Content, mobility and fintech affiliates build on earnings gains, expand into AI, autonomous driving and digital assets
Kakao is highlighting stronger earnings and new business opportunities across its content, mobility and financial technology affiliates as it prepares to split into two companies, seeking to build investor confidence in the growth prospects of its investment-focused entity, Kakao X.
The three businesses will form the core of Kakao X, which will manage affiliate stakes and investments after the planned February 2027 split. The newly established Kakao AI will take over KakaoTalk, advertising, commerce and artificial intelligence services.
The restructuring is intended to improve capital allocation and allow each business to pursue growth strategies suited to its needs. But investors have raised concerns over a potential holding company discount for Kakao X and uncertainty surrounding the profitability of Kakao's AI operations.
Kakao on Thursday postponed the split by one month to Feb. 1, citing a longer-than-expected preliminary relisting review by the Korea Exchange. It also accelerated a 150 billion won ($110 million) share buyback and cancellation plan to bolster shareholder confidence.
Against this backdrop, Kakao is emphasizing the earnings performance of its established affiliates alongside investments in emerging areas such as AI-powered financial services, autonomous driving and digital assets.
Content, mobility seek new revenue streams
Kakao's content business is preparing for a major expansion with Seoul Arena, a concert venue scheduled for completion in the first half of 2027.
With a capacity of up to 28,000 people, the venue is expected to strengthen Kakao's entertainment business by connecting music and other intellectual property with live performances, merchandise and fan engagement.
The expansion comes despite mixed quarterly results. Kakao's third-quarter content revenue fell 6 percent on-year to 851.7 billion won, as music revenue declined 10 percent to 508.3 billion won. Media revenue, however, jumped 49 percent to 142.8 billion won.
Kakao Entertainment is expanding its intellectual property business through Melon, fan platform Berriz and Melon Ticket, while SM Entertainment is seeking additional revenue from concerts, merchandise and licensing. Japan-based Kakao Piccoma is also expanding into AI-generated animation and merchandise after recording annual operating profit exceeding 10 billion yen last year.
In mobility, Kakao is seeking to build on its existing transportation services through autonomous driving and physical AI technologies.
Kakao's third-quarter revenue from its other platform businesses, which include Kakao Mobility and Kakao Pay, rose 21 percent on-year to 602.1 billion won.
Kakao Mobility has expanded its Seoul Autonomous Car service in Gangnam to six vehicles and is developing AI-powered traffic management, 3D mapping and digital twin technologies.
The company is also exploring defense applications for its mobility technologies, including AI-based vehicle dispatching, autonomous driving and integrated control systems for drones, robots and unmanned vehicles.
Fintech affiliates expand AI ambitions
Kakao's financial affiliates have delivered stronger earnings, providing another potential growth pillar for Kakao X.
KakaoBank reported record cumulative net profit of 469.8 billion won in the first nine months of this year, up 25.2 percent on-year, while monthly active users reached a record 20.57 million.
Kakao Pay's third-quarter revenue rose 27 percent to 302.1 billion won, with operating profit jumping 105 percent. Its transaction volume reached 53.7 trillion won, while stock trading volume at Kakao Pay Securities surged 139 percent to 81.6 trillion won.
Both companies are investing in AI-based financial services to build on their existing customer bases.
KakaoBank is pursuing an "AI-native bank" strategy, using financial data and specialized large language models to offer personalized banking services.
Kakao Pay's AI financial assistant, AI Coach, attracted more than 450,000 cumulative visitors by late October. The company plans to expand the service by integrating AI agents with payments, remittances and digital assets.
Kakao said the three business areas would benefit from more focused investment and capital allocation following the split.
"Content, fintech and mobility are the core businesses of Kakao X, having already demonstrated their competitiveness and growth potential," a Kakao official said.
"We will accelerate growth through strategies and capital allocation tailored to each business while continuing to explore new opportunities and synergies."
Whether those growth initiatives can translate into sustained earnings will be a key test for Kakao X as it seeks to establish its investment appeal independently of Kakao's core platform business.
herim@heraldcorp.com
