Webtoon Entertainment (WBTN) Q3 2026 earnings review
Webtoon grows in Korea and ads, but Japan shrinks faster
Webtoon Entertainment, the online comics and webnovel publisher, is growing in South Korea and advertising while its largest market, Japan, shrinks faster. Total sales excluding currency swings barely moved, missing the company's own plan as Japanese sales fell 11% on the same basis. Chief executive Junkoo Kim forecast a rebound to 9% to 12% growth in the fourth quarter, though that plan counts sales from a newly acquired game studio.
| Revenue excluding currency swings | +0.2% missed 0.7%–3.3% outlook |
|---|---|
| Reported revenue | $362.8M -4.0% from a year ago |
| Adjusted EBITDA | $2.2M 0.6% margin vs 1.4% a year ago |
| Q4 constant-currency revenue outlook | 9.0%–12.0% includes RI Games acquisition |
⚖️ Verdict: 🔴 Bearish
The story got worse because the drop in Japan deepened and the promised fourth-quarter rebound leans on an acquisition. By our math, Japanese monthly paying users fell 13% from a year ago, and folding RI Games Holdings into the fourth-quarter target obscures underlying growth. The bright spot: Korean readers spent 21% more per person and advertising sales jumped 30% excluding currency swings.
The question now is whether the fourth-quarter rebound reflects real reader demand or just easy comparisons, parent-company ad spending and bought game revenue. Either new AI chat and translation tools and the Disney app restart user growth in Japan and abroad, or Japan keeps losing paying readers while new content investments keep profit near zero. Next quarter's organic growth split and Japan's paying user count will tell.
🐂 Bull Case
Korea Readers Spend More and Buy More Comics
Webtoon's home market of South Korea is carrying its core digital comics business. Paid Content revenue, the money readers spend to unlock comic episodes, rose 23.7% in Korea in dollar terms. Chief executive Junkoo Kim credited better story recommendations and new loyalty features like Fan Score, a tool introduced in August that ranks a reader's dedication to a series.
Average revenue per paying user (ARPPU), the monthly spend of each paying reader, grew 21.1% in Korea to $9.70 when excluding currency swings. By our math, using the company's revenue and average spend figures, Korea's monthly paying users also grew about 5% from a year ago to roughly 3.9 million. Readers are both joining the paying base and spending more once they arrive.
What to watch: Korea Paid Content revenue and average spend per paying user in the fourth quarter. Another quarter of double-digit local-currency spend growth will show that the new loyalty features are driving lasting habits rather than a one-time bump.
Ad Sales Grow Thirty Percent With Help From Parent
Advertising was the fastest-growing part of the company this quarter, rising 30.1% excluding currency swings to $51.2 million. Kim said Korean ad demand is "broadening across categories and advertisers", while international teams signed custom comic series for video game maker Capcom and food brand bibigo.
The rebound sets an easy comparison against last year's third quarter, when ad sales fell 8.9%, and it leans on Webtoon's majority owner, NAVER Corporation. Total revenue earned from related parties jumped by $8.8 million, or 51.6%, to $25.8 million this quarter, alongside the $10.3 million rise in reported ad revenue. The release does not split out how much of the ad gain came from NAVER.
What to watch: related-party revenue in the fourth-quarter footnote alongside advertising growth. If ad sales grow while related-party revenue levels off, outside brands are driving the recovery.
AI Translation and Chat Tools Lift Reader Activity
Webtoon is rolling out artificial intelligence tools to translate comics faster and keep fans on its apps between chapters. Auto-Translation, software that translates amateur comics on its CANVAS platform into seven languages, expanded after its May test. In the eight weeks through August, non-English readers read nearly 40% more CANVAS episodes per week than before the launch.
The storytelling group also scaled byUs, an AI chat service where fans talk with comic characters and generate five-minute stories. Cumulative chats doubled from week 10 to 28.4 million by week 17, "reigniting fandoms around completed series" like Garbage Time, and the company launched byUs in Japan in October.
What to watch: Paid Content revenue outside Korea and Japan, which fell 8.1% this quarter to $31.8 million. When the 40% jump in translated reading turns into coin purchases, international paid revenue will return to growth.
🐻 Bear Case
Japan Shrinks Faster and Misses Constant Currency Plan
"We delivered third quarter reported revenue and Adjusted EBITDA within our guidance ranges while continuing to invest with discipline in our next phase of growth," chief executive Junkoo Kim said. However, the company missed its own constant-currency revenue growth plan of 0.7% to 3.3%, growing just 0.2% because its largest market, Japan, deteriorated.
- Japan revenue excluding currency swings: down 11.4%, worse than the 6.7% drop in the second quarter
- Japan monthly paying users: down 13.1% from a year ago to about 2.02 million by our math
- IP Adaptations revenue: down 27.0% excluding currency swings to $37.8 million against last year's movie release
- User disclosures: the release dropped the quarterly tables for monthly active users and paying users
To fix Japan, Webtoon hired a new regional business chief in September and plans to spend 10 billion yen ($63 million) over three years to "discover more Japanese series through three channels: in-house production, co-production with publishers and studios, and individual creators". That spending will take quarters to produce hit comics, while Japanese paying readers are leaving now.
