Revenue topped 100 trillion won for the first time and the operating margin reached 80%, sending the shares up nearly 11% in Seoul and the KOSPI up 6.6%. Net profit came in well below forecasts after currency and investment-valuation losses.
SK Hynix's third quarter showed how profitable the AI memory boom has become. Its bottom line showed how much else can move a memory maker's results.
The South Korean memory maker reported revenue of 104.6 trillion won, the first quarter above 100 trillion, and operating profit of 83.3 trillion won, an 80% margin and up 632% from a year earlier. Analysts polled by FactSet had expected operating profit of about 77.0 trillion won on revenue of 98.2 trillion. The beat on operating profit was about 6.3 trillion won, or roughly $4.7 billion at about 1,330 won per dollar.
Net profit was 39.8 trillion won, a 38% margin. That is down 58% from 93.9 trillion won in the second quarter and well below the 61.4 trillion won FactSet's analysts expected.
The market chose operating profit
Investors focused on the operating line. SK Hynix shares rose 10.9% to 1,487,000 won in Seoul, and the KOSPI index rose 6.6% to 6,012.44. The company's U.S.-traded shares were indicated about 7.5% higher early on Wednesday.
The company also said it will pursue shareholder returns of about 100 trillion won, roughly $75 billion, for fiscal 2026: at least 30 trillion won of cash dividends and at least 60 trillion won of buybacks and cancellations, including the 40 trillion won it announced in August.
The gap below the line
The difference between operating profit of 83.3 trillion won and net profit of 39.8 trillion won is about 43.5 trillion won. The company said non-operating items cost a net 32.6 trillion won, including about 11.6 trillion won of currency-related losses as the won strengthened and about 22.9 trillion won of losses on the valuation of investment assets. That left pretax income of 50.7 trillion won, and income tax of 10.9 trillion won accounts for the rest.
The second quarter's net profit had included large gains tied to its Kioxia investment, about 63.3 trillion won, which exaggerates the decline. Most of the 58% sequential drop in net profit came from below the operating line, not from the memory business itself.
A contrast with U.S. hardware
The reaction stood out against U.S. AI hardware names that also beat on Tuesday evening. Seagate and Teradyne, a disk-drive maker and a chip-testing company that cited record memory test revenue, both reported results above forecasts and guided above estimates, and both traded lower after hours.
How investors are reading it
The bullish case is straightforward: a record quarter, an 80% operating margin, a beat against the major forecasts and a very large return program point to sustained demand for the memory used in AI systems.
The cautious case is the net profit line. A 58% sequential drop and a large miss against forecasts at the bottom line came from non-operating swings, which can reverse in either direction, and a market that rallied 6.6% in a day has priced a lot of good news in advance.
What to watch
Whether the investment-valuation losses reverse, details of the return program in its filings, comments on contracts for high-bandwidth memory, and capital spending plans from Microsoft and Alphabet after the U.S. close on Wednesday.