Naver Corp Ord

I am Choe Myung Hwan from the IR team. I would like to thank the analysts and investors for joining Naver's 2025 Q2 earnings presentation. On this call, we're joined by CEOs Hyeong Choi and CFO Heeter Kim, and they will walk you through Naver's business highlights and strategies and financial results, after which we will entertain your questions. Please note that the earnings results are KIFRS-based, provided for timely communications, and have not yet been audited by an independent auditor. and hence are subject to change after such review. With that, I will turn it over to our CEO to present on the business highlights. Good morning. I am Jian Choi, the CEO. Recently, the global importance of high-quality data for AI applications has been growing, leading to an increase in the value of data-rich platforms. Naver, backed by an overwhelming volume of UGC and business data, such as shopping at local places, is a platform that captures detailed and comprehensive user behavior across daily activities, including search, shopping, payments, reservations, and visits, with a level of granularity rarely seen worldwide. By combining its proprietary content and data with AI technology, Naver is strengthening its platform competitiveness and expanding monetization. AI Briefing, now accounting for up to 8% of total search queries, has grown into a service with an MAU of 30 million. Search sessions featuring AI Briefing show higher search and content click volumes compared to standard search results. Metrics such as long-tail query volume and time spent at the top of the search page have also increased year over year, indicating positive improvements. We plan to expand AI briefing coverage to 20% by year-end above our initial target and further enhance the search experience with the launch of the interactive AI tab next year. In advertising, leveraging AI technologies like AdBoost has further expanded monetization of previously non-revenue-generating non-commercial keywords this quarter, enhanced inventory efficiency, and improved both click-through rates and return on ad spend or ROAS. Naver Shopping is recognized as Korea's leading seller-friendly platform. Building on this strength, its product assortment is enhanced by AI technology to deliver highly personalized recommendations and discovery experiences. By year end, Naver plans to launch a proprietary AI shopping agent to assist customers in exploring products more effectively. NeighborCloud is the only Korean provider that has leveraged its expertise and experience in building data centers, operating GPUs, developing proprietary foundation models, and applying these models directly to user-facing services to successfully secure overseas references. It will continue to be sovereign AI initiatives, both in domestic government projects and global markets. Next, I will discuss the performance of the search platform segment. In response to users' evolving information search behavior driven by the expansion of generative AI services, Naver is focusing on enhancing search technology through AI, adjusting long-tail keywords, and improving user engagement via feed integration, while also expanding monetization efforts. First, in search, through AI integration, we have seen growth not only in search sessions but also in business query volume, confirming that the platform's core competitiveness remains robust. Specifically, advancements in AI search technology have enabled reach responses to a broader range of queries, effectively addressing the rise in user search demand and resulting in increased search session volume. Furthermore, the sustained growth in the business queries indicates that despite the diversification of channels for information search, Naver continues to serve as the primary destination for users seeking information and products and places. This also highlights new monetization opportunities through the expansion of commercial long-tail keywords. In the second half of the year, we plan to enhance competitiveness by revamping integrated search to provide personalized search results for each user based on their usage data within the Naver ecosystem. To enhance discovery and exploration within the platform, we completed the feed rollout of six thematic sessions, including fashion and beauty and living and food, by the end of July, following the full feed integration of sports and entertainment sections in the first half. As a result, both content exposure and user time spent on the feed-enabled pages have increased, and we expect this to further enhance user engagement and immersion going forward. Time spent on the mobile main page continued its upward trend in Q2, marking five consecutive quarters of over 10% YOY growth. The recent fee rollout for these theme sessions led to a 108% YOY increase in neighborhood feed advertising revenue and contributed to overall revenue growth. This enhanced personalization has made possible by neighbors' unique data assets. In today's rapidly evolving era, one of the key global challenges is securing high-quality data the foundation of training and inference for regenerative AI models, and maximizing its utility. Many companies, including global big tech, are working to better know and understand their users in order to more effectively deliver and recommend relevant information, products, and places. In this