"King of Memory" rakes in $28.6 billion, pays out $10 billion in dividends, and declares "memory shortage will last until 2030"

Original author: Su Yang

Original editor: Xu Qingyang

Original source: Tencent Technology

SK Hynix's AI memory business is still setting new profit records.

On October 28 local time, SK Hynix released its third-quarter 2026 financial report. The report shows that SK Hynix's third-quarter revenue reached KRW 104.62 trillion (approximately USD 75.3 billion), up 327.9% year-over-year; operating profit was KRW 83.33 trillion (approximately USD 60 billion), up 632.1% year-over-year; net profit was KRW 39.78 trillion (approximately USD 28.6 billion), up 215.7% year-over-year.

However, net profit did not extend the high set in the second quarter. In the second quarter, SK Hynix's net profit reached KRW 93.92 trillion (approximately USD 67.6 billion), and the third quarter fell about 58% quarter-over-quarter.

By comparison, operating profit hit a new record high, reflecting that the core business is still growing, but net profit is also affected by non-operating factors such as investment gains.

Key points of SK Hynix's third-quarter financial report, from SK Hynix's official website

SK Hynix plans to pay a cash dividend of KRW 14 trillion (approximately USD 10.1 billion) for the third quarter and repurchase an additional KRW 20 trillion of shares (approximately USD 14.4 billion).

More notably, SK Hynix expects that as AI infrastructure investment continues to expand, the global memory chip supply shortage may persist until 2030. At the same time, SK Hynix plans to accelerate HBM4 production and has locked in long-term supply agreements covering more than half of its capacity for 2027 to 2028.

Stimulated by these results, SK Hynix's stock price rose more than 4% at one point in early trading on October 28.

USD 57.1 Billion in Revenue and Two Levers

Looking at quarterly changes, SK Hynix's growth is still accelerating.

In the second quarter, the company's revenue was KRW 79.32 trillion (approximately USD 57.1 billion), and operating profit was KRW 60.54 trillion (approximately USD 43.6 billion). In the third quarter, revenue grew 32% quarter-over-quarter and operating profit grew 38% quarter-over-quarter. Profit growth continued to outpace revenue growth, indicating that the two levers of high-value-added product sales and price increases are still improving profitability.

SK Hynix's key third-quarter financial data, from SK Hynix's official website

Third-quarter net profit fell about 58% quarter-over-quarter, in contrast to operating profit hitting a record high.

Previously, in the second quarter, SK Hynix's net profit reached KRW 93.92 trillion (approximately USD 67.6 billion), higher than operating profit of KRW 60.54 trillion, with a net profit margin of 118%. However, net profit was affected by non-operating gains and other factors, mainly from gains on its investment in Kioxia.

Therefore, the decline in third-quarter net profit alone cannot be used to judge that the core business is weakening. In fact, operating profit better reflects the operating performance of the company's memory chip business.

From the third quarter of 2025 to the third quarter of 2026, SK Hynix's gross margin, operating margin and EBITDA margin continued to rise overall. In the latest quarter, the three indicators reached 86%, 80% and 84%, respectively, up 3, 4 and 3 percentage points from the previous quarter, showing that the profitability of the company's core business continued to strengthen.

However, as mentioned above, the net profit margin trend shows significant divergence and sharp fluctuations, suggesting that there may have been huge non-operating expenses, investment losses or tax effects that eroded final profit.

In terms of earnings per share, SK Hynix's diluted earnings per share in the third quarter were KRW 54,454 (approximately USD 39.2), down about 59% from the previous quarter, but still higher than about KRW 18,000 (approximately USD 13) in the same period last year. The company reported an operating margin of 80% and a net margin of 38%.

In terms of cash position, at the end of the third quarter, SK Hynix's cash and cash equivalents reached KRW 114.5 trillion (approximately USD 82.4 billion), an increase of KRW 26.5 trillion from the end of the second quarter; borrowings decreased by KRW 2.8 trillion to KRW 15.8 trillion, and net cash reached KRW 98.7 trillion (approximately USD 71 billion). Higher cash and lower debt provide the company with a funding base for future capacity expansion, R&D and shareholder returns.

SK Hynix free cash flow and debt data, from SK Hynix's official website

Memory Shortage Extends to 2030

SK Hynix's revenue growth mainly comes from demand for high-performance memory chips from AI data centers.

SK Hynix said that in the third quarter, its DRAM business was driven by significant growth in server DDR5 sales, and HBM4 also began mass shipments. On the NAND side, sales of 321-layer TLC enterprise SSDs increased, and high-value-added data center products continued to grow.

Changes in product mix help explain why operating margin rose further.

As sales of high-end products such as HBM and server memory expand, the company can allocate more capacity to higher-value-added products. At the same time, rising prices of key memory products are also driving profit growth.

However, advanced memory chip manufacturing processes are complex, and new factories still need to go through stages such as construction, equipment installation, process validation and yield improvement. On this basis, SK Hynix judges that the global memory chip shortage may persist until 2030.

