Kakao Games reported revenue of KRW 115.8 billion, an operating loss of KRW 8.6 billion, and a net loss of KRW 33.5 billion for the first half of 2025. The decline in sales compared to the same period last year is primarily attributed to the base effect of “Odin: Valhalla Rising” and the lack of new titles.
2. Why These Results? Analyzing the Earnings Decline
In addition to declining sales, increased R&D expenses, expanded marketing costs, and new investments led to an operating loss. Net loss also significantly fell short of market expectations, potentially negatively impacting investor sentiment.
3. What’s Next? Future Outlook and Investment Strategies
Kakao Games is striving to improve its fundamentals through the growth of its PC game segment and R&D investments aimed at securing future growth drivers. However, risk factors such as declining sales, worsening profitability, high R&D expenses, and financial burdens also exist. Therefore, investors should maintain a conservative investment strategy while closely monitoring the success of new titles and the visibility of a turnaround.
4. Investor Action Plan
Short-term Investment: A cautious approach is necessary, considering market conditions and stock price volatility.
Mid- to Long-term Investment: Continuously monitor the success of new releases and the visibility of a turnaround.
Frequently Asked Questions
How did Kakao Games perform in the first half of 2025?
The company reported revenue of KRW 115.8 billion, an operating loss of KRW 8.6 billion, and a net loss of KRW 33.5 billion.
What are the main reasons for the decline in earnings?
The base effect of “Odin: Valhalla Rising”, the absence of new titles, and increased R&D expenses are the primary factors.
What is the future outlook for Kakao Games?
While the growth of the PC game segment and R&D investments are positive, risk factors like declining sales and profitability exist. The success of new games is a key variable.
Kakao Games reported a 31.1% year-over-year decline in revenue to KRW 122.85 billion in Q1 2025, along with operating and net losses of KRW 12.44 billion and KRW 33.43 billion, respectively. The debt-to-equity ratio increased slightly, and operating cash flow worsened. The sluggish performance of its core mobile game business is the primary culprit, with continued sales declines in existing games and delays in new releases. While the PC game segment showed solid growth, its relatively small contribution to overall revenue limited its impact on improving the bottom line. The blockchain business (BORA) has yet to generate significant results.
2. Why Did This Happen? : Underlying Causes and Market Environment
The company’s underperformance is attributed to a combination of factors, including intensifying competition in the gaming market, evolving regulatory landscape, and macroeconomic uncertainties such as high interest rates and exchange rate volatility. Increased competition in the mobile game market has led to noticeable sales declines in existing titles, and delays in new game launches have hampered growth momentum.
3. What’s Next? : Key IR Focus and Outlook
The IR event on August 19th is expected to address the Q1 earnings disappointment and outline the company’s future business strategy, new game release schedule, and plans for performance improvement. High expectations surround upcoming titles, particularly ‘Goddess Order,’ making the disclosure of concrete release dates and game information a key factor influencing stock price. However, to secure short-term upward momentum, a clear explanation of the weak earnings and concrete improvement measures are essential.
4. What Should Investors Do? : Investment Strategy and Considerations
Currently, a ‘hold or wait-and-see’ approach is recommended. Investors should closely monitor the IR presentation’s content and subsequent earnings performance. Focus areas include the turnaround strategy for the mobile game segment, the potential success of new titles, and plans for improving financial health. Increased stock price volatility is likely following the IR, warranting caution in investment decisions.
Q: Why did Kakao Games report weak Q1 2025 earnings?
A: The primary reason is the underperformance of the mobile game segment, coupled with delayed new releases, declining sales of existing games, intensified market competition, and macroeconomic uncertainties.
Q: What are the key things to watch for in the upcoming IR?
A: The turnaround strategy for mobile games, release dates and information on new games (especially Goddess Order), and plans to improve the financial structure.
Q: Should I invest in Kakao Games?
A: Currently, a ‘hold or wait-and-see’ approach is advised. It’s crucial to monitor the IR presentation and actual earnings improvements before making any investment decisions.
Kakao Games exceeded Q1 2025 operating profit consensus by +29.5%. However, revenue decreased by 31.3%, and both operating and net income turned negative.
2. Why Did This Happen? Analyzing the Decline
Slowing mobile game performance and the launch of new PC games contributed to the shift in revenue structure. While PC game revenue increased, it wasn’t enough to offset the decline in mobile game revenue, their primary source. Discontinued operations in golf and wireless communication devices also played a role.
3. What’s Next? Future Outlook and Key Factors
While the earnings surprise may create short-term momentum, sustained growth will depend on fundamental improvements. Future performance hinges on new game releases, live service performance of existing games, marketing effectiveness, and improvements in financial health.
Key Factors: New game success, mobile game recovery, and improved financial health.
4. What Should Investors Do? Investment Strategies
Investors should look beyond short-term fluctuations and focus on long-term growth potential and core competencies. Carefully assess the company’s new game pipeline, IP strength, and global publishing capabilities before making investment decisions.
Investment Strategies: Maintain a long-term perspective, analyze core competencies, and consider macroeconomic conditions.
Q: How did Kakao Games perform in Q1 2025?
A: They posted a surprise earnings beat, but revenue declined and they reported operating and net losses.
Q: What caused the decline in performance?
A: Slowing mobile game performance, new PC game launch impact, and discontinued operations contributed to the decline.
Q: Should I invest in Kakao Games?
A: Consider the long-term growth potential and core competencies before making investment decisions, rather than focusing solely on short-term price fluctuations.
Kakao Games reported Q1 2025 revenue of KRW 115.8 billion, a 5.8% decrease year-over-year but slightly above expectations. Operating loss improved to KRW -8.6 billion, while net loss widened to KRW -26.1 billion, significantly missing estimates.
