South Korean mobile-internet platform giant, Kakao, experienced a significant decline in profit for the July-September period, mainly due to higher operating costs. Despite solid revenue growth, Kakao’s third-quarter net profit fell 64% from a year earlier to 49.49 billion won ($37.8 million), missing the consensus forecast of KRW96.60 billion.
Revenue Growth and Operating Profit
While revenue during the quarter increased by 16% compared to the previous year, operating profit slightly dipped by 6.7%. Kakao, known for operating South Korea’s top mobile messaging app Kakao Talk, attributed the decline in net profit to various factors. These factors include increased business costs to cover artificial intelligence investments, one-off labor expenses, and higher corporate taxes.
Rising Operating Costs
Operating costs also saw a significant increase of 18% from the previous year in the September quarter, resulting in the downturn in net profit. However, sales of paid content experienced a sharp rise and platform-based advertisements maintained steady growth. This growth compensated for the sluggish advertising markets in South Korea.
As a result of the quarterly results, Kakao’s shares rose by 0.6% in morning trade.