Home > Business > Industry

Kakao selling stake in Kakao Games to Japan’s LY Corporation to focus on AI

Published: 25 Mar. 2026, 18:49

A view of Kakao’s headquarters, known as Agit, in Pangyo, Seongnam, Gyeonggi. [JOONGANG ILBO]

Kakao is selling part of its stake in Kakao Games to Japan’s LY Corporation and handing over management control, as Kakao seeks to secure more room for investment in AI by shedding affiliates unrelated to its AI business.

Kakao disclosed Wednesday that it will sell part of its Kakao Games stake to LAAA Investment, LY Corporation’s investment subsidiary.

LY Corporation is a Japanese IT giant that dominates Japan’s portal and messenger markets, but management control shifted to SoftBank after the Japanese government pressured Naver to sell down its stake the following year. The giant was established in 2023 through a merger between LINE Corporation and Yahoo Japan Corporation.

Once the share transaction is completed in May, LAAA Investment will secure a stake of more than 40 percent and become the largest shareholder in Kakao Games. Kakao’s stake will fall from 37.5 percent to 14 percent, leaving it as the second-largest shareholder.

Kakao has been selling off nonessential affiliates to focus on its AI business. In January, it sold Daum, now AXZ, to AI startup Upstage through a share swap. In November 2025, Kakao also sold subsidiary Kakao Healthcare to CHA Biotech through another share swap.

The decision to hand Kakao Games over to LY Corporation is part of that broader restructuring. In a shareholder letter in October 2025, Kakao CEO Chung Shin-a wrote that the company would reduce the number of affiliates to focus on the core of the AI era. Kakao’s number of domestic affiliates fell from 119 at the end of 2024 to 94 at the end of last year, a decrease of 25.

By acquiring Kakao Games, LY Corporation will gain game development and publishing capabilities. Although it already has the Yahoo portal and the Line messenger platform, it lacks content that keeps users engaged over time. Industry observers view the Kakao Games acquisition as a move to address that weakness.

Kakao CEO Chung Shin-a delivers a keynote speech during the “if(kakao)” conference held at Kakao AI Campus in Yongin, Gyeonggi, on Sept. 23, 2025. [KAKAO]

“LY and Kakao Games’ needs aligned as both seek to make inroads into the Southeast Asian gaming market,” a domestic game industry official said. “Their needs matched perfectly. As a bonus, if LY Corporation’s game subsidiary Line Games is merged into Kakao Games, it could also amount to a backdoor listing.”

Kakao’s organizational culture is also changing as it accelerates its AI expansion. In the past, the company used the term “community” instead of “group companies,” and referred to employees as “crew.” The idea was to build a horizontal corporate culture in which affiliates could grow together.

But as Kakao expanded too aggressively into too many business areas, the number of affiliates ballooned and control became more difficult. In the IT industry, there is growing recognition that the company is now cleaning up the legacy of that expansion to focus on AI.

The move is especially striking because Kakao Games was one of the key drivers of Kakao’s growth. In 2015, Kakao acquired game company NZIN, founded by former Kakao CEO Namkoong Whon, and launched Kakao Games the following year by merging it with Daum Games. Combined with the Games on KakaoTalk service, the company grew rapidly.

But after releasing Odin: Valhalla Rising in 2021, Kakao Games failed to produce another major hit. Its revenue shrank from nearly 1.15 trillion won in 2022 to 465 billion won in 2025. “Kakao needs to pour money into AI investment, so it cannot continue carrying a company that remains in the red,” a Kakao official said.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY OH HYEON-WOO [[email protected]]