📚 Pearl Abyss Series — 1Q26 Comprehensive Edition. Earlier: Earnings Preview (4/21) — Revenue ₩395.0bn / OP ₩205.0bn Central Estimate Earlier: Earnings-Week Setup (5/11) — Consensus ₩143.5bn but Likely ₩250bn+ Actual

🔗 Related: Pearl Abyss Hub — 263750 Price / Target / Crimson Desert Analysis · CCP / EVE Divestment · Shinhan Target-Price Gap Analysis Follow-up: Pearl Abyss May 21 IR Watch — Capital Return, DLC and DokeV Decide the Next Re-Rating

Pearl Abyss released 1Q26 earnings together with its first-ever quantitative annual guidance. The headline: OP ₩212.1bn beat consensus by +48%, and the company set FY26 OP at ₩487.6-572.6bn. 2Q Crimson Desert revenue guidance of ₩224.2-276.5bn (-16% to +4% vs. 1Q) directly rebuts the market’s “1Q boom → 2Q cliff” fear. The arithmetic that has to land for the guidance to be confirmed is still ahead.

TL;DR

• 1Q26 print. Revenue ₩328.5bn, OP ₩212.1bn, NI ₩158.0bn. OPM 64.6%. OP +48% above consensus (₩143.5bn).
• FY26 company guidance. Operating revenue ₩879.0-975.4bn, OP ₩487.6-572.6bn, OPM 55.5-58.7%. Materially above the implicit pre-print market expectation (~₩410bn).
• 2Q guidance. Crimson Desert revenue ₩224.2-276.5bn — -16% to +4% vs. 1Q’s ₩266.5bn. Plateau, not cliff.
• Why the surprise. Not primarily a revenue beat — it’s a light cost base. R&D was already expensed in prior quarters, marketing was efficient, and the revenue-recognition method (net / blended) deducted platform fees from revenue rather than booking them as expense.
• Vs. prior predictions. Preview’s ₩395.0bn revenue ran 17% too high; OP ₩205.0bn ran 3% too low. Revenue-mix-recognition assumption was wrong, but the OP direction was correct.
• What to watch next. May 21-22 institutional NDR, the 6M-unit announcement timing, whether 2Q lands inside the company range, and DLC / platform-extension scheduling.

1. Today’s disclosed numbers — exact figures

1.1 1Q26 preliminary earnings

Cross-check: OPM = 212.096 / 328.499 = 64.6% ✓

Why two NI figures: Pearl Abyss completed the divestiture of CCP Games (developer of EVE Online) on May 6. The CCP-related loss (₩-12.0bn) was reclassified into “discontinued operations.” For the operating economics of the business that remains, use continuing-operations NI ₩170.0bn; for shareholder-attributable NI, use ₩158.0bn.

1.2 Revenue by game

Crimson Desert alone produced 81% of total revenue — from just 12 days of sales (March 20-31).

1.3 Revenue by region and platform

Confirmed by the geographic distribution: Crimson Desert is a Western-PC-and-console global hit. 81% from the Americas / Europe is unusual for a Korean game studio — most Korean titles lean heavily Asia.

1.4 Vs. consensus

Small revenue beat (+5%), very large OP beat (+48%). The asymmetry is the story.

1.5 Vs. comparable periods

One title repositioned the entire company in a single quarter.

2. What earlier predictions got right and wrong

2.1 Vs. the Earnings Preview (April 21)

Revenue was overpredicted by 17%; OP was under-predicted by 3%; OPM gap was 13 percentage points.

The source of the contradiction: revenue-recognition method.

2.2 Revenue recognition — the preview’s key assumption was wrong

Game-revenue accounting has two methods. Per company disclosure:

• Console (PlayStation / Xbox): platform fee is deducted first, with the residual booked as revenue
• PC (Steam, etc.): user payment is booked net of sales tax
• Offline packaging: contract terms produce booked revenue below actual unit sales

The preview leaned more heavily on gross-recognition assumptions (platform fees in revenue, then out as expense). Console turned out closer to net (fee out first). Result: lower revenue line, but fewer fees in expenses → higher reported margin.

