Kakao Announces Major Business Split to Bolster AI Capabilities
South Korea's Kakao Corp. said Friday it plans to split its major businesses, including its popular messenger service KakaoTalk, into two entities as part of efforts to strengthen its artificial intelligence (AI) capabilities. The plan to split the company into KakaoAI and KakaoX was approved at a board meeting, according to a regulatory filing. Kakao plans to complete the spinoff by Jan. 1 next year and relist KakaoAI on Jan. 27.
Under the plan, the newly created entity KakaoAI will oversee the company's flagship messenger app KakaoTalk, with the goal of growing into an "AI core company" by connecting AI with advertising and commerce, the company said in a release. Kakao said it plans to create new revenue models and aims to generate more than 6 trillion won (US$4.3 billion) in sales at KakaoAI by 2030. Kakao's Chief Executive Officer Chung Shin-a will lead the new company.
The existing Kakao Corp. will be rebranded as KakaoX and serve as the investment arm for future growth engines. Kakao's mobile payment service, mobility platform and entertainment affiliates will remain under KakaoX, the company said. Shareholders will receive shares in the new entities in proportion to their current stakes, with a split ratio of 36:64 for KakaoAI and KakaoX, respectively. Kakao said it has no plans to turn KakaoX into a holding company and that the two companies will operate independently.
Founder Kim Beom-su is expected to remain the largest shareholder of both companies while maintaining his current distance from their management and governance, the company said. Kim stepped down as chair of Kakao in 2023 and now serves as head of Kakao's Future Initiative Center.
Market Reaction and Investor Skepticism
Despite the company's framing of the split as a way to strengthen AI, investors appeared wary. Following the announcement on Friday, Kakao's stock price fell more than 7 percent, wiping out 1.8 trillion won ($1.3 billion) of market cap. This reflects lingering investor distrust over the plan, which splits the company's mobile messenger and investment businesses into separate entities.
The company stressed that the restructuring will take the form of a spin-off, in which shares of the newly created company are distributed to existing shareholders in proportion to their current stakes, so the measure is aimed at safeguarding shareholder value. It argued the split is intended to address the significant discount on Kakao Group. While announcing the plan, the company said brokerage consensus values Kakao Group at 34.2 trillion won, about 17.4 trillion won higher than Kakao's average market capitalization of 16.8 trillion won over the past three months. The company said the restructuring is intended to help the market reassess its value more appropriately.
"The main purpose of the spin-off is to address the significant discount on Kakao Group," said Kim Do-young, who is now Kakao Investment CEO and named as KakaoX CEO.
The skepticism also stems from the fact that Kakao's existing AI businesses have yet to generate earnings meeting market expectations. Hanwha Investment & Securities analyst Kim So-hye said that KakaoAI simplifies the company's structure as a platform and AI agent business, but its AI business has yet to prove its monetization potential.
AI Strategy and Background
The latest move comes as Kakao has been seeking ways to accelerate investment in its growing consumer AI business amid intensifying global competition. CEO Chung previously said the company was focusing on strengthening consumer-oriented AI services, such as AI agents, rather than entering the hyperscale AI infrastructure market, including data centers.
Kakao currently provides various everyday AI services centered around its proprietary Kanana AI models, integrated into its KakaoTalk messenger platform and other affiliated apps. Last year, Kakao partnered with OpenAI, allowing users to access ChatGPT through its messenger app.
Kakao's operating profit and sales reached record highs in the second quarter this year, helped by robust growth of its flagship platform business.
The company also announced shareholder return policies for the two entities. KakaoAI plans to use up to 35 percent of its free cash flow to fund shareholder returns, while KakaoX will use 30 percent of dividends received from subsidiaries and 30 percent of gains from investments for shareholder returns.
Historical Context and Criticism
The spinoff comes amid past criticism over Kakao's expansion. The company faced criticism after spinning off and listing some of its key businesses, including Kakao Games in 2020, KakaoBank in 2021 and Kakao Pay in 2021. As of the end of June 2021, Kakao had 158 affiliates, but following criticism, the company reduced the number to 99 by October 2025.