Naver Corp

KRX:035420

Q2-2025 Earnings Call

[Unknown Executive]

Good morning. I am [indiscernible] 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 CEO, Soo-yeon Choi; and CFO, Hee-Cheol 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 K-IFRS 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.

[Soo-yeon Choi, executive]

Good morning. I am Soo-yeon 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 by an overwhelming volume of B2C and business data such as shopping and local places is a platform that captures a detailed and comprehensive user behavior across daily activities, including search, shopping, payments, reservations and visits with a level of granularity releasing 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 gone 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-term query volume and time spend at the top of the search page have also increased year-over-year, indicating positive improvement. We plan to expand AI briefing coverage to 20% by year-end above our initial target and further enhanced the search experience with the launch of the interactive AI tab next year.

In advertising, leveraging AI technologies like it boost has further expanded the monetization of previously nonrevenue-generating noncommercial key awards this quarter, enhanced inventory efficiency and improved both the click-through rates and return on ad spend or ROAS.

NAVER Shopping is recognized as Korea's leading seller-friendly platform. Building on this trend, its vast 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.

NAVER Cloud is the only Korean provider that has leveraged its expertise and experience in building data centers, operating GPUs are developing proprietary foundation models and applying these models directly to user-facing services to successfully secure overseas references. It will continue to lease of an 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 and evolving information search behavior driven by the expansion of generative AI services, NAVER is focusing on enhancing search technology through AI, addressing long-term 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 rich 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 on 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 our discovery and exploration within the platform, we completed the FEED rollout of 6 thematic sessions, including fashion and beauty and living and food by the end of July. Following the fifth feed integration of sports and entertainment sections in the first half.

As a result of both content exposure and user time spend on the feed-enabled pages have increased, and we expect this to further enhance our user engagement and immersion going forward. Time spent on the mobile main page continued its upward trend in Q2, marking 5 consecutive quarters of over 10% Y-o-Y growth. The recent fee rollout for these theme sessions led to a 108% Y-o-Y increase in NAVER feed advertising revenue and contributed to overall revenue growth. This enhanced our personalization has made possible by NAVER's 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 our generative 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, this data competitiveness lies a virtuous cycle in which creators are 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 bot crawling on data of its core services, including blog, cafe, 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 creator's content, optimizing content placement and ensuring further compensation to grow NAVER'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 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 like Poshmark and Wallapop and establish a foundation for global expansion through domestic and international data acquisition. On August 5, 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 in 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 niche investment in 2021, the Wallapop has sustained a strong growth, recording a 25% CAGR 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 #1 platform in Spain for automobile listings continuously widened 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 HyperCLOVA access performance to maximize search service quality. At the same time, to optimize both our service quality and efficiency for also utilizing open source models tailored to each service, advancing NAVER's on service AI strategy.

We're also continuous to be advancing our services for a better search experience. Since its launch in March, AI briefing, which summarizes information in an easy to view reformat 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 spent, our 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 AI tab 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 our AI search behavior and expertise in AI technology application, that we aim to introduce an integrated AI agent spanning the entire neighbor ecosystem, establishing it as an essential service in the AI era.

From a monetization perspective, overall advertising revenue across the neighbor platform increased by 8.7% Y-o-Y in Q2 driven in part by efficient AI powered ad placements. Of this, 4 percentage points are attributed to AI effects such as those from ad boost. In Q2, we continued optimizing ad investments by leveraging technology to deliver more efficient Korea optimize ads on the same pages. As a result, some commerce ads appeared in 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% Y-o-Y, while the number of performance advertisers grew by more than 60%, driven by strong advertising and consulting capabilities. Moving forward, we will continue optimizing ad placements of the NAVER's 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 NAVER plus store app, enhanced membership and delivery capabilities and continued growth in commerce advertising. As a result, our Smartstore and on-platform GMV grew by 10.2% and 9% Y-o-Y, respectively, maintaining steady growth momentum.

In its first full quarter performance since launching in March, the NAVER plus store successfully to quote enhancing users' discovery-driven shopping experience through advanced personalized search and recommendations powered by the Smartstore database. The ad 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 70 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 a meaningful GMV growth in discovery and exploration areas such as shopping, home verticals and curated events, content quick 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 apps future growth potential.

In the second half of the year, we will actively drive app engagement with the launch of [indiscernible], aiming to establish the NAVER Plus Store app as the first shopping destination for consumers. We plan to solidify our lineup around top GMV catalog products within the app, while significantly strengthening competitiveness in high-frequency purchase categories such as fresh food and FMCG.

Through these efforts, we aim to increase visit frequency and purchase volume position the app as consumer's go to shopping destination. Organically linking [indiscernible] with membership benefits, we will drive new user acquisition and higher purchase volume, showcasing the differentiated value of the NAVER 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 NAVER ecosystem. Partnerships with Netflix, such as the quick and Season 3 campaign to 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 Y-o-Y, 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 TGG. We expect this to drive user acquisition and lock in, significantly enhancing not only e-commerce competitiveness, but also NAVER's brand value and our 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 guarantee delivery services and 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 are utilizing end delivery but also a substantial growth in the database, resulting in nearly doubling and delivery coverage for 3 consecutive quarters.

