SK hynix Posts a $78.8B Quarter at an 80% Margin, but Net Profit Falls 58% From Q2

SK hynix (SKHY) reported third-quarter revenue of 104.6 trillion won, about $78.8 billion, the first time quarterly sales have topped 100 trillion won. Operating profit rose to 83.3 trillion won, about $62.8 billion, for a record operating margin of 79.7%. Both beat brokerage forecasts. Net profit, however, fell to 39.8 trillion won, about $30.0 billion, down 58% from the second quarter. The company also set a roughly 100 trillion won shareholder-return plan for 2026.

The results

Figures are preliminary, unaudited and consolidated under K-IFRS. Dollar amounts are approximate, converted at 1,326.76 won per dollar, the Oct. 27 rate provided to MarketCatalyst.

Revenue beat the brokerage average of about 96.7 trillion won by roughly 8%, and operating profit beat the roughly 76.0 trillion won forecast by about 10%. By our calculation, the 79.7% margin was about 1.1 points above the 78.6% expected. Net profit missed an estimate of about $41.8 billion, as provided to MarketCatalyst; by our calculation the result was about 28% below it.

Why net profit fell

Operating profit rose 38% from the second quarter, yet net profit dropped from 93.9 trillion won to 39.8 trillion won. By our calculation, second-quarter net profit was about 33 trillion won higher than second-quarter operating profit of 60.5 trillion won, which points to large non-operating gains in that quarter. The company said it will return most of the gains realized from its Kioxia investment this year to shareholders, but the release does not give the size of those gains or explain the quarter-to-quarter swing in net income.

What drove the quarter

In DRAM, server DDR5 sales rose significantly and shipments of HBM4, the latest high-bandwidth memory used with AI accelerators, began in earnest. In NAND, sales of 321-layer TLC enterprise SSDs expanded. SK hynix expects HBM4 to pass HBM3E in both shipment volume and revenue in the fourth quarter and become its mainstream product, and said it will ramp its M15X fab to maximum capacity by year-end.

The company said it has signed long-term agreements with 14 major customers, including global cloud providers, covering more than 50% of its total production capacity for 2027 and 2028. The contracts typically run five years, with pricing inside ranges that reflect market conditions. SK hynix said it expects demand to exceed supply through 2030.

Q4 and 2027 outlook from the call

On the earnings call, CFO Kim Woo-hyun said average DRAM selling prices rose in the high-20% range from the second quarter. He expects fourth-quarter shipments to grow sharply, in the mid-20% range from the third quarter, as 10-nanometer-class output expands and HBM4 production ramps at the M15X fab. For 2027, he projected achievable bit growth in the mid-20% range for DRAM and the high-20% range for NAND, and said he expects supply to fall short of demand through 2030. He also cited projections for cloud-provider capital spending to rise more than 60% next year.

A roughly $75 billion shareholder-return plan

SK hynix says it will return at least 50% of free cash flow. The August 40 trillion won repurchase is complete and its shares are due to be cancelled shortly. Of the new 20 trillion won authorization, about 10 trillion won will be cancelled and counts toward shareholder returns, while about 10 trillion won funds employee compensation and is excluded from the total. Dividends will follow operating results, buybacks will continue every quarter, and large investment gains such as Kioxia will be paid out through special dividends. The final payments are subject to business conditions and board approval.

Balance sheet and 2027

Cash and equivalents reached 114.5 trillion won (about $86.3 billion), up 26.5 trillion won from the second quarter, against borrowings of 15.8 trillion won. That leaves net cash of 98.7 trillion won, about $74.4 billion. The company did not give a capital spending figure but said investment will rise significantly in 2027 as the first phase of its Yongin complex enters full-scale operation. It aims to grow revenue and profit "one step further" next year, shift more DRAM to its 1c process, and raise 321-layer NAND above half of its domestic NAND capacity in the fourth quarter.

Solidigm shelves its IPO review

Earlier in the week, on Oct. 23, SK hynix said its U.S. flash subsidiary Solidigm would halt its review of pre-IPO fundraising and IPO options. The company cited market conditions, saying increased financial-market volatility had contributed to a broader correction in semiconductor stocks, and said it needed to reassess whether an IPO was the best path. SK hynix said the decision does not reflect any change in Solidigm's growth prospects or investment needs, and that it will keep evaluating the timing, scale and financing methods for Solidigm's investment. The IPO had been seen as a way to fund new U.S. capacity for AI memory.

What it means

The operating line is the headline: an 80% margin on 100 trillion won of sales, backed by long-term contracts that cover more than half of capacity through 2028. The net profit drop reflects comparison with an unusually high second quarter rather than weaker operations. For investors the open questions are how much Kioxia gain remains to be paid out, how much 2027 spending absorbs from the 50% free-cash-flow commitment, whether HBM4 pricing holds as volume ramps, and what Solidigm does for funding now that the IPO review is off.

Sources: SK hynix, 3Q26 results and regulatory disclosure (Oct. 27 and 28 KST), the Oct. 28 earnings call and Solidigm's Oct. 23 announcement. Consensus comparisons use brokerage averages; the net profit estimate and exchange rate are as provided to MarketCatalyst. This is informational, not a recommendation to buy or sell.