Kakao expects its AI business to reach breakeven in 2028, its chief financial officer said on the third-quarter earnings call on 5 November, as reported by TheElec. The AI service unit inside Kakao’s standalone company lost KRW 64 billion in the quarter, according to Kakao’s earnings deck, up from KRW 46 billion a year earlier.
By our arithmetic from Kakao’s own split, the rest of the group made KRW 304 billion of operating profit before the AI unit, and the AI loss took 21% of it. Kakao reported group operating profit of KRW 240 billion, up 7% year over year.
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The key insight: Kakao’s AI service unit lost KRW 64 billion in the third quarter. By our arithmetic from Kakao’s own split, that took 21% of the KRW 304 billion the rest of the group made before it, and the loss is 39% wider than a year earlier. Kakao’s CFO said on the call that AI will reach breakeven in 2028, according to TheElec.
Kakao’s preliminary results, published on 5 November Korea time, show third-quarter revenue of KRW 2,086.7 billion, up 6% year over year and down 1% from the second quarter. Operating profit was KRW 240.3 billion, up 7.4% year over year and down 13% from the second quarter. The operating margin was 11.5%, against 11.4% a year earlier and 13.2% in the second quarter.
Talk Biz, the KakaoTalk advertising and commerce business, brought in KRW 633 billion, up 13%. Kakao notes the figures are estimates prepared before its external auditor finished its review.
Kakao’s third-quarter 2026 operating profit split as shown in its earnings deck (slide 11, KRW billion, preliminary): KRW 240 billion reported after a KRW 64 billion loss in the AI service unit. The 21% share of KRW 304 billion is our arithmetic. The 2028 breakeven year is the CFO’s, on the call, as reported by TheElec.Animated: operating loss of the AI service unit inside Kakao’s standalone company, by quarter, third quarter 2025 to third quarter 2026, KRW billion, rounded as shown on slide 11 of Kakao’s earnings deck (third-quarter 2026 figures preliminary). Source: Kakao 3Q26 earnings release, 5 November 2026; the 2028 breakeven year is the CFO’s, as reported by TheElec.
The AI Unit’s Line
Kakao splits its operating profit three ways: the standalone company excluding AI, its subsidiaries, and the AI service unit. In the third quarter those were KRW 182 billion, KRW 122 billion and a loss of KRW 64 billion. TheElec gives the AI loss as KRW 64.0 billion, KRW 7.0 billion wider than the KRW 57.0 billion of the second quarter.
The loss has widened in each of the last three quarters, from KRW 46 billion in both the third and fourth quarters of 2025 to KRW 55 billion, KRW 57 billion and KRW 64 billion. By our arithmetic, that is 39% wider than a year earlier, and KRW 268 billion over the five quarters. Group operating profit grew 7% over the same year.
The deck links part of the cost to AI. Outsourcing and infrastructure costs were KRW 241 billion, up 8% from the second quarter, which Kakao attributes to “growing infrastructure demand for AI model training and service operation” (our translation).
The 2028 Breakeven Claim
The breakeven statement came on the call, not in the deck. TheElec quoted CFO Shin Jong-hwan as saying, in our translation: “In 2028, AI revenue will make up a double-digit share of Talk Biz, and profitability will improve to the breakeven point.”
He tied the revenue side to agents. “From next year, we will accelerate the growth of our existing advertising and commerce through new monetization models using AI agents,” he said, according to TheElec (our translation). Chief executive Chung Shin-a said: “I am convinced KakaoTalk will become the space where users and AI agents communicate.”
TheElec reports that Kakao plans a pilot of its Kanana Space assistant in December, and the launch of two other AI services within the year.
How Kakao Says It Will Hold Costs
The cost side, as TheElec reports it, has three parts. Simple requests are to be handled on the user’s phone and complex ones on servers. Kakao’s own Kanana model is to become multimodal, with Kakao’s flagship model and outside high-performance models used selectively for complex tasks. And rather than buy GPUs directly at large scale, Kakao uses GPU cloud services, so that AI investment and costs do not necessarily rise in proportion to users.
