Kakao Games: Softer-than-expected 1Q26: Cut PO to W9,000; reiterate Underperform

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Kakao Games: Softer-than-expected 1Q26: Cut PO to W9,000; reiterate Underperform

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Kakao Games

Softer-than-expected 1Q26: Cut PO to

W9,000; reiterate Underperform

Reiterate Rating: UNDERPERFORM | PO: 9,000 KRW | Price: 11,420 KRW

Reiterate Underperform with a lower PO of W9,000 15 May 2026

We cut Kakao Games (KG)’s PO to W9,000 (19% downside) from W10,000, reflecting Equity

softer-than-expected 1Q26 revenue. Following a larger than anticipated 1Q26 net loss

of W27bn (vs our estimate of W6bn loss), we lower our FY2026 net income accordingly.

Key ChangesAs earnings recovery appears likely back-end loaded, we shift our valuation anchor from

2026 to 2H26-1H27 but maintain our 20x P/E target multiple (the average 12-month (W) Previous Current

forward P/E during 2022-24, when earnings were normalized). We reiterate Price Obj. 10,000.00 9,000.00

Underperform. Though restructuring measures are prudent, and the 2026 pipeline could 2026E Rev (m) 594,182.3 559,122.1

eventually restore growth momentum, near-term visibility looks low. 2027E Rev (m) 710,010.2 712,827.0

2028E Rev (m) 643,740.6 643,243.7

2026E EPS 488.17 96.181Q26 revenue below market expectations

Revenue reached W83bn, down 33% YoY/16% QoQ, below market consensus (W99bn), 2027E EPS 585.13 510.56

as the overall monetization momentum appeared softer than anticipated and the 2028E EPS 358.30 410.35

contribution from new titles remained limited during 1Q26. KG reported 1Q26

consolidated OP loss of W17bn. While the company’s revenue went down YoY, cost Susie Lee >>

Research Analyst

controls helped limit the earnings downside. Marketing costs (W46bn) declined 26% YoY Merrill Lynch (Seoul)

/5% QoQ, and advertising fee (W5bn) dropped 63% YoY/35% QoQ. Management +82 2 3707 0557 susie.lee1@bofa.com