Core Insights - KT Corporation (KT) reported a significant 105.4% year-over-year increase in operating profit to KRW 1,014.8 billion, with revenue rising 13.5% to KRW 7,427.4 billion, driven by strong performance in traditional telecom and AI initiatives [1][10] Financial Performance - KT Cloud achieved a 23% revenue growth, while KT Studio Genie saw a 6% increase, contributing to the overall performance and diversification of income streams [2] - Net income surged 78.6% year-over-year to KRW 733.3 billion, and EBITDA increased by 36.3% to KRW 1,990.7 billion [2] - Operating expenses rose 5.9% year-over-year, despite lower labor costs from real estate sales [5] Strategic Initiatives - The company is transitioning into an Artificial Intelligence and Information and Communications Technology (AICT) firm, launching its proprietary large language model (LLM), Mi:dm 2.0, in July [3][10] - KT has secured AI platform projects with major enterprises and public-sector clients, indicating a commitment to integrating AI across various applications [4] Competitive Landscape - KT faces execution risks during its transition to an AICT company, alongside competition from SK Telecom and Telefonica [6] - SK Telecom reported a consolidated revenue of KRW 4.34 trillion, with a significant decline in operating profit by 37.1% year-over-year [7] - Telefonica's operating income decreased by 6.7% in the second quarter of 2025, but it continues to expect organic growth in revenues and EBITDA for the year [8] Market Position and Valuation - KT stock has increased by 18.1% over the past year, compared to the Zacks Wireless Non-US market industry's 30% growth [11] - The stock is trading at a price/book multiple of 0.73X, significantly lower than the industry's 2.32X [12] - Estimates for KT have been marginally revised upwards for the current year [13]

Core Viewpoint - KT Corporation's shares have declined approximately 13.5% over the past three months, underperforming the Zacks Wireless Non-US Markets growth of 10.6, despite strong underlying fundamentals and a strategic pivot towards Artificial Intelligence and Information and Communications Technology (AICT) [1][10]. Financial Performance - In Q2 2025, KT reported a revenue increase of 13.5% year over year, reaching KRW 7,427.4 billion, while operating profit more than doubled to KRW 1,014.8 billion, driven by robust performance in traditional telecom and AI initiatives [6][10]. - The AI IT business revenues grew by 13.8% year over year, and revenues from KT Cloud increased by 23%, reflecting strong data center momentum and project wins [11]. Strategic Transformation - KT is transitioning from a traditional telecom company to an AICT firm, integrating IT and AI with telecommunications to offer unique services [7]. - The company is developing a comprehensive AI lineup anchored by its proprietary Mi:dm2.0 large language model, with early contract wins from government and public sector entities [8]. - KT has partnered with Microsoft to enhance its AI capabilities, integrating an AI agent into Genie TV and planning to introduce a tailored AI model for Korea in the second half of 2025 [9]. Shareholder Returns - KT has a stable dividend policy and a KRW 1 trillion share buyback plan, with KRW 250 billion already completed, indicating strong confidence in future cash flow [13]. - The dividend for Q2 was raised by 20% year over year to KRW 600 per share, enhancing the appeal of KT shares to investors [13]. Valuation and Market Position - KT's stock is trading at a price/book multiple of 0.72X, significantly lower than the industry average of 2.22X, indicating a potential undervaluation [18]. - Compared to peers, KT's stock performance has lagged, with SK Telecom down 6.1% and América Móvil gaining 23.3% over the same period [20]. Long-term Outlook - Despite recent stock declines, KT's solid financial performance, AICT transformation, and expanding partnerships position it for sustained long-term growth [21]. - The company's disciplined expense management and aggressive share buyback program are additional positives for potential investors [21].