SM Entertainment's corporate logo (SM Entertainment)

SM Entertainment reported a sharp decline in third-quarter earnings Tuesday, attributing the downturn to reduced album sales and rising production costs while hinting at the debut of a new girl group in January.

The parent company’s regulatory filing showed consolidated revenue of 242.2 billion won ($175.6 million) and an operating profit of 13.3 billion won, reflecting a 9 percent drop in revenue and a significant 73.6 percent decline in operating profit, year-on-year.

The company pointed to lower album sales, diminished revenue from key subsidiaries, and additional production costs for BBC’s documentary series "Dear Alice" on its first British boy group as the main factors behind the downturn.

On a separate basis, SM Entertainment’s revenue was 172.1 billion won, with an operating profit of 27.1 billion won, down 8.8 percent and 43.6 percent, respectively, from last year. While album and digital music sales were lower due to a high comparison base, concert revenue rose as the company expanded its concert lineup and linked merchandise offerings. However, net income dropped 56.8 percent to 16 billion won.

Aespa (SM Entertainment)

Despite the weaker performance, SM Entertainment remains optimistic, planning a robust slate of artist promotions through the fourth quarter and into next year, including the launch of its first girl group since aespa debuted five years ago. This debut aligns with the company's "SM 3.0" roadmap for intellectual property expansion, which has introduced new groups like Riize and NCT Wish, alongside projects featuring virtual artist Naevis.

Among current stars, aespa recently released its fifth EP “Whiplash” as part of a year-long series of successful releases led by “Supernova.” SM Entertainment has an extensive lineup of artist releases scheduled in the near future, including albums from Red Velvet’s Irene, WayV and NCT U’s Yuta.

"SM is building a strong lineup of artist IP spanning all generations of K-pop, not only with our long-beloved teams but also with new artist debuts. We plan to further strengthen our roster with a new girl group debuting next year," SM Entertainment CEO Jang Cheol-hyuk said in a press statement.

In honor of the company’s 30th anniversary next year, it is preparing several celebratory projects, including an SMTown Live concert, an SMTown album, and collaborative performances featuring stars like EXO’s Kai and Red Velvet’s Seulgi.