2.3 Per-unit recognized revenue — revised

Reverse-engineering Crimson Desert’s 1Q revenue ₩266.5bn against the official ~4M unit count:

Per-unit recognized revenue = ₩266.5bn ÷ 4M = \~₩66,625/unit

Cross-check: 66,625 × 4M = ~₩266.5bn ✓

Lower than the preview’s gross assumption of ₩80,000/unit and higher than the Earnings-Week Setup post’s working estimate of ₩58,000/unit (which had baked in EVE-inclusive legacy revenue, producing some drift).

Revised conclusion: per-unit recognized revenue ~₩66,625. Neither full gross nor full net — a blended structure.

2.4 Did the Earnings-Week Setup’s read hold?

The week-of post said: “Consensus is ₩143.5bn but actual could be ₩250bn+.” Actual was ₩212.1bn — well above consensus, but below the optimistic broker estimates (Shinhan ₩254.7bn, Meritz ₩275.2bn).

The “highest surprise probability of the week” call was correct in direction, lower in magnitude than the upper-end broker estimates.

3. Why the OP surprise — by cost line

3.1 Operating expense detail

From the company’s 1Q26 IR Letter:

3.2 Three reasons for OPM 64.6%

Reason 1: R&D already expensed in earlier quarters.

Crimson Desert was developed over multiple years. Most development costs were already booked to prior-period expense. After launch, revenue rises sharply while incremental development cost is small. Depreciation at just 0.7% of revenue reflects this.

Analogy: a factory built over 5 years has already absorbed its construction cost. When the factory starts production, revenue appears with no fresh construction expense → margin spikes.

Reason 2: Marketing was efficient.

Marketing spend ₩23.4bn against Crimson Desert revenue ₩266.5bn = 8.8%. Low for a launch quarter. Word-of-mouth pull was strong online; the company didn’t need to flood TV / outdoor with launch ads.

Reason 3: Revenue-recognition method shrinks the apparent fee rate.

Platform fees ₩42.5bn against revenue ₩266.5bn = 12.9%. That looks low, but it’s because console revenue is recognized net of platform fees. The total fees Pearl Abyss actually pays platforms is higher; accounting just doesn’t capture all of it on the expense line.

3.3 The core — the cash earned is real

Combining the three reasons: revenue-recognition produces a “higher-looking margin” optical effect, but the actual dollars earned (OP ₩212.1bn, NI ₩158.0bn) are strong regardless of recognition method. Accounting choice doesn’t change the cash itself.

4. Company guidance — why first-time numbers matter

4.1 Pearl Abyss issued quantitative guidance for the first time

Quantitative annual OP ranges from Korean game studios are rare. This is the first.

FY26 guidance:

2Q guidance:

4.2 Why these numbers matter

One: the company directly rebutted the 2Q-cliff concern.

The market’s biggest worry was the package-game pattern — concentrated revenue in launch quarter, sharp drop after.

Company’s 2Q Crimson Desert revenue: ₩224.2-276.5bn. 1Q Crimson Desert revenue: ₩266.5bn.

2Q change:
Low end: 224.2 / 266.5 - 1 = -15.9%
High end: 276.5 / 266.5 - 1 = +3.8%

-16% to +4% — plateau, not cliff. If the company is seeing this trajectory in internal sales data, the “1Q one-off” narrative weakens.

2Q OP is guided ₩129.6-176.7bn, below 1Q’s ₩212.1bn. The reason isn’t the business — it’s performance-bonus accrual. The company expects 2Q labor cost to roughly double vs. 1Q. Revenue holds; cost rises; OP falls. That’s expense structure, not a business deceleration.

Two: FY26 OP ₩487.6-572.6bn is well above prior market expectation.

Against the implicit pre-print expectation (~₩410bn):

Low end ₩487.6bn - prior ₩410bn = +₩77.6bn (+19%)
High end ₩572.6bn - prior ₩410bn = +₩162.6bn (+40%)

This isn’t just “good print” — it’s a signal that annual earnings estimates themselves need to lift. As sell-side updates models, the starting point of valuation work — including the earlier Shinhan target-price gap — shifts.

4.3 Can guidance be trusted at face value?

The company explicitly flagged: “This guidance is based on current estimates under an uncertain operating environment, and actual results may differ materially from the figures shown.”

For guidance to be realized:

• Crimson Desert needs to keep selling at 500K+ units/month through the second half
• Major updates / discount events need to sustain sales
• Operating costs need to stay within the guided ₩391.4-402.8bn range

Any one breaking can pull the print below even the low end.