2. Why These Results? Analyzing the Factors Behind the Performance
The revenue decline is primarily attributed to lower revenue from existing games and delays in new game releases. Improved operating loss is likely due to cost control efforts. The significant net loss is likely due to non-operating losses or increased tax expenses.
3. What’s Next? Outlook and Investment Strategies
In the short term, the success of new game releases will be crucial for the stock’s performance. Long-term prospects hinge on R&D investment outcomes, macroeconomic conditions, and intensifying competition.
4. Investor Action Plan: Navigating the Current Landscape
Short-term investors should closely monitor the initial performance of new game releases and adjust their strategies accordingly. Long-term investors should continue to monitor the company’s R&D investments and efforts to enhance competitiveness.
Frequently Asked Questions
What was Kakao Games’ revenue in Q1 2025?
KRW 115.8 billion.
What was Kakao Games’ operating income in Q1 2025?
KRW -8.6 billion (operating loss).
What was Kakao Games’ net income in Q1 2025?
KRW -26.1 billion (net loss).
What is the outlook for Kakao Games’ stock?
Short-term performance depends heavily on the success of new game releases. Long-term prospects are tied to R&D investments and the company’s ability to navigate a competitive market.
Kakao Games’ Critical Q2 Earnings Call: What’s at Stake?
On August 6, 2025, Kakao Games will hold its conference call (IR) to announce its Q2 results and outline its future business direction. This event is incredibly important as it offers a chance to address the market’s hopes and fears following the Q1 announcement and will set the tone for the stock’s future trajectory.
Why the Q2 IR is Crucial: Overcoming the Shadow of Q1
First, it’s essential to recall the Q1 performance. In Q1 2025, Kakao Games reported a consolidated revenue decrease and an operating loss, largely due to the discontinuation of its golf business and the sale of its wireless communications division. While this was a temporary impact aimed at improving financial structure, the sluggish performance of the PC games division also hindered growth.
However, there were positive signs, such as the solid performance of the mobile games division and efforts in overseas expansion. Therefore, this Q2 IR is a critical test to prove how much the core ‘gaming business’ competitiveness has strengthened and how robust the financial structure has become after shedding non-core assets.
4 Key Points to Watch in the August 6th IR
So, what should investors focus on during this IR? We’ve summarized the four key points.
1. Q2 Performance: The First Sign of a Rebound?
The most important factor is undoubtedly the Q2 results. Beating market expectations for revenue and operating profit is the first prerequisite for a stock rebound. The performance of the following items is particularly crucial:
PC Games Division: Has it recovered from the Q1 slump and returned to a growth trajectory?
Mobile Games Division: Did key titles like ‘Odin: Valhalla Rising,’ ‘ArcheAge War,’ and ‘R.O.M’ continue their strong performance?
Overseas Revenue: Has overseas market growth been demonstrated with concrete numbers?
2. Future Growth Strategy: What is the ‘Next Odin’?
The company must present a long-term growth vision that goes beyond short-term results. The market will critically assess the feasibility and competitiveness of its new game launch plans, specific overseas expansion strategies, and investment plans for future technologies (like AI).
3. Financial Health Improvement: The Results of Divesting Non-Core Assets
The effects of the business divestments must be shown in quantitative terms. Disclosing improved financial metrics like the debt-to-equity ratio and current ratio, along with a clear plan on how the proceeds will be utilized, is key to boosting investor confidence.
4. Risk Management: Navigating Regulation and Competition
The company must present specific countermeasures for unavoidable risks such as intensifying competition in the gaming market and regulations on probability-based items. Explaining the impact of macroeconomic variables like interest rates and currency fluctuations, and their corresponding contingency plans, can reduce uncertainty for investors.
Investor Action Plan: Analyzing Kakao Games Stock Scenarios
Depending on the IR results, Kakao Games’ stock is likely to experience significant short-term volatility. Investors should prepare a strategy considering the following two scenarios:
📈 Bullish Scenario: If Q2 results exceed market consensus and a concrete, convincing future growth strategy is presented, the stock is likely to gain upward momentum.
📉 Bearish Scenario: If the poor performance continues or the growth plan fails to meet market expectations, increasing uncertainty, the downward pressure on the stock could intensify.
Therefore, investors should meticulously analyze the IR presentation and closely monitor market reactions, especially trading trends among foreign investors. It is also advisable to consider macroeconomic indicators such as U.S. and South Korean government bond yields and benchmark interest rates to make a comprehensive investment decision.
Q1. When exactly is the Kakao Games Q2 earnings call (IR)?
A1. Kakao Games’ Q2 2025 earnings conference call (IR) is scheduled for Wednesday, August 6, 2025, at 9:00 AM Korea Standard Time (KST).
Q2. What are the most critical points for investors to watch in this Kakao Games IR?
A2. The most critical points are: 1) The rebound in Q2 earnings, especially the recovery of the PC games division and mobile game performance. Additionally, watch for 2) the specificity of their future growth strategy, 3) the proven effects of financial restructuring, and 4) their risk management plan for issues like gacha game regulations.
Q3. What will happen to Kakao Games’ stock price after the IR?
A3. The stock’s direction will be determined by the IR’s content. A stock price increase is expected if Q2 results beat expectations and the growth vision is positive. Conversely, it could fall if results disappoint. High short-term volatility is expected, so a cautious approach is necessary.
Q4. What are the biggest risks currently facing Kakao Games?
A4. There are two main risks. First, intensifying competition in the domestic and international gaming markets and the potential for new titles to underperform. Second, regulatory risks, such as the mandatory disclosure of information on probability-based items. It’s crucial to see how they address these risks in the IR.