Kakao’s deck shows third-quarter capex up KRW 2.8 billion from a year earlier.
The Business Lever
The business lever is the subsidy. Kakao is paying for AI out of a messaging, advertising and commerce business, and its plan, as TheElec reports the call, is to recover that cost through the same advertising and commerce lines.
As we read Kakao’s deck, the three-way split of operating profit makes the cost of AI visible as its own line, where a combined figure would have shown only a 7% rise in group profit.
As we read TheElec’s account of the call, Kakao plans to recover the cost through the advertising and commerce it already sells, which puts the return on AI inside Talk Biz.
As we read the cost plan, routing simple requests to the phone and renting GPU cloud capacity are both ways to keep the cost of serving each user from tracking usage.
Shin Jong-hwan, Kakao CFO, on the earnings call as reported by TheElec (our translation)
“In 2028, AI revenue will make up a double-digit share of Talk Biz, and profitability will improve to the breakeven point.”
Three Implications
FOR KAKAO The AI unit’s loss is KRW 268 billion over the five quarters Kakao shows, by our arithmetic, against KRW 240 billion of group operating profit in the third quarter alone.
FOR ADVERTISERS TheElec reports that the CEO expects AI that understands intent in conversations to create new advertising demand without a direct search.
FOR THE AI UNIT ECONOMICS QUESTION Figma covered its agent’s inference in the quarter and Apple cut some engineers’ daily AI budgets; Kakao has now put a date on when its AI unit stops needing the subsidy.
The analysis says: “The accounting metric (gross margin) and the strategic metric (harness density) are anti-correlated by design.”
As we read it, Kakao’s slide 11 puts a similar split in public: the AI unit’s loss is the accounting metric, and the return Kakao names comes through KakaoTalk’s advertising and commerce. The analysis is about AI labs’ subscriptions and does not discuss Kakao.
What Is Not Established
The 2028 breakeven and the double-digit Talk Biz share are statements on the call, as reported by TheElec; we have not heard the recording, and the deck does not repeat them. The deck we read gives no revenue figure for the AI unit, and TheElec’s report does not cite one. The third-quarter figures are preliminary.
The 21%, the 39% and the KRW 268 billion are our arithmetic from Kakao’s rounded slide figures.
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Kakao’s AI unit lost KRW 64 billion in the third quarter, its widest loss in the five quarters Kakao shows, while group operating profit rose 7% to KRW 240 billion. Its CFO said on the call that AI will reach breakeven in 2028, according to TheElec. By our arithmetic, the AI loss took 21% of the profit the rest of Kakao made.
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A note on sourcing. Kakao’s figures are from its third-quarter 2026 earnings deck and fact sheet of 5 November 2026, which are preliminary and unaudited. The 2028 breakeven and the executives’ remarks are from the earnings call as reported by TheElec; quotations are our translation from the Korean. The 21%, 39%, KRW 304 billion and KRW 268 billion are our arithmetic from Kakao’s rounded slide figures.
Gennaro Cuofano is a CRO and tech executive who has worked in AI since late 2015, starting with bringing NLP, natural-language generation, voice and chatbot products to the marketing industry. His background is in law and finance: he holds a Master's degree in Law and an International MBA with an emphasis on corporate finance (LUISS Business School and the University of San Diego, 2012), and worked as a financial analyst at a real-estate investment firm in San Diego and as an assistant controller. His work focuses on business model strategy, business engineering and, more broadly, structural analysis: how companies make money, read from their own filings. He created FourWeekMBA and leads research there and at The Business Engineer, his newsletter on AI and business strategy, with over 95,000 subscribers and more than 1,000 published analyses. His writing has also appeared on Entrepreneur (for example, How to Digitize a Family Business in Europe) and HackerNoon. Find him on LinkedIn and Substack. See how we source.