pursuit, the importance of generating and expanding meaningful data continues to grow. Naver is the only platform in the world that thoroughly captures a user's comprehensive user patterns, including search, shopping, payment, booking, and visits in their daily lives. At the core of this data competitiveness lies a virtual cycle in which creators voluntarily produce content across diverse fields, which is then effectively integrated and showcased across various Naver's service platforms, while ensuring creators receive appropriate compensation. Naver has recently implemented measures to block AI bots crawling on data of its core services, including blogs, cafes, shopping, and place reviews, in order to protect the content that creators carefully and diligently produce. At the same time, we're strengthening our reward programs for creators who produce high-quality content. Notably, in July, we launched the Shopping Connect program to seamlessly connect creators and stores within the Naver ecosystem. This initiative lays the groundwork for generating additional revenue streams, extending beyond advertising income from content exposure to include earnings linked to product sales. We will continue protecting creators' content, optimizing content placement, and ensuring fair compensation to grow labor's UGC ecosystem. In addition to promoting original UGC content creation, we will strengthen our content lineup by expanding acquisitions through partnerships with external providers such as CJ E&M and Netflix. We also plan to introduce various C2C features such as product listings and their recommendations within our cafe service, which hosts robust communities, creating a safe and convenient transaction environment for both sellers and buyers. Building on this experience, we expect to create synergies within the C2C platforms at Poshmark and Wallapop, and establish a foundation for global expansion through domestic and international data acquisition. On August 5th, to strengthen our European operations and secure future growth, we increased our stake in Wallapop, Spain's largest C2C platform, with 19 million active users. Driven by strong interest in sustainability and the circular economy, C2C is a steadily growing market in Europe. Among them, Wallapop facilitates safe and convenient P2P transactions across categories from daily essentials to electronics and vehicles, and is expanding into southern European markets such as Italy. Since Naver's initial investment in 2021, the Wallapop has sustained a strong growth, recording a 25% cap in revenue through 2024. From a business perspective, the number of listings has been growing by double digits annually, and in addition to everyday household items, Wallapop in particular has become the number one platform in space for automobile listings, continuously widening the gap with the runner-up. Moreover, to enter the refurbished electronics market, it has formed partnerships with brands such as PlayStation and Decathlon, actively expanding its category offerings. With this recent equity increase, Naver aims to leverage its technology and business expertise to transform Wallapop into a strategic platform, delivering innovative experiences across Spain and Europe. Leveraging the robust data we have secured this way, we are focusing on enhancing hyper-COVID access performance to maximize search service quality. At the same time, to optimize both service quality and efficiency, we're also utilizing open-source models tailored to each service, advancing neighbors-on-service AI strategy. We're also continuously advancing AI services for a better search experience. Since its launch in March, AI Briefing, which summarizes information in an easy-to-read format, has been expanded to cover 8% of integrated search queries and is now used by 30 million monthly users. Queries with AI Briefing have recorded a CTR that is 8 percentage points higher than traditional factual query results, with user time span or search results also increasing by over 20%. reflecting positive feedback. Furthermore, both the number of searches and content clicks over the sessions where AI briefing is shown are 32% higher than those in standard integrated search, demonstrating strong usability. By year end, we plan to expand AI briefings coverage to 20% of integrated search queries, further enhancing our competitiveness in informational search. In 2026, we will launch AITab within Naver, enabling users to access conversational AI search through a dedicated tab. This will provide data-driven in-depth search experiences across shopping, local services, finance, and more. Ultimately, by leveraging our understanding of AI search behavior and expertise in AI technology applications, we aim to introduce an integrated AI agent spanning the entire Naver ecosystem, establishing as an essential service in the AI era. From a monetization perspective, overall advertising revenue across the neighborhood platform increased by 8.7% YOY in Q2, driven in part by efficient AI-powered ad placements. Of this, four percentage points are attributed to AI effects, such as those from ad boost. In Q2, we continued optimizing ad placements by leveraging AI technology to deliver more efficient query-optimized ads on the same pages. As a result, some commerce ads appeared in certain search and display ad spaces, causing a partial shift in growth