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Momentum set to rebound in 2H25

Modest 2Q25 results expected

While Krafton has delivered earnings surprises every quarter for more than a year, we expect 2Q25 results to be unremarkable, with revenue of W717bn (+1% YoY) and operating profit of W307bn (-7% YoY). Our forecasts are slightly below the consensus estimates (W746bn and W323bn, respectively).

We expect PC revenue to grow 28% YoY to W244bn. In April-May, monthly peak concurrent users for PUBG on PC were in the low-800,000 range―similar to the January?February level and up 16% YoY. Meanwhile, we forecast mobile revenue to contract 9% YoY to W455bn, hurt by a high base of comparison stemming from one-off bonus payments from Tencent in 2Q24. Without this base effect, we estimate mobile revenue would rise 14% YoY.

2H25 outlook is brighter thanks to upcoming updates

Growth momentum should resume in 2H25, supported by several major updates in collaboration with K-pop artists and a luxury car brand. Last year, similar collaborations with―NewJeans and Lamborghini―drove earnings surprises in 2Q-3Q24.

In addition, Krafton plans to launch a user-generated content (UGC) project that will allow players to create their own custom experiences. If this initiative gains traction, it could lead to significant growth in the active player base. By year-end, the company also plans to launch a major update that will revamp existing maps with new features (including a terrain destruction feature to make gameplay more dynamic).

Maintain Buy and TP of W500,000

The stock is still attractively valued at a 2025F P/E of 16x. After taking a breather in 2Q25, earnings are likely to regain momentum in 2H25 as major updates start to be reflected.

That said, we believe that update-driven earnings improvement alone will not be sufficient to drive a re-rating. Rather, a re-rating should hinge on: 1) meaningful growth in the PUBG user base following the introduction of UGC; and 2) a clear timeline for the release of major new titles. The company plans to release Subnautica 2 within 2025.