Starting in Q3, we will introduce early morning delivery service in partnerships with Kurty and CJ Logistics to shorten delivery lead times and strength in cold chain logistics, focusing on overall delivery quality improvements. Furthermore, by year-end, we plan to complete our platform development to enable the full-scale launch of direct contracts early next year, gradually expanding the adoption of end delivery.

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 adviser in off-line stores. It will allow shoppers to ask questions and receive information throughout the shop -- 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, NAVER Pay's TPV reached KRW 20.8 trillion, up 18.7% Y-o-Y and 6.3% Q-o-Q. Non-captive payments, which now make up 54% of total payment volume reached KRW 11 trillion, up 27% Y-o-Y driven by greater payment activity and merchant expansion spurring continued growth of NAVER's third-party ecosystem across both online and off-line.

In the Platform business, loan comparison value increased 50% Y-o-Y driven by continuous service improvements and external partnerships, including the integration of the NAVER Pay loan comparison within the KeyBank 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 off-line payment terminal within the year, supporting face sign authentication and various payment methods. Building on off-line payments, we're exploring integration points with NAVER's reservations and play services to create new customer experiences and offer greater value to merchants.

Lastly, regarding the Korean won stable coin, we're currently monitoring legislative and policy developments from the national assembly and government while internally reviewing potential service opportunities.

Next is an update on the Webtoon business performance. In Q2, Webtoon revenue reached KRW 433.7 billion, up 13.3% Y-o-Y and 2.6% Q-o-Q. 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 LINE works 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 5 consecutive quarters, maintaining strong momentum.

Going forward, you 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. backed by labor cloud, full stake AI capabilities, including the 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 us scale our AI business and solidify NAVER's 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 train platforms for 3 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 robotics operation platform in the new Moraba development, securing a meaningful reference for our robotics business. Leveraging digital train technology, they were intends to provide end-to-end robotic services spanning from robot manufacturing to operational platforms.

Looking ahead, we plan to broaden the retail neighbors of robotic services to customers across multiple countries, including Korea and Japan. In addition, we're pursuing various global collaborations and business opportunities, including sovereign LLM development in Thailand, our participation in GPU as a service and AI data center projects taken in Europe from Morocco humanoid research collaboration with MIT to secure future robotics platforms, LINEWORKS expansion into Taiwan and the introduction of CLOVA Care call and 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 mid- to long-term growth and laying the foundation for global expansion.

Next, I will hand it over to CFO, Hee-Cheol Kim, to discuss the financial performance.

[Hee-cheol Kim, executive]

Good morning. This is CFO, Hee-Cheol 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 KRW 2,915 billion, up 11.7% Y-o-Y and 4.6% Q-o-Q. Driven by growing demand for competitive AI enhanced advertising products ad revenue accreted market growth rates. Meanwhile, commerce accelerated overall revenue growth aided by the successful rollout of a new commission structure in June.

Operating profit reached KRW 521.6 billion, up 10.3% Y-o-Y and 3.2% Q-o-Q as strong revenue growth partially offset cost increases carefully managed through strategic investments to support top line expansion and to secure mid- to long-term growth drivers. Operating margin stood at 17.9%, slightly decreasing Y-o-Y and Q-o-Q.

Next, I will explain the revenue by business. In Q2, search platform revenue reached KRW 1.0365 trillion, up 5.9% on Y-o-Y and 2.4% Q-o-Q. Total advertising revenue across NAVER's platform, including search, display, commerce, finance and Webtoon ads achieved an 8.7% Y-o-Y increase. This growth reflects the combined impact of AI powered feed recommendation enhancement as boost based inventory optimization and targeting improvements in NAVER's unique advertising consulting capabilities and 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 us revenue, we will boost advertising efficiency through AI-driven optimization, expand AI briefing and enhance experiences for both advertisers and users via the NAVER app. And integrated search need design, thereby reinforcing our competitive advantage in the advertising market.

Commerce revenue reached KRW 861.1 billion, up 19.8% Y-o-Y and 9.3% Q-o-Q. Investments in personalization, enhance and 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% Y-o-Y and 10.4% Q-o-Q 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% Y-o-Y and 3.2% Q-o-Q.

Commerce advertising grew 19.8% Y-o-Y and 8.9% Q-o-Q, driven by ad optimizations on NAVER Plus Store and integrated search placements. Fintech revenue reached KRW 411.7 billion, up by 11.7% Y-o-Y and 4.8% Q-o-Q. TPV grew 18.7% Y-o-Y and 1.4% Q-o-Q to KRW 20.8 trillion, driven by Smartstore growth and the continued expansion of the third-party ecosystem with noncaptive payments accounting for 54% of the total and leading overall growth.