similar to the previous quarter. Still, total ad revenue exceeded market growth rates and internal estimates. Specifically, ROAS, the key advertising efficiency metric increased by over 20% YOY, while the number of performance advertisers grew by more than 60%, driven by strong advertising consulting capabilities. Moving forward, we'll continue optimizing ad placements over the nearest platform, while expanding advertising across external channels to achieve overall ad growth exceeding the market. Let me now turn to key highlights from Commerce. In Q2, Commerce delivered solid results, driven by the successful rollout of the Neighbor Plus Store app, enhanced membership and delivery capabilities, and continued growth in commerce advertising. As a result, Smart Store and on-platform GMV grew by 10.2% and 9% YY, respectively, maintaining steady growth momentum. In its first full quarter performance since launching in March, the Neighbor Plus Store app successfully took hold, enhancing users' discovery-driven shopping experience through advanced personalized search and recommendations powered by the Smart Store database. The app is generating positive results, contributing to a net increase in total page views and GMV. Notably, user activity on the app shows that its conversion rate is 17 percentage points higher than on the web, and the average order value is also 16% higher, proving the app to be an effective channel for driving user purchase. In addition, we observed meaningful GMV growth in discovery and exploration areas, such as shopping, home, verticals, and curated events. Content click volume on the app was 7% higher than on the web, and the purchase rate among membership users was 30 percentage points higher, further validating both the intended user behavior shifts and the app's future growth potential. In the second half of the year, we will actively drive our app engagement with the launch of Curvy Nmart, aiming to establish the NeighborPlus store app as the first shopping destination for consumers. We plan to solidify our lineup around the top GMV catalog products within the app while significantly strengthening competitiveness in high-frequency purchase categories such as fresh fruit and FMCG. Through these efforts, we aim to increase visit frequency and purchase volume, positioning the app as a consumer's go-to shopping destination. Organically linking Harley and Mart with membership benefits, we will drive new user acquisition and higher purchase volume, showcasing the differentiated value of the Neighbor Plus store and further expanding our commerce ecosystem. The enhanced membership program is contributing not only to the commerce ecosystem, but also to the broader neighbor ecosystem. Partnerships with Netflix, such as the Squid Game Season 3 campaign, have led to an increase in new sign-ups and higher shopping spend. positively impacting overall GMV growth this quarter as well. Notably, both active users and paying users grew by double digits while while injecting vitality into the entire commerce ecosystem. To sustain this momentum, we partnered with Microsoft in July to add PC Game Pass as a membership benefit. This collaboration is expected to attract new users, particularly men in their 20s and 30s, with high purchasing power. Moving forward, we will continue exploring additional partnerships to offer diverse options and high-quality content to our members, aiming to broaden our user base. Partnerships with external companies through membership are also expected to positively contribute to Naver's ongoing efforts to expand its content ecosystem. We expect to create various synergies across our services, such as Netflix content being featured in short-form clips and PC Game Pass users naturally migrating to GDG. We expect this to drive user acquisition and login, significantly enhancing not only commerce competitiveness, but also Naver's brand value and overall content ecosystem expansion. Membership is now recognized as a key driver of synergy across the entire Naver ecosystem, extending beyond just shopping benefits. Enhancing delivery capabilities to innovate user experience remains a key priority. In line with the March launch of the Plus Store app, we branded our guaranteed delivery service as End Delivery and significantly improved user convenience by offering more detailed estimated delivery dates. In particular, we significantly enhanced the customer satisfaction by expanding unlimited free shipping and returns for membership users. This led to not only an increase in sellers utilizing end delivery, but also a substantial growth in the database, resulting in nearly doubling end delivery coverage for three consecutive quarters. Starting in Q3, we will introduce early morning delivery service in partnerships with Curlie and CJ Logistics to shorten delivery lead times and strengthen cold chain logistics, focusing on overall delivery quality improvements. Furthermore, by year end, we plan to complete platform development to enable the full-scale launch of direct contracts early next year, gradually expanding the adoption of end deliveries. Finally, by the end of the year, we plan to launch a shopping AI agent to elevate the user experience. Building upon the existing AI purchase guide, this advanced agent will closely assist individual customers like specialized sales advisor in offline stores. It