Naver Earnings: Record Operating Profit and Some Signs of Recovery in Search and E-Commerce

Naver reported third-quarter 2023 revenue growth of 18.9% with operating profit up 15.1% year on year, to a quarterly record KRW 380 billion, slightly better than our expectations. The key search platform business, which underpins Naver’s narrow moat based on intangible assets and network effect, reported revenue growth of only 0.3% year on year in the third quarter. This is a continuation of the slower growth seen since the fourth quarter of 2022, but we believe this is related to an industrywide advertising slowdown and does not reflect any significant deterioration in the competitive position of this narrow-moat business. Management indicated that it believed it is seeing some signs of recovery, and expects the key search and e-commerce revenue to grow a bit faster in the fourth quarter than they did in the third quarter.