Content revenue reached KRW 474 billion, rising 12.8% Y-o-Y and 3.2% Q-o-Q. In particular, Webtoon revenue based on NAVER's consolidated figures in Korean won grew 13.3% Y-o-Y and 2.6% Q-o-Q. For more details, please refer to our Webtoon Entertainment's earnings report scheduled for August 12 local time.

SNOW saw growth of 27.8% Y-o-Y and 21.2% Q-o-Q driven by an increase in paid camera app subscriptions boosted by AI content integration. Enterprise revenue came in at KRW 131.7 billion, up 5.8% Y-o-Y and down 1.9% Q-o-Q. The number of paid LINEWORKS IDs increased 14% Y-o-Y, continuing a solid growth trend. While new air related revenues from the public sector, such as with KHNP have begun to contribute overall growth slightly moderated Y-o-Y and Q-o-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% Y-o-Y mainly due to a high space effect on one-off stock-based compensation expenses related to the Webtoon listing in the same period last year or remaining largely flat Q-o-Q. Werner costs rose 10.6% Y-o-Y and 4.1% Q-o-Q.

Infrastructure costs increased 15.2% Y-o-Y and 4.5% Q-o-Q, mainly due to higher depreciation from new GPU and CPU acquisitions. Given upcoming model training and in France, 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% Y-o-Y and 12.1% Q-o-Q, 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 food category through partnerships and enhanced 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 segment saw a slight decline in profit margin Q-o-Q due to increased staffing and expanded promotions in shopping. It still maintains a solid margin of over 30%. Intact saw improved profit margins Y-o-Y and Q-o-Q, supported by robust top line growth driven by sustained payment revenue increases. Meanwhile, content enterprise narrowed 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 NAVER's overall profitability.

The consolidated net income for Q2 rose 49.8% Y-o-Y and 17.4% Q-o-Q to KRW 497.4 billion, reflecting increased equity method gains and foreign exchange gains from currency fluctuations. Operating cash flow showed a steady growth, but free cash flow for Q2 declined by KRW 48.3 billion Y-o-Y and KRW 275.1 billion Q-o-Q, recording KRW 196.8 billion, 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.

[Operator]

[Foreign Language] [Operator Instructions] The first question will be provided by Stanley Yang from JPMorgan.

[Stanley Yang, analyst]

[Foreign Language] I would like to ask you 2 questions. First one has to do with the revenue growth trend. With regards to your search ad, I see that the growth rate has -- is coming down. You 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 update 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 a 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 I would like to understand as to what impact it will have on your monetization, would there be 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 to the government's initiative on sovereign AI, what business opportunity will this bring to NAVER? .

[Soo-yeon Choi, executive]

[Foreign Language] So regarding the search ad question, you've mentioned that the growth rate for the revenue is on a downward trend, but I would 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 also 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.

Regarding the question on 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.

And because we are focusing on the information seeking type of we do not believe that there is going to be any revenue-related cannibalization. And in terms of such information-seeking queries that has to do with the long tail search keyword, we're making use of ad boost 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 NAVER shopping as well as NAVER 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.

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 that NAVER as well as the investment that it has made over many years. And this really is a new opportunity for NAVER 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 would participate in the LLM development project as well, which once again, is a good opportunity for NAVER. Going forward, we believe that this will open up 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.

[Operator]

[Foreign Language] The following question will be presented by Jin-Gu Kim from Kiwoom Securities.

[Jingu Kim, analyst]

[Foreign Language] 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 tech? And will there be a chance for you to -- including the orchestration aspect to really unlock that global competitiveness?

[Soo-yeon Choi, executive]

[Foreign Language] 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 start-up company called 12 labs, even 12 labs 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.

So regarding the value that sovereign and AI-related initiatives bring and also our proprietary LLM model, HyperCLOVA X, the strategy that we employ within NAVER does not in any way conflict with the potential cooperation and collaboration with Google big tax 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 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 LLM made by other global providers as well as orchestration strategy. So whichever really benefits further enhancing the user experience. We are actively utilizing that approach.

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 and being able to provide these types of platforms. So global big tech are actually approaching us with a potential for entering into certain -- 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 close to change. So that really works towards our benefit when it comes to a potential tie-up with a third-party entity.

[Operator]

[Foreign Language] The last question will be presented by Junhyun Kim from HSBC.

[Junhyun Kim, analyst]

[Foreign Language] I would like to ask you 2 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 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 a SaaS business, would 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 do you -- 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 setting up that basis for growth?

[Soo-yeon Choi, executive]

[Foreign Language] Now regarding cloud over the past 2 years, our focus was actually gaining AI references against large corporations and national government entities like BOK and Korea Hydro and Nuclear Power. And we believe that acquiring those references were quite successful and that 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.

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 is 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 relating -- regarding the long tail commerce aspect. We -- from that perspective, consider C2C to be quite important for us.

Especially if you look at the C2C 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.

So basically, within this ecosystem, we want to be able to assist sellers and the curators through the use of the advertisement and creating business opportunities that comes from such commerce-related transaction. 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. .

[Unknown Executive]

This ends the second quarter 2025 earnings call for NAVER. Thank you very much for joining us, and we look forward to your continued support. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call]