LG CNS Rides Financial Next-Gen, AI Momentum ... Operating Profit Up 15% in Q3 (Overall)

LG CNS said on the 30th that it announced third-quarter results, with both sales and operating profit increasing from a year earlier, led by its financial next-generation business, AI, and cloud operations. Third-quarter sales came to KRW 1.6643 trillion, up 9.3% from a year earlier, while third-quarter operating profit rose 15.0% to KRW 138.2 billion, the company said.

The company cited its financial next-generation business, AI, and cloud as the main drivers of the strong results. LG CNS said these businesses helped deliver a solid third-quarter performance.

LG CNS also held an earnings conference call that day. At the session, it said the sales contribution from its financial next-generation business is expected to grow further next year.

As evidence, it pointed to planned orders for new next-generation projects across banking, securities, and insurance. LG CNS said it expects growth to continue as new next-generation projects are slated to be ordered across the financial sector.

LG CNS said it plans to strengthen its competitiveness in agentic AI services and AI infrastructure, and to push ahead with its robotics transformation (RX) business. The company presented these as its next growth engines.

LG CNS's digital business services sales in the third quarter totaled KRW 408.2 billion. That figure was up 21.3% from a year earlier.

The increase was driven by the full-scale development phase of next-generation system projects for NH NongHyup Bank, Mirae Asset Life Insurance, and KB Kookmin Bank. The company said digital business services results improved as next-generation system projects across the financial sector moved into the development stage.

Song Gwang-ryun, CFO at LG CNS, said financial next-generation projects have the characteristics of large-scale, long-term projects, so a stable trajectory is expected going forward. The company emphasized the long-term nature of these financial next-generation businesses.

In response to the view that AI adoption will replace traditional systems integration (SI), the company said it sees AI as creating more additional demand than replacing existing work. It also said interest in the financial sector is shifting from building AI platforms to applying them to actual business operations.

The company expects demand for existing systems that support expanding agent adoption to rise as well. Kim Hong-geun, vice president and head of LG CNS's Digital Business Division, said generative AI is being used in the KB Securities next-generation information system project to create marketing copy and content. As an insurance-sector example, he cited automated generation of insurance application design documents and the establishment of a copilot for work support.

Vice President Kim said current AX investments are having a stronger additional and complementary effect than replacing SI. He added that interest is also growing in how AX can be used in actual business operations.

The financial sector said it believes proof of concept (PoC) and demonstration projects currently make up a large share of the market. It also said profitability is difficult to compare directly with existing large SI projects.

However, the financial sector said it expects additional business opportunities to emerge as agents are expanded and advanced for individual business tasks. Amid this trend, growth factors in AI and cloud were also shared.

Sales in the segment for the third quarter stood at KRW 961.5 billion. Sales in the segment for the third quarter were up 9.3% from a year earlier. Growth drivers included the expansion of managed service provider (MSP) business and increased corporate use of AI.

The construction and operation of the Samsung-dong AI data center is under way. LG CNS is currently entrusted with operating the AI data center, and colocation revenue from the AI data center it operates under entrustment also increased. LG CNS recently took part in a Singapore global data center event and unveiled the pre-fabricated modular data center 'AI HAUS' and GPUaaS based on Nvidia's 'Vera Rubin.'

Eugene Yoo, executive director of LG CNS's AI and Cloud Division, cited the expansion of the MSP business and rising demand for cloud-based AI as the main drivers of growth this quarter. Based on these trends, he said growth was broad-based across cloud and infrastructure.

LG CNS plans to expand its customer base through collaboration with global AI companies and connect that to higher-value-added businesses. LG CNS holds the distinction of being the first Korean company to receive Preferred status in Anthropic's Claude Partner Network (CPN).

Yoo said the company is combining the technology of global companies with LG CNS's capabilities in data and systems construction. He added that it is working to turn PoC projects carried out in the field into full-scale business projects.

LG CNS plans to expand its customer base from large enterprises to small and midsize companies. It also plans to broaden customer touchpoints through various channels.

LG CNS sees strong growth potential in its GPUaaS business. However, it said GPUaaS investments will be made based on business viability. This reflects the view that initial AI infrastructure investment is large, technology changes are rapid, and customer demand and return-on-investment potential need to be reviewed. Accordingly, GPUaaS investments will be pursued step by step.

To expand its AI business, LG CNS said it will acquire tangible assets worth about KRW 380 billion for securing GPUs for building and operating AI factories, and it is moving ahead in earnest with joint investment in enterprise SW and AI businesses with global investment firm General Atlantic. LG CNS plans to diversify its AI business portfolio using that foundation.

Regarding the investment execution, CFO Song said the company will proceed cautiously, focusing on projects for which business viability has been secured by taking customer demand and investment recovery into account. Funding will be arranged using cash and cash equivalents on hand and stable cash generation.

LG CNS said it will also consider joint investment if a large-scale investment opportunity arises. The company intends to proceed primarily on the basis of its own cash capacity while leaving room for joint investment if needed.

Its overseas data center business base is the Jakarta project in Indonesia, which is scheduled for completion in November. LG CNS plans to use the Jakarta project to push into Asia-Pacific, North America, and Europe, while steadily carrying out its existing construction business. It also plans to strengthen its medium- to long-term revenue base by linking operations and colocation.

Executive Director Yoo said the Jakarta data center secured tenants before completion. He explained that the Jakarta data center has thus secured a stable base before going live.

Based on this, the company is discussing a new project in Indonesia and is also discussing expansion into major Asia-Pacific countries.

It is also pursuing a plan to use a pre-fabricated modular data center. This is intended to shorten the construction period and respond to project delays caused by difficulties in securing local specialized personnel.

The company is also pursuing entry into North American and European markets. Based on cooperation between its U.S. subsidiary and local partners, it plans to expand pre-fabricated modular data centers based on Nvidia's Vera Rubin as a business target.

It also plans to expand its smart engineering business and has set a goal of boosting growth over the next 2 to 3 years. Smart engineering sales in the third quarter fell 3.9% from a year earlier to KRW 294.5 billion, hit hard by a slowdown in the manufacturing industry. LG CNS is seeking growth through customer diversification and RX commercialization.

LG CNS has secured references from customers in various industries, including defense, pharmaceuticals, electronics, and batteries, in its smart factory business. In smart logistics, it has expanded logistics automation projects for Korean companies expanding overseas.

Based on this, LG CNS is pushing ahead with commercialization based on its robot learning and operations platform 'PhysicalWorks' and expanding physical AI collaboration within the group. It has introduced 'PhysicalWorks' at LG Electronics' data factory and is providing the systems needed for robot learning.

Going forward, the company plans to expand the scope of 'PhysicalWorks' to factories in Korea and overseas. Lee Jun-ho, executive vice president and head of LG CNS's Smart Logistics and City Division, said the company aims to raise its growth rate to a new level over the next 2 to 3 years.

Lee Jun-ho, executive vice president and head of LG CNS's Smart Logistics and City Division, said he expects the RX business to grow after 2027, centered on on-site robot adoption, infrastructure securing, learning, and an operations data platform for physical AI use across various industries.

Source: IT DAILY · Yang Seung-gap
Original: https://www.itdaily.kr/news/articleView.html?idxno=242585

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