1. What Happened? Microdigital’s Q2 Performance

Microdigital reported revenue of ₩3.2 billion, an operating loss of ₩2.1 billion, and a net loss of ₩3.4 billion for Q2 2025. These figures significantly missed market expectations, highlighting a concerning decline in profitability, particularly with the company swinging to an operating and net loss.

2. Why the Disappointing Results? Unpacking the Underperformance

The primary drivers behind this earnings shock are increased cost of goods sold (COGS) and selling, general, and administrative expenses (SG&A), coupled with significant losses from convertible bond derivatives. The increased financial burden from convertible bonds is putting pressure on the company’s financial health. Furthermore, a high dependence on key customers and low export diversification pose risks to long-term growth.

3. What’s Next? Outlook and Investment Strategies

In the short term, downward pressure on the stock price is expected. Investors are likely to react negatively to the earnings announcement, and further negative news should be anticipated. The medium-to-long-term outlook hinges on the company’s ability to improve profitability and stabilize its financial structure. Close monitoring of the company’s remedial actions and their effectiveness is crucial.

4. Investor Action Plan

  • Short-Term Investors: A cautious approach is advised, considering the potential for further stock price decline. Setting stop-loss orders and focusing on risk management are essential.
  • Long-Term Investors: Continuously monitor the company’s efforts to improve profitability and stabilize its financial structure, as well as the commercialization of its R&D efforts, to inform investment decisions.