Naver touts AI progress as earnings hit record high

Naver's headquarters in Seongnam, Gyeonggi Province. (Naver)

Naver CEO Choi Soo-yeon on Friday expressed her satisfaction with the company’s business results regarding its upgraded, hyperscale generative artificial intelligence model, HyperClova X, unveiled in August.

“Based on what we’ve observed and experienced so far, we seem to be having better results than we expected," Choi said when asked about the level of the IT giant’s hyperscale AI-based business when compared to her prior expectations, during the company’s earnings conference.

Naver still faces questions over its services and business models amid the fierce technological competition in the fast-growing AI market, the CEO noted. But its HyperClova X-based services such as Cue:, a generative AI search service, and Clova for Writing, a content creation tool for creators and business operators, have elicited good responses from users, Choi explained.

Naver is planning to expand the application of its hyperscale model to its flagship search service. It has undergone PC testing on the Cue: service starting in September to advance it gradually based on its massive amount of high-quality data.

Choi further hinted that a hybrid cloud service, called Neurocloud for HyperClova X, will be rolled out within this month. The service aims to prevent enterprise customers’ data leakage with a strong focus on security. The Cue: service will also be available on users’ smartphones starting next year.

“We’ll provide the tools and customized services to improve the productivity and efficiency of regular users, creators and business operators with our advanced technologies and accumulated data sources. We’ll search for opportunities to generate new profit out of it,” the Naver chief said.

Additionally, Naver has set its eye on its global expansion with future technologies.

The Korean IT firm struck a deal with the Saudi Arabian government to create a digital twin platform for the country's five cities, including its capital Riyadh, based on its cloud technology and operate the platform for the next five years starting in 2024.

Naver did not elaborate on the financial terms of the contract, but industry sources predicted that the deal would be worth over $100 million.

"(The recent deal) is a meaningful achievement in that our technology has been highly evaluated globally in the next-generation future cities construction market," Choi said. "We expect to expand (our business) beyond Saudi Arabia to the world."

Before Friday's earnings call, the IT firm released its quarterly earnings reports for the July-September period before the opening of the Korea Exchange. The company logged all-time high quarterly results in profit and sales.

Naver said its third-quarter operating profit came to 380.2 billion won ($290 million) on a consolidated basis, up 15.1 percent from a year ago. Sales rose 18.9 percent on-year to 2.44 trillion won.

Compared to the consensus projected by local analysts, provided by market intelligence firm FnGuide, the operating income was higher than the estimate of 368.1 billion won but lower than the sales forecast.

Net profit also jumped 53.8 percent on-year to 356.2 billion won over the cited period.

Naver attributed the strong quarterly earnings to the sharp growth of its key businesses, centering around commerce, content and cloud.

By business, the company's commerce unit recorded 647.4 billion won in revenue, advancing 41.3 percent from a year earlier, while content sales soared 39.5 percent on-year to 434.9 billion won.

The cloud sector gained 30.3 percent on-year to log 123.6 billion won in sales in the third quarter. The search platform saw its sales increase by 0.3 percent to 898.5 billion won with its fintech sales increasing 15.1 percent on-year to 340.8 billion won.

Its capital spending on investment went up 3.3 percent on-year to 157.3 billion won due to the construction of the company's second data center, Gak Sejong, in Sejong city, alongside AI equipment advancement, the company said.

On the back of the robust quarterly earnings results and rosy outlook of its business, Naver's shares closed at 200,500 won on Friday, up 5.08 percent from the close of the previous session.

By Jie Ye-eun(yeeun@heraldcorp.com)