NAVER (035420.KS), Kakao Hit Record Q1 but Lag KOSPI Rally

TL;DR - NAVER booked all-time-high Q1 revenue and Kakao consensus signals 66% operating-profit growth, yet both names trail an approximately 65% KOSPI rally year-to-date. - NAVER (035420.KS) Q1 2026 revenue rose 16.3% to ₩3.2411 trillion ($2.37 billion); operating profit climbed 7.2% to ₩541.8 billion ($395 million). - Kakao (035720.KS) reports Q1 results May 7; investor focus shifts to AI monetization timelines and any NAVER buyback follow-through.

Lead

South Korea's two biggest internet platforms are delivering some of their strongest earnings ever — and trading like also-rans. NAVER posted record first-quarter revenue on April 30, while Kakao is expected to show double-digit operating-profit growth when it reports May 7. Both stocks have nonetheless lost ground in 2026 even as the KOSPI has rallied to historic highs.

What Happened

NAVER (035420.KS), Korea's largest search and commerce platform, reported Q1 2026 consolidated revenue of ₩3.2411 trillion ($2.37 billion), up 16.3% year-over-year, and operating profit of ₩541.8 billion ($395 million), up 7.2%, according to its earnings release covered by The Korea Herald and Asia Business Daily. Per Asia Business Daily and other coverage, the Q1 2026 revenue marked another all-time high for the company; outside reporting (e.g., BigGo Finance) has framed it as a fifth consecutive quarter of record revenue.

Despite the figures, NAVER shares are down 14% year-to-date as of May 4, while Kakao (035720.KS) — the operator of the KakaoTalk messenger — has fallen 21%, against an approximately 65% gain for the benchmark KOSPI index year-to-date, per Korea Exchange (KRX) data. NAVER trades roughly 53% below its July 26, 2021 record of ₩465,000 (about $339), and Kakao roughly 72% below its June 24, 2021 peak of ₩173,000 (about $126).

CFO Kim Hee-cheol told analysts NAVER is "considering" a treasury share cancellation, with details to follow in a future disclosure, per Chosun Biz. Kakao's Q1 2026 consensus, compiled by FnGuide (a Korean financial-data provider), points to revenue of ₩2.0091 trillion ($1.47 billion), up 8% year-over-year, and operating profit of ₩175.3 billion ($128 million), up 66% year-over-year, ahead of the May 7 report, per Chosun Biz.

Why It Matters

This is the first concrete signal that record fundamentals alone are no longer enough to re-rate Korea's platform leaders. Strong revenue and rising margins coexist with double-digit share-price declines — a structural shift in how the market is pricing AI-led growth stories. Brokerages have reset expectations sharply lower in recent weeks: nine of 11 firms covering NAVER cut targets in April, with DS Investment & Securities trimming to ₩300,000 from ₩400,000, and SK Securities cutting Kakao to ₩74,000 from ₩87,000, per Bloomingbit citing brokerage notes. The disconnect points to investor skepticism that heavy AI infrastructure spending will translate into near-term cash flows.

Business Impact

NAVER's Q1 operating margin slipped to 16.7% — the lowest quarterly figure in three years, per Chosun Biz — as promotional spending and AI infrastructure outlays rose. Kim Hee-cheol said GPU usage has come in roughly 30% below internal projections so far, even as the company plans to keep ramping AI capex through 2026, per The Korea Herald. AI was already meaningful in the mix: NAVER said advertising revenue climbed 9.3%, with AI-powered targeting tool ADVoost contributing more than half of that growth, per The Korea Herald.

Kakao's strategy hinges on turning KakaoTalk into an AI "super-app" via its "Kanana in KakaoTalk" feature and a "ChatGPT for Kakao" tie-up. Samsung Securities analyst Oh Dong-hwan said traffic gains so far have been "limited" and that monetization will take time, per Chosun Biz. Past governance and legal overhangs on Kakao's leadership have also weighed on new-business momentum, per Chosun Biz.

Industry & Historical Context

The KOSPI's roughly 65% year-to-date advance has been led by chipmakers, shipbuilders, and defense names rather than consumer internet platforms — a reversal of the 2020-2021 cycle when NAVER and Kakao were the index's bellwethers. Korea Investment & Securities analyst Jung Ho-yoon said the domestic ad and e-commerce markets face "growth limits," and that technology alone "cannot fully offset" that constraint, per Chosun Biz. The closing of NAVER Financial's share swap with Dunamu, the operator of crypto exchange Upbit, has been pushed from June to September pending Korea Fair Trade Commission antitrust review, with delays to the Digital Asset Basic Act — Korea's pending crypto-asset framework — adding to the timing uncertainty, per Digital Today.

What to Watch

• Kakao's May 7 Q1 print: whether reported figures meet the FnGuide consensus, plus any update on Kanana traffic, per Chosun Biz.
• NAVER's formal disclosure on the size and timing of any treasury-share cancellation, per Chosun Biz.
• AI Tab launch and shopping-agent monetization milestones at NAVER over the second half, flagged by analysts as a precondition for re-rating, per Digital Today.
• Further brokerage target revisions after Kakao's report, following the April wave of cuts catalogued by Bloomingbit.

Sources: - Chosun Biz — https://biz.chosun.com/stock/stock_general/2026/05/05/V2CTVWSTSBHGLNRML4JYW3AXXY/ - The Korea Herald — https://www.koreaherald.com/article/10729307 - Digital Today — https://www.digitaltoday.co.kr/en/view/50176/naver-kakao-shares-lag-despite-solid-earnings-ai-monetisation-delays-cut-valuation-expectations - Bloomingbit — https://en.bloomingbit.io/feed/news/109926 - Asia Business Daily — https://www.asiae.co.kr/en/article/2026043008060697860

By LineVest Markets Desk — 2026-05-05

This article is for informational purposes only and does not constitute investment advice.