will allow shoppers to ask questions and receive information throughout their shopping journey, helping them to make more convenient and confident purchase decisions. Next, I will provide an update on the FinTech business. In Q2, neighbor-paced TPV reached 20.8 trillion won of 18.7% YY and 6.3% QOQ. Non-captive payments, which now make up 54% of total payment volume, reached $11.1 trillion, up 27% YOY, driven by greater payment activity and merchant expansion, spurring continued growth of neighbors' third-party ecosystem across both online and offline. In the platform business, loan comparison value increased 50% YOY, driven by continuous service improvements and external partnerships. including the integration of the never-paid loan comparison within the KBank app. We will continue expanding third-party acquisition channels through collaboration with diverse partners to drive sustained growth. In addition, we plan to launch the Connect Offline Payment Terminal within the year, supporting face-to-face authentication and various payment methods. Building on offline payments, we're exploring integration points with neighbors' reservations and place services to create new customer experiences and offer greater value to merchants. Lastly, regarding the Korean Won stablecoin, we're currently monitoring legislative and policy developments from the National Assembly and government by internally reviewing potential service opportunities. Next is an update on the Web2M business performance. In Q2, WebToon revenue reached $433.7 billion, up 13.3% YY and 2.6% QOQ. Please note that the WebToon Entertainment will announce its Q2 results on August 12 at U.S. time. Please refer to their earnings release for more detailed information. Finally, I will share an update on the enterprise business performance. The B2B business in the enterprise segment continues a steady growth driven by increasing paid users of Lineworks and new AI-related revenue from public sector clients such as Korea Hydro and Nuclear Power. Lineworks is receiving positive feedback from customers by launching a range of services that can be integrated with its existing offerings. As a result, the number of paid Lineworks IDs have grown by over 10% for five consecutive quarters, maintaining strong momentum. Going forward, we plan to introduce various SaaS products to establish a leading position in the AI agent space within the business messaging market. Following the launch of the new government in June, we also plan to actively pursue government-led AI projects led by labor clouds of full-stack AI capabilities, including data center construction and operations, proprietary LLM development and deployment, and GPU infrastructure management. We aim to contribute to the development of Korea's AI ecosystem. We believe these initiatives will help scale our AI business and solidify neighbors' long-term competitive advantage. Leveraging these AI capabilities, we're also making strong progress in our global sovereign AI initiatives. In Saudi Arabia, we completed the development and deployment of digital twin platforms for three cities in June, and we're now aiming to expand the business to other cities across the Middle East based on this experience. In addition, we are pursuing new business opportunities through a joint venture with the Saudi Ministry of Housing to launch a map-based super app. We also started a project to deploy service robots and a robotics operation platform in the new Muraba development, securing a meaningful reference for our robotics business. Leveraging digital training technology, Naver intends to provide end-to-end robotic services spanning from robot manufacturing to operational platforms. Looking ahead, we plan to broaden the reach of Naver's robotic services to customers across multiple countries, including Korea and Japan. In addition, we're pursuing various global collaborations and business opportunities, including Southern LLM development in Thailand, participation in GPU as a service, and AI data center projects targeting Europe from Morocco, humanoid research collaboration with MIT, future robotics platforms, line works on expansion into Taiwan, and the introduction of Global Care Call, an AI-based wellness call service in Izumo City, Japan. We will provide updates on these developments in due course. Moving forward, Naver will continue to strengthen its service platform competitiveness and B2B capabilities across B2C, B2B, and B2G by leveraging AI, while also securing new business references for a need to long-term growth and laying the foundation for global expansion. Next, I will hand it over to CFO Heechar Kim to discuss the financial performance. Good morning. This is CFO Hechar Kim. I will now present the financial results for Q2. Driven by solid growth in core business such as advertising, commerce, and fintech, Q2 revenue reached $2.9151 trillion, up 11.7% YY and 4.6% QOQ. Driven by growing demand for competitive AI and advertising products, as revenue exceeded market growth rates. Meanwhile, commerce accelerated overall revenue growth, aided by the successful rollout of a new commission structure in June. Operating profit reached 521.6 billion won of 10.3% OLY and 3.2% QOQ. A strong revenue growth partially offset cost increases carefully managed through strategic investments to support top-line expansion and to secure