Original | Odaily Planet Daily (@OdailyChina)
Author｜Azuma (@azuma_eth)
On October 28, global memory chip giant SK Hynix delivered a financial report for the third quarter of fiscal year 2026 that can only be described as "explosive."
Driven by both the AI infrastructure boom and supply shortages of high-value-added products, SK Hynix's quarterly revenue exceeded the 100 trillion won mark for the first time in its history; operating profit exploded, soaring 632.1% year-over-year; net profit came in at 39.77 trillion won, also up 215.7% year-over-year.
At the same time, SK Hynix not only unveiled an annual shareholder return plan totaling 100 trillion won, but also publicly asserted: "The global memory chip supply shortage will persist throughout the second half of the 2020s and continue until 2030."
Boosted by this strong earnings report, SK Hynix's stock price rose accordingly in the Korean stock market today, driving collective gains among memory peers in Asian markets and even in U.S. after-hours trading, as well as in the upstream semiconductor equipment sector. As of 12:35 local time in South Korea, SK Hynix was temporarily quoted at 1,477,000 won, up 10.14% on the day.
Explosive Data: Revenue Historically Breaks One Hundred Trillion
The financial report shows that in the third quarter of fiscal year 2026 (July-September), SK Hynix delivered a rather exaggerated report card.
- Revenue: 104.62 trillion won (approximately $78.32 billion), up 32% quarter-over-quarter and soaring more than 320% year-over-year. Quarterly revenue crossed the 100 trillion won threshold for the first time, greatly exceeding market expectations of around 98 trillion won.
- Operating Profit: 83.33 trillion won (approximately $62.38 billion), stunningly surging more than 630% year-over-year, far exceeding market expectations (approximately 76.7 trillion won). What stunned the market most was its profit quality — the quarterly operating margin approached 80% (up another 4 percentage points quarter-over-quarter), meaning that for every 100 won of chips Hynix sells, nearly 80 won is directly converted into operating profit. This near-monopoly pricing power even surpasses that of the vast majority of asset-light software giants.
- Net Profit: 39.78 trillion won (approximately $29.78 billion), up 216% year-over-year, but down 58% quarter-over-quarter, and also below market expectations of 60.73 trillion won.
- Cash Flow: As of the end of the third quarter, cash and cash equivalents had reached 114.5 trillion won (approximately $85.72 billion), an increase of 26.5 trillion won from the end of the previous quarter, while borrowings decreased by 2.8 trillion won to 15.8 trillion won. Accordingly, the net cash position expanded to 98.7 trillion won (approximately $78.39 billion), with book wealth at a historical peak.
It should be noted that although the net profit metric fell short of market expectations by about one-third, this was not a stall in business fundamentals, but rather an "accounting impairment" caused by a combination of multiple non-operating factors. On the one hand, the company concentrated this year on realizing huge investment gains from Japan's Kioxia, which generated large tax provisions; on the other hand, exchange rate fluctuation gains and losses, as well as share buybacks and cancellations amounting to tens of trillions of won, sharply offset net profit for the period on the accounting books.
More Than HBM: Traditional Memory Price Increases Are the Real "Profit Amplifier"
In the past, when outsiders mentioned SK Hynix, their first reaction was often "the HBM (high-bandwidth memory) overlord behind Nvidia." But in the third quarter, what truly pushed the company's revenue to the one-hundred-trillion-won level was actually the dual-engine resonance of "cutting-edge HBM iteration + comprehensive price increases for traditional memory."
On the high-end front, HBM's dominance remains solid. With the M15X factory's capacity fully ramped up before the end of the year, higher-premium HBM4 has been fully rolled out for shipment. Management has clearly given a timetable — in the fourth quarter of this year, HBM4 will officially overtake HBM3E in both shipment volume and revenue scale, becoming the absolute mainstay.
But in the third quarter, what deserves more attention is actually the explosion of traditional DRAM and NAND flash. Because over the past two years, the three major memory manufacturers (Hynix, Samsung, Micron) collectively shifted advanced capacity and capital expenditure toward HBM, inadvertently draining the supply pool for traditional memory. Against the backdrop of AI data centers frantically snapping up server DDR5 and high-capacity 321-layer enterprise solid-state drives (eSSD), the supply-demand balance for traditional memory has completely tipped.
Data shows that in the third quarter, SK Hynix's average DRAM and NAND prices surged by about 20% and 25% quarter-over-quarter, respectively. Counterpoint Research analyzed this, stating that while HBM certainly set the tone for high gross margins, the rapid price increases of large-volume traditional DRAM and NAND in a short period were the biggest driver behind the exponential leap in profits this quarter.
One-Hundred-Trillion-Won Shareholder Return Plan
Along with the earnings announcement, SK Hynix officially announced an unprecedented shareholder return initiative, further stimulating market sentiment.
