Naver delivers best Q2 results in history on shopping, content growth

Naver Corp. headquarters in Seongnam, Gyeonggi Province. [Photo by Lee Seung-hwan]

South Korean platform giant Naver Corp. posted record-breaking second-quarter earnings, showcasing robust growth across all its business segments, including commerce, content, and fintech.

Despite a sluggish advertising market due to an ongoing economic recession, Naver demonstrated resilience and managed to drive sales in search advertisements and commerce through product enhancements. Remarkably, its sales as an online shopping platform and intermediary more than doubled compared to the previous year.

Last Friday, Naver announced sales of 2.41 trillion won ($1.84 billion) for the second quarter, up 17.7 percent from a year ago and an operating profit of 372.7 billion won, up 10.9 percent. Operating profit surged by 10.9 percent on-year to 372.7 billion won.

The results are the largest quarterly earnings ever for the company, with operating profit exceeding market expectations of 368.4 billion won.

“The result is largely attributed to the strategic refinement of our artificial intelligence (AI) foundation, in which we have invested in the recent few years, and our continued efforts to improve profitability by expanding monetization of each business segment and carefully controlling costs,” said Choi Soo-yeon, chief executive officer of Naver, at a conference call on Sunday.

While overall operating expenses, which include labor costs and fees from payments, increased 19.0 percent year over year to 2.04 trillion won, business growth was driven by search platforms at 0.5 percent, commerce at 44 percent, fintech at 14.9 percent, and content at 40.1 percent. Only the cloud business, which accounts for about 4 percent of total quarterly sales, saw a slight decline of 0.4 percent. “While global search platforms turned positive this quarter after a decline in the second half of last year, Naver’s search advertising has continued to grow 5 percent and grew more than 4 percent from a year ago in the second quarter,” Choi said.

In the meantime, Naver plans to speed up its business expansion related to generative AI by releasing its own large language model (LLM), HyperCLOVA X, and a conversational agent, Clova X, in the market on August 24.

Shares of Naver jumped to as high as the 5 percent range shortly after the market opened on reports that the company posted a record-high operating profit in the second quarter, although they finished with a modest 0.22 percent gain. Brokerage analysts expect the stock to rise further with the launch of HyperCLOVA X late this month.

“Generative AI is expected to generate profits for the company to dispel market concerns,” said Kim Ha-jung, an analyst at Daol Investment & Securities Co.