Reading Vietnam tech giant VNG's profit through different lenses

VNG's latest earnings highlight how different profit metrics can paint very different pictures of the same business, underscoring the complexity of evaluating technology companies undergoing a transition toward sustainable profitability.

At its 2026 annual general meeting, shareholders of VNG Corp approved a revenue target of VND12.5-13.5 trillion ($512.9 million), pre-tax profit of 300-450 billion ($17 million), and continued growth in adjusted operating profit (AOP).

The company's continued use of multiple profitability measures suggests that its performance can be viewed through several distinct lenses, each telling a different story about the business.

From accounting profit to shareholder earnings

According to VNG's Q1/2026 consolidated financial statements, the company (UPCoM: VNZ) reported net revenue of nearly VND2.79 trillion ($105.8 million), up 32% from a year earlier, and net profit of VND125.35 billion ($4.76 million).

This is the figure most commonly cited by investors and analysts because it represents consolidated after-tax profit under accounting standards.

However, a closer look at the financial statements reveals another number.

Profit attributable to shareholders of the parent company reached VND182.06 billion ($6.92 million), nearly VND57 billion higher than consolidated net profit.

The difference stems from losses attributable to non-controlling interests, which totaled VND56.7 billion ($2.15 million) during the quarter. Because those losses were allocated to minority shareholders, profit attributable to VNG's shareholders exceeded overall consolidated earnings.

In most profitable companies, profit attributable to parent shareholders is typically lower than consolidated profit because a portion of earnings must be allocated to minority investors in subsidiaries.

In VNG's case, the opposite occurred.

The losses were largely incurred by subsidiaries where economic interests are shared with minority investors. As a result, those losses reduced the portion attributable to non-controlling interests rather than VNG shareholders.

According to the company's disclosures, most subsidiaries are almost wholly owned by VNG. The main exceptions are entities within the InstantiaPay group, where ownership is shared more substantially with outside investors.

Many of those businesses remain in investment or development phases and had yet to generate meaningful operating activities as of March 31.

Viewed from the perspective of shareholder value, VNG's first-quarter profit was therefore closer to VND182 billion ($6.91 million) than the headline figure of VND125 billion.

Why management focuses on VND470 billion ($17.86 million)

Even the VND182 billion figure is not the metric management relies on most heavily when evaluating performance.

In shareholder communications, VNG frequently highlights adjusted operating profit (AOP), a non-GAAP measure designed to reflect operating performance after removing certain accounting distortions.

Under the company's methodology, AOP excludes the impact of deferred revenue recognition and selected non-core items.

For the first quarter, AOP reached VND470 billion ($17.86 million), up 154% from the same period last year.

The substantial gap between AOP and accounting profit reflects the economics of VNG's technology businesses, particularly online gaming.

Gaming revenue, which remains the company's largest business segment, rose 38% year-on-year to nearly VND1.94 trillion ($73.63 million) during the quarter.

In many cases, players pay upfront for virtual items, subscriptions or other digital services whose benefits are delivered over time. While the cash is collected immediately and often requires little incremental cost, accounting rules require revenue to be recognized gradually over the service period.

As a result, reported revenue and profit may lag behind the underlying economic activity and cash generation of the business.

That said, AOP remains a company-defined metric rather than a standardized accounting measure. While it may provide useful insight into operational performance, investors still need to compare it against reported earnings and cash flow when assessing corporate health.

One data point supporting management's view is operating cash flow.

Net cash generated from operating activities reached VND123.2 billion ($4.68 million) in the first quarter, more than double the VND52.8 billion recorded a year earlier.

The improvement suggests that earnings growth is increasingly being translated into actual cash generation rather than remaining purely an accounting outcome.

A company in transition

Depending on which metric investors choose to focus on, VNG earned VND125 billion ($4.75 million), VND182 billion or VND470 billion in the first quarter.

All three figures are valid because each answers a different question.

The accounting profit reflects statutory earnings. Profit attributable to parent shareholders measures value accruing to VNG investors. AOP seeks to capture the profitability of the company's core operations.

More importantly, all three indicators appear to be moving in the same direction.

After years of prioritizing ecosystem expansion and investment in startups over short-term profitability, VNG is showing signs of a broader financial turnaround.

Although the company reported a net loss of VND326 billion in 2025 under accounting standards, full-year AOP surged 183% to VND856 billion ($32.52 million).

Those improvements help explain why management felt confident enough to set its first full-year profit target since listing on the UPCoM exchange in 2023.

For 2026, VNG expects pre-tax profit of VND300-450 billion ($17 billion) while targeting further AOP growth of 15-30%.

The company is also entering a new phase in which accounting earnings, operating efficiency and cash generation are becoming equally important performance indicators, rather than focusing primarily on ecosystem expansion.

Those metrics may become even more relevant as VNG accelerates its AI-first strategy across its ecosystem.

Management has identified artificial intelligence, Zalo, ZaloPay and cloud infrastructure platform GreenNode as key long-term growth drivers, with 2026 expected to mark a period of increased investment.

For investors, VNG serves as a reminder that technology companies cannot always be evaluated through a single profit figure. Understanding where earnings come from - and which measure best reflects underlying business performance - can be just as important as the headline number itself.

On the unlisted public companies market (UPCoM), VNZ closed Wednesday at VND355,100 ($13.49) apiece.