MSX US Stock Daily Watch: SK Hynix Q3 Earnings: Revenue Tops KRW 100 Trillion for the First Time, HBM4 to Become Main Product in Q4

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Today's Watch

SK Hynix delivered the strongest quarterly earnings in its history. In FY2026 Q3, the company's revenue reached KRW 104.62 trillion, up 328% year-over-year and 32% quarter-over-quarter, surpassing KRW 100 trillion for the first time and exceeding market expectations of approximately KRW 98.23 trillion. Operating profit reached KRW 83.33 trillion, up 632% year-over-year and 38% quarter-over-quarter, also above market expectations of approximately KRW 76.96 trillion.

The operating margin further rose to nearly 80%, up about 33 percentage points from the same period last year. This means that for every KRW 100 in revenue SK Hynix generated, nearly KRW 80 converted into operating profit. Such a high margin stems not only from high-value-added products such as HBM, but also reflects tight supply of AI server memory, conventional DRAM, and enterprise SSDs, driving simultaneous improvement in product prices and sales mix.

The biggest product change this quarter is that HBM4 began full-scale ramp-up. The company stated that HBM4 shipments had substantially begun in Q3 and are expected to exceed HBM3E in both shipment volume and revenue in Q4, officially becoming the main product of SK Hynix's HBM business.

This means SK Hynix's growth focus is shifting from HBM3E to the next-generation HBM4. Compared with traditional memory, HBM4 requires more advanced DRAM processes, stacking, packaging, and customer qualification capabilities, carries higher product value, and benefits more directly from the upgrade of next-generation AI accelerator platforms.

Growth is not only coming from HBM. Server DDR5 sales increased significantly, driving DRAM business growth; on the NAND side, shipments of 321-layer TLC enterprise SSDs expanded, and high-capacity storage demand from data centers is beginning to become a new source of profit. SK Hynix is transitioning from reliance on a single HBM product to joint growth across HBM, server DRAM, and enterprise SSDs.

Data in a Minute

FY2026 Q3 revenue KRW 104.62 trillion, up 328% year-over-year and 32% quarter-over-quarter;

Market expected revenue of approximately KRW 98.23 trillion;

Operating profit KRW 83.33 trillion, up 632% year-over-year and 38% quarter-over-quarter;

Market expected operating profit of approximately KRW 76.96 trillion;

Operating margin approximately 80%, versus 76% in the previous quarter and 47% in the same period last year;

Net profit KRW 39.78 trillion, up 216% year-over-year and down 58% quarter-over-quarter;

HBM4 began full-scale ramp-up in Q3;

The company expects Q4 HBM4 shipments and revenue to both exceed HBM3E;

SK Hynix has signed long-term supply agreements with 14 major customers;

Signed long-term agreements cover more than 50% of total capacity from 2027 to 2028;

Some long-term agreements typically run up to five years and include pricing mechanisms linked to market prices within agreed ranges;

The company expects the memory supply-demand imbalance to potentially persist until 2030;

Cash and cash equivalents at quarter-end were KRW 114.5 trillion, up KRW 26.5 trillion quarter-over-quarter;

Borrowings fell to KRW 15.8 trillion, down KRW 2.8 trillion quarter-over-quarter;

Net cash rose to KRW 98.7 trillion;

Plans to implement approximately KRW 100 trillion in shareholder returns in 2026;

Including at least KRW 30 trillion in cash dividends and at least KRW 60 trillion in share buybacks and cancellations;

Q3 dividend per share was KRW 20,000, including a special dividend of KRW 10,000;

After the earnings release, SK Hynix's Korean stock rose as much as about 2.4% in early trading.

MSX View

This earnings report from SK Hynix proves that AI infrastructure investment has expanded from GPU demand to the entire memory system. AI servers need more than just computing chips. Model parameters, training data, and inference caches need to move continuously between GPUs, HBM, server memory, and storage systems. The larger the model scale and the more inference requests, the higher the system's requirements for memory bandwidth, capacity, and data read speed.