meet-to-long-term growth drivers. Operating margins due at 17.9%, slightly decreasing YOY and QOQ. Next, I will explain the revenue by business. In Q2, search platform revenue reached 1.0365 trillion won, up 5.9% YOY and 2.4% QOQ. Total advertising revenue across numerous platforms, including Search, Display, Commerce, Finance, and Webtoon ads achieved an 8.7% YOY increase. This growth reflects the combined impact of AI Power Feed recommendation enhancements as boosts base inventory optimization and targeting improvements. Enabler's unique advertising consulting capabilities is noteworthy for outperforming market growth, despite challenging advertising conditions and a strong base effect from the previous year. In the second half, despite factors like an unusually long holiday that could affect ad revenue, we will boost advertising efficiency through AI-driven optimization, expand AI briefing, and enhance experiences for both advertisers and users via the Enabler app. and integrated search redesign, thereby reinforcing our competitive advantage in the advertising market. Commerce revenue reached 861.1 billion won of 19.8% YY and 9.3% QOQ. Advancements in the personalization enhanced end delivery and membership benefits and the commission restructuring all contributed positively, accelerating growth across all segments compared to the same period last year. Commission and sales revenue grew 19.6% YOY and 10.4% QOQ driven by the successful launch of the Naver Plus Store app and the commission restructuring implemented in June. Membership continues to grow in Q2 boosted by the Netflix partnership including the Squid Game Season 3 campaign with active and paid users increasing 20.7% YOY and 3.2% QOQ. Commerce advertising grew 19.8% YY and 8.9% QOQ driven by ad optimizations on Naver Plus Store and integrated search placements. FinTech revenue reached 411.7 billion won, up 11.7% YY and 4.8% QOQ. GDP grew 18.7% YOY and 1.4% QOQ to 20.8 trillion won, driven by smart store growth and the continued expansion of the third-party ecosystem, with non-captive payments accounting for 54% of the total and leading overall growth. Content revenue reached $474.1 billion, rising 12.8% YOY and 3.2% QOQ. In particular, Webtoon revenue based on neighbors' consolidated figures in 3-on-1 grew 13.3% YOY and 2.6% QOQ. For more details, please refer to Webtoon Entertainment's earnings report scheduled for August 12th, local time. Snow saw growth of 27.8% YOY and 21.2% QOQ driven by an increase in paid camera ad subscriptions boosted by AI content integration. Enterprise revenue came in at 131.7 billion won, up 5.8% YOY and down 1.9% QOQ. The number of paid line works IDs increased 14% YOY, continuing a solid growth trend. While new AI-related revenues from the public sector, such as with KHMP, have begun to contribute over a growth slightly moderated YOY into Q basis, due to a high base effect from the last year's one-off Intel project and new revenue recognition from NeuroCloud, as well as the completion of the first Saudi digital twin project in the previous quarter. Next, let me walk you through the detailed cost items. Development and operations costs rose 2.4% YOY, mainly due to a high space effect from one of stock-based compensation expenses related to the WebToon listing in the same period last year, while remaining largely flat, QOQ. Partner costs rose 10.6% YOY and 4.1% QOQ. Infrastructure costs increased 15.2% YOY and 4.5% QOQ mainly due to higher depreciation from new GPU and CPU acquisitions. Given upcoming model training and inference, AI integration into services, and potential government project wins, infrastructure investment is expected to accelerate, leading to higher related costs. Marketing expenses rose 31.5% YOY and 12.1% to QOQ mainly due to strategic spending on shopping coupons in commerce and increased promotions in FinTech and Webtoon. In the second half, we plan to ramp up marketing to strengthen the fresh fruit category through partnerships and enhance competitiveness in Webtoon and FinTech while rigorously assessing the effectiveness of these initiatives. Next, let me discuss the P&L by the business. First, combined search platform and commerce segments saw a slight decline in profit margin of QOQ due to increased staffing and expanded promotions in shopping. It still maintains a solid margin of over 30%. In-tech saw improved profit margins by a wide QOQ supported by robust top line growth driven by sustained payment revenue increases. Meanwhile, content and enterprise narrow their losses through continuous structural improvements and financial discipline. While some volatility may arise from Webtoon's global marketing efforts and enterprise project acquisitions, we will continue to strengthen core business competitiveness and pursue new opportunities to contribute to Nevers' overall profitability. The consolidated net income for Q2 rose 49.8% YOY and 17.4% QOQ to 497.4 billion won, reflecting increased equity method gains and foreign exchange gains from currency fluctuations. Operating cash flow showed steady growth, but free cash flow for Q2 declined by 48.3 billion won YOY and 275.1 billion QOQ, recording 1,096.8 billion won, mainly due to reduced stock-based compensation expenses and corporate tax payments in Q2. This concludes the overview of our Q2 financial results, so we will now move on to the Q&A session.

