Disclosed is an electronic device processing an image using AI encoding. The electronic device comprises: a memory in which a learned first neural network model is stored; a communication interface; and a processor configured to obtain AI decoding information of an external device and context information of the electronic device; identify operation setting information associated with AI encoding based on the AI decoding information of the external device and the context information of the electronic device; input an image into a first neural network model to which the operation setting information is applied to obtain an AI-encoded image; obtain a compressed image by encoding the AI-encoded image; transmit the compressed image and AI encoding information associated with the first neural network model to the external device through the communication interface.