What to watch: the quarterly filing's user table for official Japan monthly paying users, and fourth-quarter Japan constant-currency revenue. Until the paying user count stops falling from roughly 2.0 million, Japan will keep dragging down the company.
Fourth Quarter Rebound Relies on Bought Revenue
Webtoon is spending cash to own video games and television shows based on its comics rather than just licensing them. Supporters see a way to keep more profit from hit stories, and in October the company teamed up with HAYATE and Crunchyroll to co-produce 15 anime series. In the first nine months of 2026, it spent $45.3 million on equity-method investments.
Now that spending is propping up the top-line target. Kim said his team is "confident in our return to double-digit revenue growth in the fourth quarter", forecasting 9.0% to 12.0% growth excluding currency swings. A footnote adds that the plan includes "expected revenue and contributions from RI Games Holdings Inc. following the anticipated second closing of the transaction".
Including a newly consolidated game studio and comparing against last year's 4.1% fourth-quarter drop flatters the rebound. What to watch: how much revenue RI Games contributes in the fourth-quarter report, which will show whether Webtoon reached double-digit growth from businesses it owned a year ago.
Marketing Spend Absorbs Gross Profit Gains
Webtoon kept a larger share of each revenue dollar after direct creator and platform costs this quarter. Cost of revenue—mainly payments to comic creators and app-store fees—dropped by 3.6 percentage points of revenue to 74.5%, lifting gross margin to 25.5% as high-margin advertising grew.
None of that improvement reached operating cash profit because the company spent more on promotions and currency swings went against it. Marketing expense rose 1.5 percentage points of revenue to 10.8% ($39.1 million), and "higher foreign currency losses" cut Adjusted EBITDA (earnings before interest, tax, depreciation, stock pay and one-offs) in half to $2.2 million, a 0.6% margin.
What to watch: fourth-quarter marketing expense as a share of revenue alongside the new $63 million Japan content commitment. If marketing stays above 10% of sales while content spending ramps up, profit margins will remain near zero into 2027.
👓 Other Themes
Weaker Yen and Won Erase Sixteen Million Dollars
Webtoon collects most of its revenue in Japanese yen and Korean won, but reports its financials in US dollars. Weaker Asian currencies reduced third-quarter reported revenue by $15.9 million, turning 0.2% constant-currency growth into a 4.0% dollar decline. In Japan alone, currency translation erased $11.8 million, adding 6.6 percentage points to the region's reported drop.
💲 Other KPIs
Up 15.0% from $88.2 million a year ago, though down 2.3% from the second quarter. Contract liabilities are cash readers have paid for digital coins not yet spent on comic episodes. Because coins are usually spent within a few months, the higher year-over-year balance supports fourth-quarter paid content sales.
Cash and equivalents of $548.4 million plus $13.3 million in short-term deposits fell from $594.3 million in the second quarter, with zero debt. Operating cash flow was $6.2 million, down from $16.5 million a year ago, as receivables climbed 20.3% since December to $212.6 million and the company paid $45.3 million for equity investments.
Weighted average diluted shares rose 3.9% from 130.6 million a year ago and edged up from 135.3 million in the second quarter. The increase comes from employee stock compensation ($27.4 million over nine months) and the first-quarter share sale to Disney, with no share buybacks.
🔮 Guidance
Unchanged. The formal range puts the middle of the plan at 10.5% growth excluding currency swings, up from 0.2% in the third quarter and matching management's earlier pledge of a double-digit finish to the year. The jump relies on an easy comparison against last year's 4.1% fourth-quarter decline and adds revenue from RI Games Holdings after the second closing.
New. At current exchange rates, the middle of the range ($376 million) points to 13.7% dollar growth from a year ago and a 3.6% rise from the third quarter, by our math. Over the past four quarters, reported revenue has landed within half a percent of the middle of the company's initial range three times.
New. Webtoon issued the exact same $0.0 to $5.0 million range for a fourth straight quarter, equal to a 0.0% to 1.3% margin. The digital publisher beat the top of this range in the first and second quarters before currency losses held third-quarter profit to $2.2 million. If its four-quarter average beat of $3.6 million holds, fourth-quarter profit would reach about $6.1 million by our math.
❓ Key Questions
How much fourth-quarter growth comes from RI Games?
The fourth-quarter outlook of 9% to 12% constant-currency growth includes RI Games Holdings after its second closing. Investors need to know the growth rate from businesses owned a year ago without the acquisition.
Why were the quarterly user tables left out?
The earnings release gave a single figure of roughly 159 million monthly active users and omitted the regional active and paying user tables. By our math, Japan paying users fell 13% from a year ago.
How much of the advertising jump came from NAVER?
Reported advertising sales grew by $10.3 million from a year ago, while revenue from related parties rose by $8.8 million. Management has not disclosed how much of the ad rebound came from outside brands versus its parent.
How will the $63 million Japan content plan affect margins?
Webtoon plans to invest 10 billion yen ($63 million) over three years in Japanese comics. Management has not said how much of that sum hits the income statement versus the balance sheet each quarter.