HBM addresses high-speed data transmission near the GPU, server DDR5 and SOCAMM handle larger-capacity system memory, and enterprise SSDs are used to store models, training data, and inference results. SK Hynix covers all three segments simultaneously, allowing it to benefit not only from the increased HBM value per GPU but also from the overall expansion of AI data centers.

The synchronized growth of server DDR5 and enterprise SSDs this quarter shows that AI storage demand has begun to spread beyond HBM. This is very important, because relying solely on HBM could concentrate company revenue heavily on a few GPU customers and product cycles; joint growth in server memory and enterprise SSDs can expand the customer base and revenue opportunities per data center.

HBM4 surpassing HBM3E in Q4 is the most noteworthy forward-looking signal in this earnings report. Competition in the memory industry has traditionally revolved around capacity, cost, and price, but HBM competition relies more on product design, advanced processes, packaging capabilities, yield, and customer qualification. Suppliers must co-develop with GPU manufacturers in advance and complete qualification before accelerators enter mass production. This makes HBM closer to customized semiconductors rather than entirely traditional standardized memory commodities.

SK Hynix plans to ramp M15X to maximum capacity by year-end, indicating the company has entered the stage of large-scale HBM4 delivery. As long as product yield and customer demand remain stable, HBM4 will continue to improve the product mix and value per wafer.

However, an 80% operating margin cannot be viewed as a long-term norm. This margin is built on the simultaneous presence of three conditions: rapid growth in AI memory demand, tight supply of advanced capacity, and continuously rising product prices. Once competitors' HBM4 capacity rises, traditional memory supply increases, or cloud providers slow capital expenditure, both prices and margins could decline.

SK Hynix is reducing this cyclical risk through long-term supply agreements. The company has signed long-term agreements with 14 major customers, covering more than 50% of total capacity from 2027 to 2028, and has incorporated market-price-linked mechanisms within agreed ranges. This model addresses two problems at once: customers can secure HBM and server memory supply in advance; SK Hynix can arrange wafer, packaging, and equipment investment based on contracted demand, improving visibility of future revenue.

Another change is capital allocation. SK Hynix expects its investment scale to increase significantly in 2027, mainly for M15X, Yongin Phase 1, and infrastructure in Korea and overseas. Such strong demand visibility makes capacity expansion reasonable, but large-scale capital expenditure will also increase depreciation and cash flow pressure. If market demand remains strong when new capacity comes online, expansion will continue to drive revenue; if supply grows faster than demand, it could bring back price pressure.

As of the end of Q3, the company already had KRW 98.7 trillion in net cash, a marked improvement in its financial structure. This allows SK Hynix to simultaneously invest in advanced capacity and return capital to shareholders without relying entirely on new debt to support expansion. The company plans to implement approximately KRW 100 trillion in shareholder returns in 2026, including cash dividends, share buybacks, and cancellations, and will return most of the investment gains from Kioxia to shareholders through special dividends. This shows that SK Hynix is transforming from a cyclical company that previously needed to prioritize repairing its balance sheet into a highly profitable company capable of both investing in expansion and returning cash.

The decision to halt the Solidigm IPO is also related to this change. The company originally hoped to use external capital to support Solidigm's expansion and reduce its own investment burden, but after cash levels rose and the capital market environment changed, the necessity of a separate listing declined. Retaining Solidigm also allows SK Hynix to fully capture the profits from enterprise SSD growth.

Therefore, the core of this earnings report is not just that revenue and profit once again hit new highs, but that SK Hynix's business model is changing. HBM raises product value and technical barriers, long-term agreements improve demand visibility, server DRAM and enterprise SSDs expand AI revenue sources, and strong cash flow supports continued investment and higher shareholder returns.

Three indicators need to be closely watched next: whether HBM4 can surpass HBM3E in Q4 as planned, the yield and profitability after M15X expansion, and whether the 2027 capital expenditure growth can continue to deliver revenue and free cash flow of a comparable scale. SK Hynix has proven itself to be a major beneficiary of the AI infrastructure cycle. What needs to be verified in the next stage is whether HBM technological advantages and long-term contracts can enable the company to maintain profitability and return on capital above traditional memory cycles while expanding capacity.

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