[Edaily Reporter kyoungeun kim ] Forecasts suggest that NAVER ( NAVER(035420)) will post third-quarter earnings that fall short of market expectations due to factors such as investments in e-commerce and sports broadcasting rights costs. While the company finds itself in an “uncomfortable sandwich” situation—caught between the cost burden of its existing businesses and concerns about competition from Meta’s Agent AI “Muse”—analysts say that proving the profitability of its new businesses is the key to a turnaround.

In a report released on the 8th, Lee Hyo-jin, an analyst at Meritz Securities, estimated NAVER’s third-quarter consolidated revenue at 3.4844 trillion won—an 11.0% increase year-over-year—and operating profit at 485.8 billion won, a 14.9% decrease. Operating profit is 5.8% below the consensus estimate. She maintained her “Buy” investment rating and a target price of 330,000 won. The previous day’s closing price was 189,000 won.

The analyst stated, “Unlike last year, the impact of Chuseok was recognized in the third quarter, putting additional pressure on e-commerce revenue and advertising,” adding, “However, this is due to seasonal factors and is expected to normalize in the fourth quarter.” The increase in costs was primarily attributed to investments in the World Cup and Asian Games, as well as the free supply of N Pay terminals and related promotional expenses. Consequently, the analyst lowered operating profit estimates for this year and next year to 2.0796 trillion won and 2.5825 trillion won, respectively, representing decreases of 3.4% and 6.3%.

The analyst also highlighted concerns about competition in the search market following the launch of Meta’s Agent AI, Muse. Since Muse’s unveiling, online travel agencies (OTAs) such as Expedia and Booking.com—which had been monetizing the consumer search process—have seen their stock prices take a significant hit. The analyst noted, “It is true that we need to prepare given the anticipated domestic launch next year,” but added, “Current investments focused on finding opportunities in online-to-offline (O2O) models utilizing offline data could serve as an appropriate defensive strategy.” He further stated, “Given the precedent of successful monetization when Naver Maps fully introduced a search advertising model in the past, expectations remain valid.”

Concerns regarding the new business are expected to be resolved by the end of this month. The analyst stated, “Around the payment date for NVIDIA’s rights offering (October 30), details regarding graphics processing unit (GPU) shipments and order contracts will be disclosed, which should alleviate investor concerns about the new business,” and “Since the issue of data leakage overseas when using large language models (LLMs) in the cloud remains significant, if Naver can provide GPU-as-a-Service (GPUaaS)—which addresses this bottleneck—there is no reason for AI frontier companies to turn it down,” the analyst explained. Meritz Securities projected that Naver will record 1 trillion won in NeoCloud revenue in 2027, the business’s first year.

However, the analyst also expressed some reservations. “Even though this is the quarter immediately preceding the launch of the new business, weak earnings are expected through the fourth quarter due to investments and expenses in existing businesses,” the analyst said, emphasizing, “For the current situation to be ‘the darkest hour before dawn,’ the company needs to share with the market a plan for recouping investments not only in NeoCloud but also in commerce and peer-to-peer (C2C) transactions.”