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We will now begin the Q&A session. To ask a question, please press star and number 1 on your phone. To withdraw your question, please press star and number 2. In consideration of all participants, We kindly request that you limit your questions to two per person. The first question will be provided by Stanley Yang from JP Morgan. Please go ahead with your question.

Thank you for the question. I'll give you two questions. The first question is about the growth of search ad sales. The growth rate is currently at a white line. We were curious about the fact that you said that there was no impact on the quality of the chat GPT, but I would appreciate it if you could tell us about the recent trend. Next, you said that you will increase the exposure of AI briefing to 20% by the end of the year. This seems to be a very good news. Because in the case of Google, Gemini AI power search is actively driving, and the search sales are well protected. So, we have been actively implementing AI briefing so far, In terms of monetization, there may be cannibalization and additional sales opportunities. I am curious about the overall impact of monetization. Next, I would appreciate it if you could tell us how much it can go up from 20% to next year. Thank you for taking my question.

I would like to ask you two questions. First one has to do with the revenue growth trend with regards to your search ad. I see that the growth rate is coming down. You've previously mentioned in other occasions that with regards to the impact coming from ChatGPT on your search that there is no meaningful impact. So, hence, I would like to gain some updates on what the current trend is. And it's also very good to hear that you have plans to expand the coverage of your AI briefing feature to 20% by the end of the year. I say that's the good news because Google is also saying that Gemini-powered search is really increasing their volume of queries. So up to now, I think Naver has been a little less aggressive in terms of deploying its AI briefing, but it's good to hear that you will increase that to 20%. So we'd like to understand as to what impact it will have on your monetization. Would there be a possibility of, for instance, cannibalization, or do you foresee opportunities to further drive up your top-line revenue? And for that AI briefing coverage, to what level would you be increasing that next year? Second question, I understand that Naver will be playing a very critical role with regards to the government's initiative on sovereign AI.

What business opportunity will this bring to Naver? As of this year, we have been providing all-platform advertising results. As we proceed with the surface efficiency, we are exposing some shopping search ads on some surfaces, and there are parts where the growth rate of some shopping search ads is caught, so I think it will be better to provide the detailed data through the IR team. What we are looking at is actually the growth rate Regarding the search ad question, you've mentioned that the growth rate for the revenue is in a downward trend, but we'd like to just make a correction that we are continuously seeing an upward trend.

And that is why starting this quarter's earnings figure, we have added the advertisement-related performance on our own platform line item. And so we are able to capture some uptrend in the shopping search advertisement as we went through the optimization of the ad slots or the inventory. The metrics that we are seeing is that in terms of the business query as well as the number of visits by the users, even in this age of AI, we are seeing a solid growth, and we consider that to be quite positive.

AI briefing Regarding the question and AI briefing, as mentioned during my previous conference calls that we will be expanding the coverage

as we look at and monitor the responses and the feedback that we get from the user base. If you look at some of the metrics including the click-through rate as well as time spent and additional queries and searches, we can tell you that compared to what you've mentioned with regards to what Google is seeing in terms of their trend, it's either similar or it's actually higher in terms of also the content clicks that are actually happening. So that is the basis upon which we've decided to expand the coverage to 20% by the end of the year.

We're focusing on the information quality, so we don't see any sales cannibalism in that area. In fact, in the information long-tail search engine, we're using AdBoost and other search ads to expose the business side. Also, the flow of shopping and localization is being strengthened through AI briefing, so we have found a more positive opportunity for sales. Through this, we are thinking of increasing the coverage of AI briefing, and as I mentioned earlier, next year, we are going to release an AI tab that can further enhance the AI briefing experience, so we will be able to

And because we are focusing on the information-seeking type of queries, we do not believe that there is going to be any revenue-related cannibalization. And in terms of such information-seeking queries that have to do with the long-tail search keyword, we're making use of Advoost. to make sure that we maximize and optimize that search ad loading. And also we're strengthening through AI briefing the connection that it has with neighbor shopping as well as neighbor local place, for instance. So we actually see this as an additional opportunity for us to generate added revenue. And that is why we will continuously improve and expand on the coverage that AI briefing really brings as we go forward into next year. And also, we want to further enhance the experience that the users will have through the use of the AI briefing. And so next year, we've also decided to have a dedicated tab under the name of AI tab, which is more of an interactive and conversational user experience. So users will be able to choose to their preference the AI briefing and AI tab within the AI search domain.

In the case of AI that has been removed, In the meantime, we see that Naver's investment in AI technology over a long period of time can be a basis for making new opportunities in the medium term. In July, various business opportunities have appeared, such as a second-tier GPU business for support of the WBL Challenge project, or being selected as a businessperson to be in charge of the construction of the national representative LLM. I think it will be a good opportunity for us to build AI infrastructure, LLM models, and other countries that want to build such ecosystems, such as Saudi Arabia and Southeast Asia. I think it is positive that we have become a good entrepreneur who can respond to the needs of these countries.

