1. Xgate H1 2025 Performance: What Happened?

Xgate achieved KRW 10.6 billion in revenue in the first half of 2025, but recorded an operating loss of KRW 300 million. This falls short of market expectations for improved profitability following the return to profit in Q4 2024. While the HW/SW segment maintained stable growth, high R&D spending negatively impacted profitability. The service segment performed well with double-digit growth, and the growth in the maintenance/RMA segment demonstrates the successful expansion of the business into service and solution provision.

2. Reasons for the Performance Decline: Why These Results?

The main reason for the operating loss is the increase in selling, general, and administrative expenses, particularly R&D expenses. Although investment for future growth is essential, a short-term decline in profitability was inevitable. The significant increase in inventory is also a concern. The possibility of inventory accumulation due to new business preparations or sluggish sales cannot be ruled out, and future inventory management and turnover improvement are emerging as important tasks.

3. Investment Strategy: What Should Investors Do?

Currently, a conservative wait-and-see approach or a reduction in Xgate holdings is recommended. Closely monitor the trend of profitability improvement and inventory management. However, the growth outlook for the information security market is positive, and Xgate’s service sector growth and new business initiatives suggest long-term growth potential. Therefore, while considering short-term risk factors, it is also necessary to evaluate future growth possibilities.

4. Key Monitoring Points: Investor Action Plan

  • Profitability Improvement: Check for a return to operating profit and cost efficiency efforts in the next quarter.
  • Inventory Turnover: Monitor inventory depletion trends and improvements.
  • New Business Performance: Check the revenue and profit contribution of the new business segments.
  • R&D Spending Efficiency: Measure the effectiveness of R&D investment.
  • Exchange Rate Volatility Management: Evaluate the impact of exchange rate fluctuations and risk management capabilities.