Gravity Q2 2026 earnings: Lower operating expenses lift profit despite weaker revenue

Gravity (NASDAQ: GRVY) reported second-quarter 2026 revenue of KRW 161.884 billion, down 5.2% year over year, while basic and diluted EPS rose to KRW 3,503 from KRW 1,906. Operating profit increased 40.2% despite the revenue decline as lower year-over-year advertising and other operating expenses outweighed weaker mobile-game sales; sequentially, however, higher R&D and salary costs reduced profit.

Core Earnings Results

Gravity’s unaudited IFRS results showed a mixed margin picture. Cost of revenue declined only 3.9%, slower than revenue, causing gross margin to narrow by about 0.9 percentage points; operating expenses fell 33.2%, however, lifting operating margin by approximately 5.5 percentage points.

Each Gravity ADS represents one common share.

Business and Segment Performance

Mobile games remained Gravity’s largest business, accounting for approximately 79% of quarterly revenue. Mobile revenue declined 10.7% year over year to KRW 128.611 billion, more than offsetting growth elsewhere. The decrease reflected lower revenue from Ragnarok M: Classic, Ragnarok Idle Adventure Plus, and Ragnarok Origin, partly offset by initial revenue from Ragnarok: The New World and Ragnarok Origin Classic.

Sequentially, mobile revenue fell 3.2%. Lower contributions from Ragnarok: The New World in Taiwan, Hong Kong, and Macau, Ragnarok: Twilight in Southeast Asia, and Ragnarok M: Classic in Southeast Asia were partly offset by growth from Ragnarok Origin Classic.

Online-game revenue provided the main counterweight, increasing 35.0% year over year and 14.5% sequentially to KRW 29.660 billion. Year-over-year growth came mainly from Ragnarok Online in Thailand, Taiwan, Hong Kong, and Macau. On a sequential basis, Thailand and Latin America drove the increase, while Japan declined. Other revenue fell 24.2% year over year to KRW 3.613 billion.

Gravity also expanded its release slate after the quarter ended. July launches included Ragnarok: Rebirth in Vietnam and the Americas, Ragnarok: The New World in Southeast Asia, Ragnarok M: Classic in Korea, and Ragnarok Origin Classic in the Americas. The company also received a Chinese ISBN for Ragnarok M: Eternal Love 2 and scheduled Ragnarok Zero: Global for August 18, 2026. These post-quarter releases did not contribute to Q2 results, and Gravity did not provide quantitative revenue targets for them.

Lower Annual Spending Offset Mobile Weakness, but Sequential Costs Rose

Compared with Q2 2025, operating expenses fell by about KRW 12.3 billion, more than enough to absorb the approximately KRW 4.4 billion decrease in gross profit. Gravity attributed the spending reduction mainly to lower advertising expenses for several titles, including Ragnarok Idle Adventure Plus, Ragnarok Online America Latina, Nobunaga’s Ambition: The Road to the World, and Ragnarok: Back to Glory.

The sequential comparison was less favorable. Revenue was essentially unchanged from Q1, and gross profit increased by only KRW 689 million, while operating expenses rose by about KRW 3.9 billion because of higher R&D expenses and salaries. As a result, operating profit declined 10.5% sequentially to KRW 27.582 billion, showing that the year-over-year profit increase relied substantially on a lower operating-expense base.

Results below the operating line also supported net profit growth. The net finance result shifted from an expense of approximately KRW 1.0 billion in Q2 2025 to income of about KRW 4.9 billion in Q2 2026, helping profit before tax and net profit grow faster than operating profit.

Liquidity and Balance Sheet

Cash and cash equivalents totaled KRW 210.058 billion at June 30, 2026, while short-term financial instruments were KRW 439.173 billion. The combined balance was KRW 649.231 billion, approximately 4.9% higher than the KRW 618.633 billion reported at December 31, 2025.

Total current assets increased to KRW 758.912 billion from KRW 698.513 billion at year-end, while current liabilities rose to KRW 105.402 billion from KRW 96.031 billion. Total equity increased to KRW 700.283 billion.

Risks Investors Need to Watch

• Continued mobile-game weakness: Mobile games generate about four-fifths of revenue, so the 10.7% decline remained the primary reason consolidated revenue contracted.
• Dependence on expense control: The year-over-year increase in operating profit was driven by sharply lower operating expenses, while the sequential rise in R&D and salary costs reduced operating profit.
• Gross-margin pressure: Revenue fell faster than cost of revenue, narrowing gross margin despite lower service commissions and outsourcing fees.
• Unproven contribution from new releases: Gravity launched multiple games after quarter-end, but it did not quantify their expected revenue or profit contribution. Their ability to offset declines in older mobile titles remains an important operating measure.

Summary

Gravity’s Q2 2026 results combined weaker revenue with substantially higher year-over-year profit. Online-game growth and lower advertising expenses helped offset declining mobile-game revenue, while a favorable finance-income swing further supported net profit. The next key questions are whether recent Ragnarok launches can stabilize mobile revenue and whether Gravity can maintain operating discipline as R&D and salary expenses increase sequentially.