Digital storytelling platform WEBTOON (NASDAQ: WBTN) reported Q2 CY2025 results beating Wall Street’s revenue expectations, with sales up 8.5% year on year to $348.3 million. Guidance for next quarter’s revenue was optimistic at $385 million at the midpoint, 2.3% above analysts’ estimates. Its GAAP loss of $0.03 per share was 85.6% above analysts’ consensus estimates.
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WEBTOON (WBTN) Q2 CY2025 Highlights:
- Revenue: $348.3 million vs analyst estimates of $340.9 million (8.5% year-on-year growth, 2.2% beat)
- EPS (GAAP): -$0.03 vs analyst estimates of -$0.21 (85.6% beat)
- Adjusted EBITDA: $9.66 million vs analyst estimates of $3.67 million (2.8% margin, significant beat)
- Revenue Guidance for Q3 CY2025 is $385 million at the midpoint, above analyst estimates of $376.2 million
- EBITDA guidance for Q3 CY2025 is $4.5 million at the midpoint, below analyst estimates of $10.32 million
- Operating Margin: -2.5%, up from -24.6% in the same quarter last year
- Free Cash Flow was $6.38 million, up from -$3.75 million in the same quarter last year
- Monthly Active Users: 155 million, down 11.3 million year on year
- Market Capitalization: $1.19 billion
Junkoo Kim, Founder and CEO, said, “We are pleased to report strong second quarter results, with both revenue and Adjusted EBITDA coming in above the top end of our guidance range. Total revenue was up 5.5% on a constant currency basis, with growth in all three revenue streams – Paid Content, Advertising, and IP Adaptations – as we continue to build our leadership position globally.”
Company Overview
Pioneering a vertical-scrolling format optimized for mobile devices, WEBTOON Entertainment (NASDAQ: WBTN) operates a global platform where creators publish serialized web-comics and web-novels that users can read in bite-sized episodes.
Revenue Growth
Reviewing a company’s top-line performance can reveal insights into its business quality. Growth can signal it’s capitalizing on a new product or emerging industry trend.
With $1.37 billion in revenue over the past 12 months, WEBTOON is a small player in the business services space, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and numerous distribution channels.
We can better understand the company’s revenue dynamics by analyzing its number of monthly active users, which reached 155 million in the latest quarter. Over the last two years, WEBTOON’s monthly active users averaged 2% year-on-year declines. Because this number is lower than its revenue growth during the same period, we can see the company’s monetization has risen. 
This quarter, WEBTOON reported year-on-year revenue growth of 8.5%, and its $348.3 million of revenue exceeded Wall Street’s estimates by 2.2%. Company management is currently guiding for a 10.7% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 11.2% over the next 12 months, an improvement versus the last two years. This projection is noteworthy and suggests its newer products and services will catalyze better top-line performance.
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Operating Margin
WEBTOON’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging negative 6.5% over the last four years. Unprofitable business services companies that fail to improve their losses or grow sales rapidly require extra attention. In WEBTOON’s case, it seems it’s deferring current profits by investing heavily.
Looking at the trend in its profitability, WEBTOON’s operating margin might fluctuated slightly but has generally stayed the same over the last four years, meaning it will take a fundamental shift in the business model to change.
In Q2, WEBTOON generated a negative 2.5% operating margin.
Cash Is King
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
WEBTOON broke even from a free cash flow perspective over the last three years, giving the company limited opportunities to return capital to shareholders.
WEBTOON’s free cash flow clocked in at $6.38 million in Q2, equivalent to a 1.8% margin. Its cash flow turned positive after being negative in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends carry greater meaning.
Key Takeaways from WEBTOON’s Q2 Results
It was good to see WEBTOON beat analysts’ revenue, EPS, and EBITDA expectations this quarter. We were also glad its revenue guidance for next quarter exceeded Wall Street’s estimates. Zooming out, we think this quarter featured some important positives. The stock traded up 24.7% to $11.67 immediately following the results.
Sure, WEBTOON had a solid quarter, but if we look at the bigger picture, is this stock a buy? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.