5. Lessons from the prediction series

5.1 What was right

5.2 What needs revision

5.3 Lesson

Revenue-recognition method is the hardest-to-forecast variable in game-company analysis. Same units sold and same price can produce 30%+ revenue differences depending on accounting choice. OP, however, is much less variable across methods — that’s why the OP direction was right even when revenue was wrong.

6. Valuation — updated against company guidance

6.1 EPS estimates

Shares outstanding 64,247,855. Post-tax conversion ratio (OP → NI) assumed 70-75% based on 1Q actual (~74.5%) plus tax-rate and discontinued-operations effects.

Cross-check: Base EPS = 384.3 / 64.248M = ₩5,982 ✓

6.2 What the current price implies

May 12 close ₩52,800:

Current price implies PER 8.8× on the guidance midpoint. That looks low. The market discounts the multiple because of one concern: repeatability — what if 2026 earnings are a one-off Crimson Desert launch year?

6.3 PER × scenario grid (reference)

This is “EPS scenario × PER multiple” arithmetic. PER 10× is closer to “single-package one-off” framing; PER 15× requires recognition as “a studio capable of running multiple successful titles.” Which multiple the market awards depends on 2Q guidance delivery, sales persistence, and DLC / platform-extension announcements.

7. Forward price triggers — by sequence

7.1 Near-term — sell-side EPS revisions (this week to next)

With print and guidance now public, sell-side models revise. Since company guidance (₩487.6-572.6bn) sits well above the prior market expectation (~₩410bn), EPS upgrades and target-price upgrades are likely.

Price tends to respond to FY26 EPS revision magnitude more than report headlines.

7.2 May 15 — 1Q quarterly filing

The full filing on DART includes cost-line detail, revenue-recognition footnotes, and balance-sheet detail. This is the key source for distinguishing “structurally light cost” from “temporarily deferred cost.”

7.3 May 21-22 — Meritz Securities NDR (Non-Deal Roadshow)

Yeouido-based 1:1 and group meetings with domestic institutions. First major opportunity for institutional models to update post-print. Post-NDR institutional flow can reset the share-price level.

7.4 May-June — 6M unit announcement

Official latest unit count is 5M (April 15). Acceleration to 6M strengthens guidance credibility. Hitting FY26 Crimson Desert guidance (₩644.1-734.8bn) requires sustained add-on sales.

7.5 August — 2Q earnings

The single most important trigger. Delivering 2Q guidance (OP ₩129.6-176.7bn) weakens the “1Q one-off” narrative significantly. Missing the low end damages guidance credibility.

7.6 TBD — DLC / platform expansion

Pearl Abyss stated: “Researching ways to extend the game into different dimensions, including DLC.” Not a confirmed plan yet, but on-record. A paid expansion materially extends sales-cycle longevity — CD Projekt Red’s Blood and Wine expansion (Witcher 3) launched ~18 months post-base and re-extended the title’s revenue curve as a comparable reference.

Pipeline titles (DokeV in pre-production, Plan 8 in concept iteration) remain long-dated options. Premature to load them into base-case valuation.

7.7 Trigger summary

8. Investment-thesis update

8.1 Prior thesis

“Crimson Desert sells more than expected, and the market is slow to price it in.”

8.2 Updated thesis

“Pearl Abyss now has 1Q numbers that confirm Crimson Desert’s commercial trajectory and FY26 guidance that partially dismantles the 1Q-one-off concern. The current price is PER 8.8× on the guidance midpoint — still low. For the market’s residual doubt (‘is this earnings stream repeatable?’) to fully clear, 2Q sales persistence, the 6M unit milestone, and post-NDR institutional re-rating need to land. The real alpha resides in the window where that doubt resolves.”

8.3 Invalidation conditions

This thesis can break:

• 2Q Crimson Desert revenue undershoots the company-guidance low end (₩224.2bn) → cliff narrative returns
• 2Q OPM collapses below 45% → cost-control failure
• 6M-unit milestone meaningfully delays, Steam / console rankings deteriorate → sales-persistence damage
• Pure single-package monetization with no DLC / update extension → no PER expansion path
• DokeV / Plan 8 development schedule slips materially → multi-IP optionality fades

9. Bottom line

Pearl Abyss 1Q26 print is strong. OP ₩212.1bn, OPM 64.6%, +48% above consensus. The bigger development is FY26 guidance — OP ₩487.6-572.6bn, and 2Q Crimson Desert revenue at plateau (-16% to +4%) rather than cliff.