Regarding the sovereign AI initiative that's undertaken by the government, I believe that this is really coming to the fruition of all of the efforts at NABIR as well as the investment that it has made over many years. And this really is a new opportunity for NABIR to leverage and we consider this to be a quite significant opportunity. Already we have been chosen in the month of July as a GPU leasing service provider and also we will participate in the LLM development project as well, which once again is a good opportunity for NAVA. Going forward, we believe that this will open up a new opportunity for us to engage in other projects that happen in other nations as well, and we believe that we will be able to be equipped with the appropriate capabilities to actually respond to the demand of AI infrastructure build-out as well as development of LLM for other countries as well, for instance, countries like Saudi Arabia and countries in Southeast Asia. So this will be added opportunity from our perspective.

The following question will be presented by Jingu Kim from Qoom Securities.

Please go ahead with your question.

Yes, thank you for the question. I'd like to ask you a question about AI. In the AI Sovereign strategy, if you look at the relationship between the government and the government, how do you build an alliance to show competitiveness? And now, in addition, global debt tax relief and orchestration strategy. Is there a possibility of showing competitiveness in the global market? Is there a chance to use these options? Thank you for taking my question.

My question relates to the sovereign strategy, sovereign AI strategy. I would like to gain some insight as to what you're envisioning in terms of setting up an alliance with domestic stakeholders, and also would there be potential partnerships or alliances with global big techs, and would there be a chance for you to, including the orchestration aspect, to really unlock global competitiveness?

I think we can't do everything on our own in the serverless strategy. We have AI technology and unique data capabilities, but if there is an ecosystem that can join forces with us, especially to help discover national LLMs and such stacks, we will actively cooperate. Regarding the sovereign AI strategy, we by ourselves cannot do everything.

We are hence open to any ecosystem that we could collaborate and cooperate with which will help us further leverage our AI technology and data capabilities that we have towards building the national LLM that the project seeks to achieve. Even during the WBL competition, there was a startup company called 12Labs who actually participated in that competition, and also we are already in close cooperation with well-known academic universities. So we are open to opportunities to collaborate and have an open alliance.

And the fact that we are developing our own LLM, Hyper Clover X, with the value of Sovereign AI is not a concept that is associated with global big tech or an orchestration strategy. In fact, we are using LLM technology in all services of Naver in the process of Regarding the value that sovereign AI-related initiatives bring and also our proprietary LLM model, HyperClovaX,

The strategy that we employ within Naver does not in any way conflict with the potential cooperation and collaboration with Google Big Tech or the orchestration approach. Basically, our overarching strategy is on-service AI, whereby we bring the AI into and integrate that into various different services that we provide within the Naver platform. So already we are fully leveraging the orchestration strategy. So we will be using our proprietary HyperClova X as well as the other LLMs made by other global providers as well as orchestration strategies. So whichever really benefits further enhancing the user experience, we are actively utilizing that approach.

So we are actively utilizing that approach. because Naver has a large business platform in Korea. Many big tech companies with global LLM are actually talking about the ratio with us, and we are also discussing it quickly. And we are developing HyperCloverX, and we are also building a full-stack capacity including the cloud in Korea. I think this is the part that works best for us when promoting this ratio.

So Naver really is ahead of others in terms of the robust user base that we have, as well as the shopping and the place services that we provide, which are by far most advanced in the form of most advanced and we are unrivaled by any other entities in being able to provide these types of platforms. So global big techs are actually approaching us with a potential for entering into some sort of partnerships and collaborations. So we have the capabilities as well as a very strong data-related basis and capability as well. So with our own proprietary LLM, we also have the full stack capability across the chain. So that really works towards our benefit when it comes to a potential tie-up with a third-party entity.

네, 다음 분 질문 받을 텐데요. 이게 시간상 한 분 정도 질문 받고 끝내도록 하겠습니다.

마지막으로 질문해 주실 분은 HSBC의 김준현 님입니다.

The last question will be presented by Jinyoung Kim from HSBC. Please go ahead with your question.

