[Edaily Reporter Shin Ha-yeon ] On the 1st, HANWHA INVESTMENT & SECURITIES projected that while NAVER(035420)(Naver) is experiencing solid growth in advertising and e-commerce, profitability will remain under pressure through the third quarter due to cost burdens stemming from expanded investments in generative artificial intelligence (AI) and infrastructure. The firm maintained its “Buy” investment rating and target price of 300,000 won.

Kim So-hye, an analyst at HANWHA INVESTMENT & SECURITIES, stated, “Despite solid revenue growth in the second quarter, we estimate that operating profit fell short of expectations as investments for future growth continued.” She added, “We have not revised our earnings estimates for the second half of the year, and since short-term earnings momentum is not strong, we look forward to seeing the results of new business initiatives unveiled one by one.”

Analyst Kim estimated that Naver’s second-quarter revenue would reach 3.393 trillion won, a 16.4% year-over-year increase, while operating profit would come in at 544.7 billion won—6% below the market consensus. He projected that advertising revenue would grow by 9.6% due to the expansion of the AI-based “AdBoost” and strong performance in commerce advertising, while service revenue—including commerce—would rise by 35.5%, driven by increased transaction volume on Smart Store.

However, the firm believes that rising costs will constrain profitability. With partner fees expected to rise 8% quarter-over-quarter due to the inclusion of World Cup broadcasting rights costs, and infrastructure and marketing expenses increasing by 5% and 3.6%, respectively, the operating profit margin is projected to decline to 16.1%. Analyst Kim stated, “While revenue growth is expected to continue overall, cost pressures related to investments will persist, leading to a one-time decline in the operating profit margin.”

He viewed the fact that revenue growth rates for e-commerce and advertising are proving more robust than previously feared as a positive sign. However, Analyst Kim noted, “While high growth levels are expected to continue in the second half of the year due to strengthened delivery competitiveness and the ongoing effects of the membership program,” he added, “a slight slowdown in growth is inevitable as the effect of commission rate hikes wears off.”

He cited the generative AI monetization strategy as a key driver of medium- to long-term growth. Analyst Kim noted, “Integrated service assets—which begin with search and lead to actual purchases and reservations—could become a strong competitive advantage.” However, he added, “I expect a gap of at least two quarters before we can confirm whether AI performance represents cannibalization of existing advertising, a net increment, or what the conversion rate is,” and concluded, “It is too early to see related results in this year’s earnings.”

He continued, “It is difficult to expect earnings momentum in the second half of the year,” adding, “We anticipate that results from new business initiatives—such as AIDC, cloud, and digital assets—will be disclosed sequentially, and the stock price is expected to continue trading within a range in the short term.”