Shares of WEBTOON Entertainment Inc. (NASDAQ: WBTN) tumbled 6.29% in after-hours trading on Tuesday following the release of the company's first-quarter 2025 financial results, which fell short of investor expectations and raised concerns about the company's near-term growth prospects.

The global entertainment company, known for its mobile webcomic platforms, reported a net loss of $22.0 million for Q1 2025, a significant downturn from the net income of $6.2 million recorded in the same period last year. Revenue remained relatively flat at $325.7 million, showing a slight decline of 0.3% year-over-year. However, on a constant currency basis, revenue grew by 5.3%.

WEBTOON's profitability took a hit in the first quarter, with Adjusted EBITDA falling to $4.1 million from $22.2 million in the prior year, representing a margin decrease from 6.8% to 1.3%. Adjusted earnings per share (EPS) also declined sharply to $0.03, down from $0.20 in Q1 2024. The company attributed the weaker performance to increased general and administrative expenses, including costs associated with being a public company, and higher marketing expenses.

Adding to investor concerns, WEBTOON's outlook for the second quarter of 2025 suggests only modest growth. The company expects revenue growth on a constant currency basis to be in the range of 2.2% to 5.2%, with projected revenue between $335 million and $345 million. Adjusted EBITDA for Q2 is forecasted to be between $0.5 million and $5.5 million, indicating continued pressure on profitability.

Despite the challenging quarter, WEBTOON highlighted some positive developments, including the implementation of AI-powered discovery features on its English-language platform and the addition of major global franchises like 'Godzilla' and 'Sonic the Hedgehog' to its content library. However, these initiatives did not appear to be enough to offset investor disappointment in the company's financial performance and near-term outlook.