Highlights
- HYBE reported record Q2 revenue and operating profit increases, but shares dropped 16.3% over two sessions.
- BTS’ ARIRANG world tour expenses and higher artist payouts squeezed gross margins to 32%, below analyst expectations.
- HYBE is liquidating loss-making AI subsidiary Supertone and shifting focus toward higher-margin IP expansion.
HYBE Co. hit the ₩1 trillion (~ $660 million USD) quarterly revenue mark for the first time in its history during the second quarter of 2026. However, the milestone couldn’t help the company avoid a sharp selloff in its equity. HYBE shares fell 9.8% to ₩170,300 (~ $118) on July 29 after dipping down as much as 16.1% intraday, making it the company’s steepest single-day drop since June 2022. The two-session selloff erased about ₩2.845 trillion (~ $2B) in market value, pushing the stock to its lowest level since September 2024.
HYBE’s Record Revenue vs. Margin Compression
HYBE’s consolidated revenue for the quarter reached ₩1.45T (~ $1B), depicting a 105.5% increase year-over-year, while operating profit rose 159.4% to ₩170.9B (~ $119M), surpassing market consensus by roughly 10%, as per figures reported by Billboard Korea. Notably, performance-based revenue bolstered the top-line growth, surging 243.3% year-over-year to ₩647.7B (~ $450M) following the April kickoff of BTS’ ARIRANG world tour.
Physical music sales added ₩326.8B (~ $228M) on 11.32M album units sold, backed by 3M copies from rookie group CORTIS. Meanwhile, merchandise and licensing revenue reached ₩310.6B (~ $216M), The Chosun Daily reported.
Even though the company hit its highest-ever revenue (sales) figures, its profit-related results were comparatively weaker than what financial analysts expected. Consolidated gross profit margin contracted to 32% in the second quarter, down from 43% in the quarter earlier.
Analysts at SK Securities and Eugene Securities noted that mature talent like BTS carry higher royalty payout ratios and premium stage production costs, which put pressure on overall returns. Operating margin settled at 11.8%, missing the 12.7% mark estimated by SK Securities, as per CNBC’s reporting.
Macroeconomic Factors and Investor Expectations
The selloff emphasized a mismatch between market expectations and revenue composition. For instance, Kiwoom Securities analyst Lim Soo-jin observed that investors had priced in growth driven by merchandise sales, which can dominate gross margins at about 50%, instead of capital-intensive concert operations, as cited by CNBC.
Although many people online tried to align the drop to non-financial narratives such as the group's Grammy exit, structural financial metrics and the wider economic situation pointed towards a different story. The decline, notably, occurred alongside a wider downturn across South Korea's financial markets, where the benchmark KOSPI index plummeted over 20% across two sessions in the midst of an aggressive technology sector selloff and several exchange-wide circuit breaker halts. According to Billboard Korea, foreign investors selling their stocks for profit also further added to the decline as KOSPI battled economic uncertainty.
Restructuring and Portfolio Outlook
In response to market scrutiny over profitability, HYBE is already moving to cut capital-draining ventures. On July 15, the company’s reportedly board voted to dissolve its AI audio technology subsidiary, Supertone, initiating official liquidation proceedings, as noted by Billboard Korea. HYBE had invested ₩49B (~ $34M) in Supertone since 2021, but the unit amassed ₩36.5B (~ 25.4M) in cumulative operating losses over three years, including a ₩15.4B (~ $10.7M) loss in 2025.
Management is pivoting capital back into major artist operations, scheduling over 200 live shows across its roster in the second half of 2026. Data from major financial firms studied by CNBC have kept a positive view on HYBE shares. Analysts also point to tour expansions for localized global IPs, including CORTIS and KATSEYE, and the return of groups like NewJeans, as primary catalysts for mid-term margin recovery.
