Kakao’s first-quarter profit falls 55.2% on server investments

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Kakao Corp. reported profit in the first quarter fell 55.2 percent due to continued investment in server infrastructure and new business projects.

Operating profit reached 71.1 billion won ($53.7 million) in the first quarter, compared with 158.7 billion won a year ago, according to regulatory filing Thursday. Sales rose 5.4 percent to 1.74 trillion won, but net profit plunged 93.4 percent to 87.1 billion won.

“Fixed costs such as labor costs, amortization and infrastructure expenses increased as we continued to invest in data center redundancy and addition to ensure stable services even in the off-season in the advertising market and the economic downturn,” a Kakao spokesperson explained. “Our artificial intelligence-related investments were also substantial for the quarter and we plan to continue investing in our AI foundation model as a future growth engine.”

Specifically, platform and content business revenue increased 8.9 percent and 1.3 percent on-year to 964.7 billion won and 775.6 billion won, respectively.

In the platform segment, Kakao Talk revenue increased 11.8 percent to 515.6 billion won, driven by an increase in transactional revenue, including gift and Talk store sales.

Revenue from other platforms increased 17.6 percent to 365.6 billion won due to balanced growth in Kakao Mobility’s taxi, agency and parking businesses, as well as stable revenue from Kakao Pay’s payment and financial services.

However, portal business revenue fell 26.7 percent to 83.6 billion won. Kakao is currently considering a separation of its portal site business, DAUM, as a company in company (CIC).