Nexon H1 Revenue Edges Up; Issues YTD Outlook; Launches 25 Bln Yen Share Buyback

Nexon Co., Ltd. reported mixed H1 2025 financial results, with consolidated revenue rising a modest 0.8% to ¥232.8 billion and operating profit increasing 6.6% to ¥79.3 billion. However, profitability sharply declined, with profit before tax falling 41.6% and profit attributable to owners down 43.2%, primarily driven by a significant ¥21.6 billion foreign exchange loss. Despite the profit pressure, Nexon maintained a strong balance sheet with increased assets and robust operating cash flow, and announced a new share buyback program of up to ¥25 billion, representing 1.4% of outstanding shares, to be completed by October 2025, while forecasting a year-over-year revenue decline for the nine-month period.

Analysis

Nexon's financial results for the first six months of 2025 reveal a significant divergence between operational performance and bottom-line profitability. While revenue saw a marginal increase of 0.8% to ¥232.8 billion and operating profit grew a healthy 6.6% to ¥79.3 billion, profit attributable to owners plummeted 43.2% to ¥43.0 billion. This sharp decline is almost entirely attributable to a non-operating foreign exchange loss of ¥21.6 billion, which contrasts with a gain in the prior-year period. Despite this, the company's fundamentals appear robust, evidenced by a surge in operating cash flow to ¥88.1 billion and a strong balance sheet with an equity ratio of 81.7%. Management is leveraging this financial strength, approving a new share buyback program of up to ¥25 billion, representing 1.4% of outstanding shares. However, near-term guidance is cautious, forecasting a nine-month revenue decline between 1.8% and 4.7% year-over-year. This expected drop is explicitly linked to a difficult comparison against the successful 2024 launch of Dungeon & Fighter Mobile in China, rather than a broad-based deterioration in its core franchises.

Key Decisions for Investors

• Investors should look past the headline 43.2% net profit decline, as it was driven by non-operating currency effects, and instead focus on the 6.6% growth in operating profit and strong operating cash flow as better indicators of core business health.
• The new ¥25 billion share buyback program provides a notable support for the stock and signals management's confidence, potentially offering a favorable entry point for long-term investors despite the weak short-term guidance.
• A cautious stance should be taken on near-term growth, as the company's own forecast projects a revenue decline of up to 4.7% due to tough year-over-year comparisons; performance of core franchises like MapleStory should be monitored to gauge underlying momentum.
• Given the material impact of currency fluctuations on earnings, portfolios sensitive to FX risk should consider the potential for continued volatility in Nexon's bottom-line results.