SK Hynix announced: For fiscal year 2026, it will return approximately 100 trillion won (approximately $74.86 billion) to shareholders in total, fully honoring its commitment to use more than 50% of free cash flow (FCF) for shareholder returns. The specific implementation plan is divided into two major parts:
- Cash dividends: The total annual cash dividend will exceed 30 trillion won. Among them, the third-quarter dividend alone is 20,000 won per share — notably, this includes a special dividend of 10,000 won per share. SK Hynix explicitly stated that this is to return most of the gains realized this year through its strategic investment in Japan's Kioxia to shareholders without reservation.
- Share buyback and cancellation: The full-year plan is to implement more than 60 trillion won in share buybacks and cancellations. In addition to the 40 trillion won buyback previously announced in August and completed last week, the board further approved an additional 20 trillion won buyback plan on Wednesday this week (about half of which is for cancellation, while the other half is reserved for employee performance incentives).
Behind this series of generous moves, there is actually sophisticated capital game consideration. At today's earnings meeting, SK Hynix CEO Kwak Noh-jung personally confirmed that given the poor current financial market environment, the company has decided to suspend the review of a U.S. IPO for its NAND subsidiary Solidigm.
Previously, the market had been worried that Solidigm's independent listing would dilute the parent company's shareholder equity, or that continued capacity expansion would drag down Hynix's cash flow. Now, management has decisively halted the IPO on one hand, and on the other hand has laid out the fruits of the Kioxia investment and engaged in large-scale buybacks and share cancellations, clearly intending to send a more positive signal to the market — the company's current cash flow is fully self-sufficient and does not need to "draw blood" externally through a spin-off listing, and shareholder interests remain the top priority.
Industry Outlook: Supply Shortage Will Continue Until 2030
Why does SK Hynix dare to distribute 100 trillion won all at once at this point in time? The confidence likely stems from its absolute confidence in the industry's prosperity over the next four years.
In the financial report, SK Hynix gave a clear judgment on the industry's medium- and long-term supply-demand situation, believing that the supply shortage will continue until 2030 — AI investment has expanded from a few cloud giants to sovereign states and ordinary enterprises, and future market demand will be taken over by "Physical AI" such as autonomous driving and embodied intelligence, while the supply side remains constrained by the extremely high technical barriers of advanced processes (such as the 1c process) and long wafer fab construction cycles. The supply shortage pattern will continue until 2030, and the profit peak is far from arriving.
Against this backdrop, SK Hynix has now signed long-term agreements, usually for five years, with 14 core customers worldwide (mainly North American large cloud service providers, CSPs). The locked-in long-term supply volume is equivalent to more than 50% of total capacity for 2027 and 2028, and the pricing mechanism has been fully built into a dynamic structure that can flexibly reflect market conditions.
This deep long-term agreement binding is fundamentally rewriting the valuation logic of the memory industry. In the past, memory chips were regarded as a typical strongly cyclical commodity — price surges often induced blind capacity expansion, and once downstream customers cut orders, the industry would quickly fall into a price war quagmire; therefore, the capital market tended to assign low valuations at industry profit peaks. But now, through LTA agreements covering more than half of capacity and a "market-based" dynamic pricing mechanism, SK Hynix is in effect locking what was originally a highly volatile cyclical buy-and-sell business into a "quasi-customized" business with extremely high certainty, thereby responding to market doubts about whether next year's performance has peaked.
At the same time, the confidence of holding long-term agreement orders has directly translated into a new round of capacity expansion calls. SK Hynix clearly stated that with the official commissioning of the Yongin Phase 1 wafer fab (Fab) next year, the company's capital expenditure (CapEx) and infrastructure investment scale next year will rise sharply compared with this year. This also perfectly explains the linkage effect in today's market — the memory leader's real-money expansion plan not only anchors the prosperity cycle for peers such as Micron and Samsung, but also directly feeds the upstream wafer manufacturing equipment, etching and deposition, and advanced packaging industry chains, thereby triggering a collective resonance across the entire semiconductor hardware sector.
However, behind this memory frenzy driven by AI, the industry's temperature gap is also widening further. SK Hynix also warned at its earnings call that, because memory prices continue to rise and capacity is highly skewed toward servers, downstream PC and smartphone manufacturers are under obvious cost pressure, and end demand for traditional consumer electronics has begun to be suppressed.
On one side, consumer electronics are struggling to test the boundaries of demand amid a wave of price increases; on the other side, cloud giants are spending heavily to sign five-year long-term contracts in order to lock in computing power chips. With a financial report whose revenue exceeded one hundred trillion Korean won for the first time, SK Hynix proved the absolute pricing power of upstream core hardware in the current AI wave; but standing at a historical high of nearly 80% operating margin, while the market pays for current certainty, its gaze is bound to turn further ahead — when upstream has fully pulled forward expectations for the next few years, whether downstream AI commercialization can generate matching cash flow on schedule will be the next key variable determining the quality of this super cycle.
