Naver's shares slid 5.7% to KRW 183,200 on Thursday after the South Korean internet company revealed a notable deterioration in profitability for the quarter ended September 30, 2026, which countered the firm's record quarterly revenue.
Although total revenue rose 10.7% year-on-year to KRW 3.472 trillion, operating profit for the three months ended September 30 dropped 20.9% versus the prior year, to KRW 451.3 billion. Net profit contracted sharply as well, falling 45.2% to KRW 402.5 billion.
The company identified three principal cost pressures contributing to the profit decline. Partner expenses increased 18.8%, a rise Naver attributed to Npay Connect terminal investments and payments for content rights. Infrastructure costs grew 29.1% as the company added new computing assets and paid higher rents for data center capacity. Marketing spend climbed 32.3%, driven by intensified shopping promotions and additional terminal installations.
Beyond the immediate earnings news, investor sentiment was further dented by media reports about potential changes at Nvidia's top leadership. Those reports drew attention because Nvidia recently completed a KRW-denominated $1 billion equity investment in Naver and the two companies have established a close AI infrastructure partnership. The combination of those reports and the profit contraction weighed on market confidence in Naver.
There were, however, constructive elements in the report. Enterprise revenue increased 33.0% year-on-year to KRW 193.3 billion. Naver's AI Factory arm secured what the company described as its first major customer contract, valued at approximately KRW 2 trillion to be recognized over a four- to five-year period.
Market activity during the selloff showed selective buying interest. High-performing traders at Mirae Asset Securities - those ranked in the top 1% by investment return - were the most active net buyers of Naver shares by mid-morning, viewing the pullback as an opportunity to add positions.
Broader Korean equity markets moved lower alongside Naver. The KOSPI index was down 0.3% on the same trading day.
For investors and analysts focused on unit economics and margin structure, Naver's quarter illustrates the tension between top-line expansion and rising operating costs. The company delivered record revenue growth, yet amplified spending across partner fees, infrastructure and marketing eroded operating leverage and produced a marked decline in profitability.
Going forward, stakeholders will likely watch how effectively Naver can translate its enterprise AI wins and the sizable multi-year contract into margin support while managing the elevated expense base highlighted in the quarter.