On the 9th, during the first quarter earnings conference call held by Naver, questions arose about Naver's competitiveness in the era of generative artificial intelligence (AI). With suggestions for increased investment in AI infrastructure, attention is focused on whether the goal of "enhancing AI competitiveness within the year" emphasized by CEO Choi Soo-yeon can be achieved.
During the conference call, it was noted that "search traffic may decrease due to the growth of generative AI." Eddie Cue, Apple’s vice president, recently appeared as a witness in the trial of Google's parent company, Alphabet, stating that "AI-based search will ultimately replace standard search engines like Google." As a result of this, Naver's stock price dropped over 5% on the 8th.
In response, CEO Choi stated, "Currently, no adverse effects have been identified in terms of traffic."
CEO Choi remarked, "The utilization methods of generative AI search services are diversifying, and we are well aware of the various trends trying to connect places and search shopping." He added, "As this generative AI search evolves further, I believe user information consumption behavior will ultimately diversify as well."
Naver is currently introducing its own AI model, HyperCLOVA X, to its services while also seeking to secure business-to-business (B2B) customers. However, the industry views that since Naver's AI services are still in their early stages, it will take time to show results. In last year's performance, search advertising accounted for about 37% of Naver's revenue, and if generative AI invades the search market, a hit to Naver's revenue is inevitable.
CEO Choi noted, "We have signed a paid cloud usage contract equipped with AI HyperCLOVA X with Korea Hydro & Nuclear Power, following that with the Bank of Korea," and added, "We expect revenue generation starting from the second quarter." He further stated that "We are focusing on developing HyperCLOVA X to enhance Naver's search and commerce capabilities."
CEO Choi also mentioned, "As the AI ecosystem expands and the AI adoption rate among corporations increases, Naver's cloud-based monetization models such as NeuroCloud and GPU edge will also be able to settle stably," and said, "We plan to contribute to the ecosystem while simultaneously expanding our own revenue model."
Naver announced that it will expand the coverage of its newly launched search result summary feature, "AI Briefing," from the current 1% to double digits within this year.
CEO Choi explained, "The overall impact of Naver search on the internet ecosystem in Korea is significant, which led us to initially apply some of these queries to launch stably and manage their impact."
Questions also arose regarding Naver’s GPU (graphics processing unit) acquisition plans. CFO Kim Hee-cheol responded to the question, "DeepSeek, known as 'cost-effective AI,' has over 50,000 GPUs; how does Naver plan to secure them?" by stating, "As we also strive to integrate AI into all services, we will increase our GPU investments."
However, he added, "Rather than trying to catch up with global big tech, we will financially review Naver's capabilities and appropriate levels to increase capital expenditures (CAPEX)."
Naver reported revenue of 2.78 trillion won and an operating profit of 505.3 billion won for the first quarter of this year, with revenue and operating profit increasing by 10.3% and 15.0%, respectively, and an operating profit margin of 18.1%.