Thank you for the question. There are two questions. Actually, the first is that when looking at the domestic market environment, it seems that the need for new growth power is increasing, not only in advertising and commerce. So, if you compare the defects like this, the growth rate of our enterprise cloud business seems relatively low, but this year, we We started this again, and you mentioned it in the call earlier, but I would appreciate it if you could explain to us when we can check this as a sales growth rate and what our strategy is. And secondly, you talked about data security in terms of the acquisition of Wallapot this time. Recently, the acquisition of the C2C business has been continuing, so are you still looking at the future growth power for Comus? Or is it related to the addition of AI data center construction to such a morocco area that came out a lot as a news article recently? Is it a track record for any B2C AI business in the European region, or is it a track record for data acquisition for new AI services? Thank you for taking my question.

I would like to ask you two questions. First one has to do with I would think that the company needs to identify a domain of new growth for you. For the domestic market, you'd have advertisement and commerce, but it seems like the growth rate of the enterprise and the cloud business is somewhat muted. So since you've started with the GPU leasing business as well as SaaS business, We'd like to know as to when that will actually translate into an actual increase in revenue and what is your strategy to drive that? Second question, you've talked about the acquisition of Wallapop and one of the key reasons behind that would be for you to secure and have data acquisition. Going forward, would you continuously be interested in C2C player acquisition and does that mean that you consider commerce as your key growth engine going forward? And also I read in a news article that you are engaged in an AI data center project in Morocco. For Europe, what is your more detailed strategy in terms of, you know, setting up that basis for growth?

In the case of cloud business, over the past one or two years, we have been working with AI-related major references, such as big companies and countries. We focused on securing important references such as Korea Bank and Han Suwon, and this has a meaning in that it has been successfully achieved. Depending on how fast the domestic cloud adoption rate and AI transformation will proceed, we believe that our growth rate will be in the 4th place. Among domestic cloud entrepreneurs, entrepreneurs who have secured AI models and service capabilities like us

Regarding cloud, over the past two years, our focus was actually gaining AI references against large corporations and government entities like BOK and Korea Hydro and Nuclear Power. And we believe that acquiring those references were quite successful and that it was meaningful. So depending on the pace at which the cloud is adopted, as well as the speed of AI transformation, our growth speed will be determined. And we believe and we pride ourselves in the fact that we are the only provider that have the capability of both the AI model and service capabilities. So going forward, we believe that that will really underpin a solid growth for us.

The most important aspect of Alata's strategy is the continuous growth of the C2C sector I think we can explain it as a base. We continue to explain the various achievements and strategies of Naver in the AI ecosystem, but I think we can't do everything well in all areas. In particular, we should not miss the AI agent part in the business area that we should not miss, and we judge it as the part that we should do the best. In the end, the key to success is the diversity of data and the search for data. You asked about more detailed strategy that we have regarding this additional acquisition of Wallapop stake.

As you've mentioned, yes, data acquisition is one important aspect as well as the fact that we do look forward to further growth from the C2C business going forward. We keep talking about the business performances and strategies that we have with regards to the AI ecosystem as a whole, but we can't be good at everything. But we believe that in the business domain of AI agents, that is a segment that we must be very good at. And so the key to that will be for us to have an acquisition of data that is diverse, wide-ranging, And so we believe that having a strong footing in C2C, because this is where we are able to secure data regarding the long-tail commerce aspect.

From that perspective, we consider C2C to be quite important for us. 그리고 여러 지역 특히 유럽 시장에서의 성장률이 굉장히 높은 편입니다.

Especially if you look at the CTC services, this is really a combination of multiple number of factors. For instance, the user community, the product information, trend-related data, communication, as well as the user community. And the growth rate is quite impressive, especially in Europe.

이러한 생태계에서 판매자와 창작자의 육성을 저희가 지원을 하고 또 이를 통해서 광고라든지

So basically within this ecosystem, we want to be able to assist the sellers and the curators through the use of the advertisement and creating business opportunities that comes from such commerce-related transactions. And that is what Naver excels at. And when we are able to bring and integrate Naver's technology and add products to Wallapop, we believe that we can really look forward to strong growth going forward.

네, 이것으로 2025년 2분기 실적 발표를 마치겠습니다. 오늘 참석해 주신 모든 분들께 감사드리며 앞으로도 많은 격려 부탁드립니다.

This ends the second quarter of 2025, Ernie's call for neighbor. Thank you very much for joining us, and we look forward to your continued support.