As the market absorbs the numbers, sell-side EPS upgrades, the May 21-22 NDR, and post-NDR institutional repositioning can compound. Current price ₩52,800 = guidance-midpoint PER 8.8× — arithmetically low.

But “looks low” becoming “confirmed undervaluation” requires verification — whether 2Q sales hold, whether 6M lands, whether costs stay within range. That sequence is what makes ₩70K-handle a reasonable level, and DLC / platform extension is what would unlock anything above. 1Q opened the door. What’s behind the door is determined by 2Q.

FAQ

Q: Is the 1Q OPM 64.6% sustainable? A: This margin mixes three effects: (1) prior-quarter R&D expense (structural, sustainable); (2) efficient launch-quarter marketing (partly one-off); (3) revenue-recognition method shrinking the apparent fee line (structural). The company’s 2Q guidance OPM is 47.8-54.4%, lower than 1Q because of performance-bonus accrual — not because the business decelerated.

Q: Should one fully trust the company guidance? A: The company explicitly flagged “estimates under uncertain operating environment.” For the guidance to be realized: (a) Crimson Desert needs to sustain 500K+ units/month through 2H, (b) major updates need to support sales, (c) costs need to stay within the guided range. That said, this is the company’s first quantitative guidance, and the 2Q range (-16% to +4% vs. 1Q) is conservative on the upper end, both of which add credibility.

Q: Why did consensus ₩143.5bn miss actual ₩212.1bn by so much? A: The consensus median was anchored in post-launch March estimates and hadn’t fully absorbed April sales data (5M units cleared) or the cost structure. Some sell-side estimates (Shinhan ₩254.7bn, Meritz ₩275.2bn) were closer to actual but the median update was slow.

Q: Revenue -17% from prior estimate but OP +3% — how? A: Revenue recognition. Console deducts platform fees from revenue first, so revenue is lower-looking but the fee line in expenses is also smaller. Margin lifts. The same business can show 30%+ revenue divergence depending on accounting choice.

Q: Why does 2Q OP guidance fall below 1Q despite revenue being held? A: Cost rises. The company expects 2Q labor cost to roughly double vs. 1Q — performance-bonus accrual on the 1Q print. Revenue holds at -16% to +4% but expense rises, so OP comes down. Not a business deceleration.

Q: Is PER 8.8× really cheap? A: It’s low against both the Korean-market average and global game-studio peers. But the market discounts the multiple for the “repeatability” question — if Crimson Desert becomes a single-package one-off, FY26 earnings won’t recur. PER 8.8× is the multiple the market awards under that doubt.

Q: Which trigger matters most? A: August 2Q earnings. Delivering the company guidance (OP ₩129.6-176.7bn) cleanly dismantles the “1Q one-off” narrative. Intermediate checkpoints are how May 21-22 NDR-driven institutional model updates land, and how the 6M-unit announcement paces between May and June.

Q: Among DokeV / Plan 8 / DLC, which matters first? A: Short term, DLC. The company explicitly stated on-record that “DLC and ways to extend the game into different dimensions” are under research. CD Projekt Red’s Witcher 3: Blood and Wine expansion, which extended the title’s revenue curve by 18+ months, is the comparable reference. DokeV and Plan 8 remain long-dated options not yet appropriate to load into base-case valuation.

This article is for research and informational purposes only and does not constitute investment advice. 1Q26 figures are from Pearl Abyss’s KIND (KRX) regulatory filing and 1Q26 Earnings Letter. Company guidance (FY26 and 2Q) is taken from the company’s IR materials, where the company explicitly states “based on uncertain estimates and actuals may differ materially.” Revenue-recognition method (console net / PC net-of-tax) is drawn from the company’s IR Letter narrative. Cost-line figures reference the IR Letter Appendix. CCP-divestment-related discontinued-operations loss is reflected in 1Q; cash-inflow effects flow more fully into 2Q. EPS / PER / scenario-grid in the valuation section are analyst estimates and may be incorrect. Analysis can be wrong. Data cut: May 12, 2026 KST.

Disclaimer: For research and information purposes only. Not investment advice. Names cited are for analytical illustration; readers should perform their own due diligence and consult licensed advisors before any investment decision.