Webtoon's Q1 Earnings Insights

Revenue Slips, But Margins Improve

WEBTOON Entertainment reported first-quarter 2026 revenue of $320.9 million, a slight decrease of 1.5% compared to the same period in 2025. However, this decline was offset by growth in paid content and advertising, with the results falling within the company's prior guidance range. On a constant currency basis, revenue increased by 0.2%.

Gross profit for the quarter rose significantly by 16% year over year to $83 million, with gross margin expanding by 390 basis points to 25.9%. This improvement was attributed to stronger cost management and higher-margin businesses like advertising. The company also narrowed its net loss to $8.8 million from $22.0 million in the previous year’s quarter.

Adjusted EBITDA saw a substantial increase of 132% to $9.5 million, surpassing the high end of the guidance range. Adjusted EPS reached $0.07, up from $0.03 in the first quarter of 2025. CFO David Lee highlighted that the improved performance reflected better cost discipline and efficiency in general and administrative and marketing expenses.

Paid Users Grow Despite Lower MAU

Despite a 5.9% decline in global monthly active users (MAU), the number of monthly paying users grew by 2.2%. Lee explained that the decline in MAU was partly due to the exclusion of automated web traffic in non-core markets starting in March 2026. While app MAU and web comic app MAU declined by 6.7% and 3.0%, respectively, the English platform web comic app MAU saw a 3.1% increase.

WEBTOON launched two notable titles during the quarter: - Ties That Bind Us, an adaptation of a Wattpad web novel that has generated over 5 million views. - Shifting Tails, which consistently ranked in the top 20 among English platform titles.

Revenue from paid content grew by 2.3% on a constant currency basis, while advertising revenue increased by 0.8%. IP adaptations, however, saw a 22.2% decline on a constant currency basis, with revenue recognition varying based on milestone timing.

Korea Leads Growth, Japan Remains a Focus

In Korea, first-quarter revenue grew by 3.2% year over year on a constant currency basis, driven by double-digit growth in paid content. However, this was offset by declines in IP adaptations and advertising. Monthly paying users in Korea rose by 8.5% to 3.7 million, with the paying ratio increasing to 16.1%.

Japan experienced a 3.4% decline in revenue on a constant currency basis. Paid content saw a single-digit decline, but advertising growth and triple-digit IP adaptations growth helped mitigate the impact. Monthly paying users in Japan fell by 8.3% to 2.1 million, but ARPU increased by 3.7% to $23.20.

WEBTOON completed infrastructure projects in Japan by the end of the first quarter and redirected resources to improve the user experience. Yuki Chae, now chief product officer, is expected to focus on the Japan business after contributing to growth in Korea.

The rest of the world segment saw a 5.6% increase in revenue on a constant currency basis, driven by growth in paid content and advertising. Monthly paying users in this region increased by 3.3%, with the paying ratio rising to 1.7%.

Canvas, AI Translation and Disney Collaboration in Focus

Junkoo Kim, founder and CEO, announced major changes to Canvas, WEBTOON’s amateur creator platform. These include a unified international platform to support distribution across languages such as English, Spanish, and French. An opt-in AI-powered translation program will allow creators to translate and distribute their series in other languages.

WEBTOON plans to expand ad revenue sharing to all supported Canvas languages and continues to support creators in monetizing their content. From 2021 to 2025, the company paid $2.7 billion to creators, with plans to grow this amount over time.

During the Q&A session, Lee stated that WEBTOON does not believe it needs to increase revenue sharing to stay competitive. Instead, the focus is on providing value through tools like AI translation and expanded distribution. Yongsoo Kim emphasized that the global Canvas platform aims to attract more creators, help them reach larger audiences, and strengthen the pipeline for WEBTOON Originals and IP adaptations.

WEBTOON also updated investors on its Disney collaboration, including five new titles launched since the end of the fourth quarter. These include Star Wars: Darth Maul, Daredevil, and Mickey x F1: Racing to the Top! The new Disney consumer app platform is expected to launch in 2026.

Second-Quarter Outlook and Growth Plans

For the second quarter of 2026, WEBTOON expects revenue growth of 1.7% to 4.6% on a constant currency basis, translating to $332 million to $342 million. Adjusted EBITDA is projected to be between $0 million and $5 million, or an adjusted EBITDA margin of 0.0% to 1.5%.

Lee anticipates improvements in Japan and advertising trends as the year progresses, with the goal of returning to double-digit revenue growth by the end of 2026. Key drivers include paid content growth, product investments, personalization, Japan improvement, advertising recovery, and continued IP adaptation opportunities.

Yongsoo Kim noted that the management team is focused on initiatives to accelerate growth, such as expanding video formats, strengthening digital character interaction, and building "mega IP franchises" to support platform growth.

WEBTOON ended the quarter with $595 million in cash and $11 million in short-term deposits. Lee emphasized the company’s capital-efficient business model and financial strength for long-term investments.

About WEBTOON Entertainment (NASDAQ:WBTN)

Webtoon Entertainment Inc operates WEBTOON, a leading digital comics platform offering a diverse library of user-generated and professionally produced webcomics. The company enables creators around the world to publish serialized content in a vertical-scrolling format optimized for mobile and web consumption. Through its platform, readers can access thousands of titles across genres such as romance, fantasy, drama, and action, with both free-to-read episodes and advanced access options supported by microtransactions and advertising.

Founded as part of Naver Corporation and launched internationally in 2014, Webtoon Entertainment has grown rapidly by fostering a direct connection between comic creators and global audiences.