Digital storytelling platform WEBTOON (NASDAQ: WBTN) missed Wall Street’s revenue expectations in Q1 CY2025, with sales flat year on year at $325.7 million. Its GAAP loss of $0.17 per share decreased from $0.06 in the same quarter last year.

Is now the time to buy WBTN? Find out in our full research report (it’s free).

StockStory’s Take

WEBTOON’s first quarter results reflected a business in transition, with management attributing the flat revenue to mixed regional trends and ongoing investments. CEO Junkoo Kim emphasized the strength of Japan, where all three business lines—paid content, advertising, and IP adaptations—grew, with LINE Manga ranked number one for app revenue in the country. Kim also pointed to the company’s cross-border strategy, highlighting efforts to bring Japanese titles to new markets and continued expansion of a local creator ecosystem. CFO David Lee cited declines in rest-of-world users, particularly at Wattpad, due to a security upgrade that impacted traffic, and noted that elevated general and administrative costs, including public company expenses, weighed on profitability. Management acknowledged external volatility and emphasized a focus on operational efficiency and long-term growth.

Looking forward, WEBTOON’s guidance for the next quarter is driven by continued investment in user growth initiatives and infrastructure, particularly in English-speaking markets. CFO David Lee stated, “We are persisting in investments in infrastructure and marketing, even as we guide to a positive adjusted EBITDA in Q2,” and noted that new product features—such as revamped onboarding and discovery—are expected to roll out more broadly in the back half of the year. Management highlighted that product innovation is intended to increase engagement and monetization, with early tests showing a 9% rise in episodes read by users exposed to new features. The company is also closely monitoring macroeconomic uncertainty and FX headwinds, but believes its microtransaction-based business model and diverse content offerings provide resilience. WEBTOON plans to further leverage global creator networks and new content partnerships to expand its user base and drive future growth.

Key Insights from Management’s Remarks

Management identified regional performance differences, execution on product innovation, and the impact of external factors as core themes for the quarter.

• Japan drives revenue mix: Japan was a bright spot, with revenue growth across paid content, advertising, and IP adaptations. Management emphasized LINE Manga’s market leadership and success in exporting Japanese content to Western markets, reflecting a maturing cross-border content strategy.

• Product innovation for engagement: The company highlighted significant updates to its English language app, including a new onboarding experience and content discovery features. Early A/B testing showed a 9% increase in episodes read, with broader rollout expected later in the year to drive engagement and monetization.

• Rest-of-world user challenges: Wattpad, which is the largest contributor to the 'rest of world' segment, experienced a decline in monthly active users after a security upgrade disrupted search traffic and a government ban in one country restricted access. Management expects these impacts to persist through the next quarter but is working on remediation.

• Advertising and IP adaptation strength: Advertising revenue grew in double digits (constant currency) in both Japan and Korea, helped by achievement-based and pre-roll ads. IP adaptation revenue saw substantial growth in Japan, with new titles released globally and successful adaptations on platforms like Netflix.

• Cost pressures impact margins: Elevated general and administrative expenses, largely due to new public company costs and higher marketing spend, contributed to a higher net loss. One-time items in cost of revenue, including a true-up for Japan creator revenue share and reclassification of marketing expenses, also affected gross margin.

Drivers of Future Performance

WEBTOON’s forward outlook is shaped by ongoing product rollouts, regional user trends, and investment in content and marketing to drive engagement and margin improvement.

• Expansion of product features: Management is prioritizing the rollout of new app features in English-speaking markets, with the goal of boosting user engagement and driving higher monetization per user. Early test results on new features have been positive, but the full impact is expected in the second half of the year.

• Continued investment in marketing: The company is maintaining elevated marketing spend to attract new users and support product launches, particularly in the U.S. and Europe. Management believes these investments will pay off over the medium term, though they are expected to weigh on near-term margins.

• External headwinds and resilience: Management cited foreign exchange rate pressures and macroeconomic uncertainty as ongoing risks but expressed confidence in the resilience of its microtransaction-based model. The company is monitoring user market health closely and expects to adapt as needed.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be tracking (1) the full rollout and user response to new app features in English-speaking markets, (2) stabilization and recovery in rest-of-world monthly active users as security and access issues are resolved, and (3) margin trends as elevated marketing and public company expenses continue. Progress on global content partnerships and IP adaptations will also be important indicators of execution.

WEBTOON currently trades at a forward EV-to-EBITDA ratio of 21.3×. In the wake of earnings, is it a buy or sell? Find out in our full research report (it’s free).

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