A securities firm report predicts KRAFTON's third-quarter earnings will fall short of market expectations. On October 6, Kyobo Securities released a report maintaining its 'Buy' rating on KRAFTON while lowering its target price by 5.1% from 390,000 won to 370,000 won.
Kyobo Securities analyst Kim Dong-woo estimated KRAFTON's Q3 consolidated revenue (including subsidiary performance) at 1.1164 trillion won and operating profit at 252.6 billion won. Compared to the same period last year, revenue would increase by 28.2% while operating profit would decrease by 27.5%. These figures are approximately 7% lower in revenue and roughly 23% lower in operating profit than the consensus average among securities firms (revenue of 1.2 trillion won, operating profit of 327.8 billion won). Operating margin, the ratio of operating profit to revenue, is projected to drop over 17 percentage points from 40.0% in the prior-year period to 22.6%. The revenue increase reflects the inclusion of ADK in consolidated results, which began in Q4 of last year.
By segment, PC revenue is expected to reach 340.7 billion won, down 3.7% year-over-year and 39.2% quarter-over-quarter. Analyst Kim noted that Steam traffic for 'PUBG: BATTLEGROUNDS' has maintained higher levels than last year. However, he analyzed that revenue will decrease year-over-year because supercar and K-pop collaborations that boosted Q3 revenue last year are slated for Q4 this year. As for the steep quarter-over-quarter drop, he cited the fading effect of 'Subnautica 2', which saw concentrated sales immediately after its Q2 launch.
Mobile revenue is projected to reach 501.5 billion won, up 2.7% year-over-year and 11.2% quarter-over-quarter. Collaborations with 'Naruto', Ferrari, and Greater China animation IPs are expected to support performance. Advertising and content revenue was expected to remain at a level similar to Q2.
Rising expenses are driving down profitability. Labor costs were estimated at 240.2 billion won, up 54.5% year-over-year due to the consolidation of ADK, while marketing expenses were estimated at 60.3 billion won, up 39.4% due to the consolidation of Neptune and expanded marketing for live services and new titles. Commission fees are expected to jump 146.5% to 349.1 billion won, driven by ADK's inclusion as well as outsourced development expenses for "well-made modes" and 'PUBG 2.0'.
The target price reduction stems from shifting the valuation base period. Kyobo Securities moved its reference period from the previous 'Q3 2026–Q2 2027' to full-year 2027, applying a target price-to-earnings ratio (PER) of 13.8x to the estimated 2027 net profit attributable to controlling shareholders (KRAFTON shareholders' share of net profit) of 1.233 trillion won.
Analyst Kim highlighted two key concerns behind the market's low expectations for KRAFTON's 2027 performance: the waning boost from the major IP 'Subnautica 2', and whether PUBG IP revenue—which grew 25% year-over-year in the first half of this year—can maintain its growth momentum.
Kyobo Securities expects both concerns to be offset. The gap left by 'Subnautica 2' is expected to be filled by a lineup of upcoming releases, including 'NO LAW', 'TARAE', and 'Age Twisters'. Including the official launches of 'Palworld Mobile' and 'inZOI', seven major titles are now within sight of release. Analyst Kim also noted that non-operating expenses related to 'Subnautica 2' will be eliminated.
For the PUBG IP, revenue growth driven by expanded gameplay is expected to continue throughout 2027, anchored by 10th-anniversary PC updates centered around "well-made modes". He also pointed to 'PUBG Mobile Lite', scheduled for release in the second half of the year, as a growth engine. The analysis suggests that this version targeting low-spec devices will enable meaningful regional expansion starting in 2027 across regions like Latin America, India, and Southeast Asia. The report cited 'Free Fire', which recorded 100 million daily active users (DAU) in Q2 2026, as evidence of demand for mobile battle royales on low-spec devices.
Annual earnings are expected to maintain an upward trend. Kyobo Securities estimated KRAFTON's 2026 revenue at 4.7849 trillion won and operating profit at 1.3692 trillion won, marking year-over-year increases of 43.8% and 29.9%, respectively. Estimates for 2027 project revenue of 5.3222 trillion won and operating profit of 1.6057 trillion won. Fourth-quarter operating profit was forecasted at 144.1 billion won, declining further from Q3.