SK Hynix has signed long-term supply agreements with 14 major customers, including large global cloud service providers, with contract terms typically five years. As of now, the relevant agreements cover more than 50% of total capacity for 2027 and 2028, and agreement prices will reflect market changes within a range agreed by both parties, so as to balance supply stability and profitability.

However, the competitive landscape also deserves attention.

SK Hynix is an important HBM supplier to Nvidia's AI accelerators and has a strong technology and customer base in high-bandwidth memory. Samsung Electronics and Micron are also advancing HBM product development and capacity expansion.

In the coming quarters, the pace of HBM4 mass production and customer certification progress will directly affect whether SK Hynix can continue to expand high-end product sales.

HBM4 Takes Over as the "Revenue Mainstay"

Facing continued order growth, SK Hynix is preparing to further increase high-end memory chip capacity.

The company said it will raise capacity at its M15X fab to the maximum level by the end of the year to increase HBM4 supply. According to the company's plan, in the fourth quarter, both HBM4 shipments and revenue will exceed those of the previous generation HBM3E, making it the mainstream product.

On DRAM, the company plans to increase the share of its sixth-generation 10nm-class (1c) process and expand sales of DDR5 and LPDDR5 SOCAMM for AI servers. On NAND, SK Hynix plans to raise the share of 321-layer process products to more than half of its domestic capacity in the fourth quarter, increasing the supply of high-performance, high-capacity enterprise SSDs.

In the medium to long term, SK Hynix also plans to use high-bandwidth flash (HBF) and system optimization technologies to improve the throughput and cost-effectiveness of NAND in AI services. This will make its memory product portfolio cover both high-speed memory and high-capacity data storage.

It is worth noting that SK Hynix was relatively restrained in disclosing information related to capacity construction. The company expects that as the first phase of its Yongin project enters full operation next year, infrastructure investment in South Korea and overseas will increase significantly. However, the company did not provide a specific amount for next year's capital expenditure in this announcement, nor did it disclose the latest budgets and commissioning timelines for the Yongin cluster, the Cheongju P&T7 site and its advanced packaging plant in the United States.

But the company stressed that in the future it will flexibly adjust the scale and timing of investment based on customer demand, product competitiveness, profitability and investment efficiency.

Shareholder Returns Reach USD 72 Billion

Record profits are beginning to translate into shareholder returns.

SK Hynix announced that total shareholder returns for 2026 are expected to be about KRW 100 trillion (approximately USD 72 billion), including at least KRW 30 trillion in cash dividends (approximately USD 20.8 billion) and at least KRW 60 trillion in share repurchases and cancellations for the full year (approximately USD 41.6 billion). The company said this will fulfill its commitment to return more than 50% of cumulative free cash flow from 2025 to 2027.

In the third quarter, the company's board of directors decided to pay a cash dividend of KRW 14 trillion (approximately USD 10.1 billion), or KRW 20,000 per share (approximately USD 14.4) — of which KRW 10,000 is a dividend increased based on improved performance, and the other KRW 10,000 is a special dividend, mainly to share with shareholders the gains from the company's investment in Japan's Kioxia.

Of the KRW 20 trillion in share repurchases decided in the third quarter, about KRW 10 trillion will be cancelled, and another about KRW 10 trillion will be used for employee compensation. The latter is not included in total shareholder returns.

In addition, SK Hynix completed on October 21 its previously announced KRW 40 trillion (approximately USD 27.7 billion) share repurchase plan announced in August and plans to cancel the relevant shares soon. This repurchase is part of a previously announced arrangement and is separate from the new KRW 20 trillion repurchase decided in the third quarter.

Shortage and Expansion Risks Coexist

In the short term, SK Hynix will still benefit from AI server construction, HBM upgrades and growth in enterprise SSD demand.

Medium- and long-term challenges come from three areas: supply and demand, competition and capital expenditure.

The company expects the shortage to last until 2030, but this judgment is based on continued growth in AI investment and supply expansion being constrained by technology and construction cycles. If cloud service providers cut capital expenditure, or if new capacity is released in a concentrated manner, memory prices may come under pressure.

Second, Samsung Electronics and Micron Technology are both accelerating high-end memory R&D and capacity construction, and SK Hynix needs to continue maintaining advantages in HBM technology, yield and delivery. Chinese memory manufacturers are also expanding their share of the traditional DRAM and NAND markets, but their mass production capability for advanced products still needs to be observed.

In terms of capital expenditure, SK Hynix has ample cash. As projects such as Yongin enter the construction and operation stages, equipment procurement, plant construction and advanced packaging investment will all increase. The company has said that investment will expand significantly next year, while the specific scale will still be adjusted according to demand, profitability and investment efficiency.

Affected by market turbulence caused by uncertainty over cloud giants' capital expenditure, memory concept stocks have experienced a significant pullback over the past half month, which has also dealt a blow to SK Hynix's capital allocation. Last week, SK Hynix suspended the evaluation of a potential listing and IPO financing for its U.S. subsidiary Solidigm.