks at 6.7%. Hyundai AutoEver came in at 5.1%, Samsung SDS at 4.4%, Lotte Innovate at 4.0%, and POSCO DX at 2.9%.

The ranking and year-over-year changes in operating margin across these companies illustrate the divergence in their AX strategies. Companies that increased their mix of high-value AI and DX projects or exited low-margin businesses lifted profitability, while those that invested preemptively in GPU infrastructure and data centers saw near-term cost burdens reflected in their results.

Three Companies That Drove Margin Improvement

SK AX delivered profit growth that outpaced its revenue expansion. On a standalone basis, first-half revenue rose 3.1% year-over-year to 1.27 trillion won (approximately $927.4 million), while operating profit climbed 17.4% to 92.8 billion won (approximately $67.7 million). Operating margin improved by roughly 0.9 percentage points from about 6.4% in the first half of last year to 7.3% this year.

The improvement is attributed to a shift in business portfolio and productivity gains. The company increased technology-driven projects over labor-intensive systems integration (SI) work, while internally deploying AI solutions to automate business processes—both of which translated into higher profit.

Shinsegae I&C lifted profitability despite flat revenue. First-half revenue was 353.6 billion won (approximately $257.9 million), roughly in line with the prior-year period, but operating profit rose 14.8% to 27.7 billion won (approximately $20.2 million). Operating margin climbed 1 percentage point from about 6.8% in the first half of last year to 7.8% this year. The expansion of subscription-based solution offerings, business structure optimization, and AI-driven productivity improvements were the key drivers.

Lotte Innovate posted a significant profit increase even as revenue declined. First-half revenue fell 1.7% to 555.7 billion won (approximately $405.2 million), but operating profit surged 47.6% to 22.1 billion won (approximately $16.1 million). Operating margin rose 1.4 percentage points from 2.6% to 4.0%. Selective bidding focused on high-margin projects and a narrower loss at EV charging subsidiary EVSIS underpinned the performance.

Companies Where Investment Costs Weighed on Margins

LG CNS retained the top spot in operating margin, though the figure edged lower. First-half operating margin slipped from 8.2% last year to 7.8% this year. The company expanded its R&D scope into generative AI, agentic AI, physical AI, and GPU-as-a-Service (GPUaaS), pushing first-half R&D spending to 26.8 billion won (approximately $19.5 million). That said, cloud and AI revenue—which includes cloud, data, and AI—grew 5.1% year-over-year to 1.67 trillion won (approximately $1.2 billion), maintaining its 59% share of total revenue.

Samsung SDS saw its operating margin fall sharply due to one-time costs. First-half revenue rose 1.0% to 7.07 trillion won (approximately $5.2 billion), but operating profit dropped 37.8% to 310.1 billion won (approximately $226.1 million). Operating margin declined 2.7 percentage points from 7.1% to 4.4%. The primary factor was a one-time recognition of 112 billion won (approximately $81.7 million) in retirement benefit expenses in the first quarter following a change in severance calculation standards. Even excluding that item, first-half operating margin would have been only about 6.0%. Cloud revenue, however, continued to grow, rising 11.5% to 1.47 trillion won (approximately $1.1 billion).

Hyundai AutoEver’s profitability declined despite double-digit top-line growth. First-half revenue jumped 16.6% to 2.19 trillion won (approximately $1.6 billion), but operating profit rose only 3.4% to 111.7 billion won (approximately $81.5 million). Operating margin fell from 5.8% to 5.1%. The main culprit was a near-halving of gross profit from automotive software, which dropped from 71.5 billion won (approximately $52.1 million) in the first half of last year to 36.6 billion won (approximately $26.7 million) this year. Slowing navigation sales and increased R&D spending for next-generation platform development weighed on results.

POSCO DX suffered a sharp deterioration in profitability due to investment adjustments at its key customers. First-half revenue fell 16.8% to 474.1 billion won (approximately $345.7 million), while operating profit plunged 66.2% to 13.5 billion won (approximately $9.8 million). Operating margin tumbled 4.1 percentage points from 7.0% to 2.9%. Reduced capital expenditure on steel and secondary battery materials facilities, along with project schedule adjustments, dragged down both revenue and profit.

CJ OliveNetworks was the only company among the eight to grow both revenue and operating profit by more than 20%. First-half revenue rose 20.7% to 466.3 billion won (approximately $340.0 million), and operating profit increased 20.8% to 31.3 billion won (approximately $22.8 million). Operating margin held steady at 6.7%, similar to last year. The expansion of group-wide AX initiatives and the broader application of AI Factory and logistics solutions across industrial sites positively impacted results.

Affiliate Dependence Also Diverges

Internal transaction dependence also moved in different directions across the group. Samsung SDS saw its affiliate revenue share decline from 81.3% in the first half of last year to 78.2% this year, while LG CNS fell from 50.9% to 48.9% and Lotte Innovate from 65.0% to 61.8%. Growth in external customer revenue drove the shift.

In contrast, Hyundai AutoEver’s affiliate revenue share rose from 94.2% to 96.1%, and POSCO DX’s climbed from 94.6% to 96.5%. For Hyundai AutoEver, group-level ERP and cloud investments fueled growth, while POSCO DX once again demonstrated a structure in which reduced group investment directly translates into weaker results. Shinsegae I&C also saw its group-related revenue share rise from 67.9% to 69.0%.

An industry source said, “How each company responded to expanding AI and cloud demand is driving the divergence in profitability. Companies that extended their existing SI businesses into cloud operations and AI services, or adjusted their portfolios toward high-margin businesses, defended profitability, while those investing preemptively in AI platforms, GPUs, and data centers are experiencing near-term cost pressures.”

The source added, “Since system integration and operational capabilities are essential for enterprises to connect their existing business systems with generative AI, the more AI projects evolve from one-time implementations into recurring operations and service revenue, the greater the room for margin improvement at IT services firms.”