SK Hynix delivered record quarterly revenue and operating profit in the second quarter, but the numbers still fell short of analyst expectations, sharpening investor focus on whether AI memory demand can continue to justify rich valuations.
After the U.S. market closed on July 28, SK Hynix reported second-quarter operating profit of KRW 60.5 trillion, up 557% from a year earlier, and revenue of KRW 79.3 trillion, up 257%. Both were quarterly records. Market expectations had been about KRW 64.2 trillion for operating profit and KRW 83.9 trillion for revenue.
On demand, the company kept an upbeat view. SK Hynix said it has finalized long-term agreements with about 10 customers and is still in talks with other major industry clients to improve operating efficiency and strengthen business stability and sustainable growth over the medium to long term.
Since June this year, SK Hynix has lost more than $500 billion in market value, and at its deepest point the monthly decline erased about 45% of the stock’s value. After the earnings release, SK Hynix ADRs fell more than 5% in after-hours trading, while its Korea-listed shares were down 4.5% before the local market open.
Record margins still were not enough
In absolute terms, SK Hynix’s second-quarter results reflected the full force of the current memory upcycle.
Revenue came in at KRW 79.3187 trillion, up from KRW 22.232 trillion a year earlier and more than 50% above KRW 52.5763 trillion in the first quarter. Operating profit reached KRW 60.5426 trillion, up from KRW 9.2129 trillion a year earlier and about 61% above KRW 37.6103 trillion in the first quarter.
Profitability moved even higher. Operating margin rose to 76.3% in the second quarter from 71.5% in the first quarter. Gross margin reached 83%, showing how pricing and demand for high-value products such as AI server memory, HBM and enterprise SSDs lifted profitability.
Net profit came to KRW 93.9226 trillion, with a net margin of 118%. That figure was not driven entirely by core operations. During the quarter, the company booked KRW 62.166 trillion in non-operating income from a partial sale of its stake in Kioxia, which pushed pretax profit to KRW 122.7084 trillion. That helped drive a sharp increase in net profit, though the sustainability of that gain is weaker than that of operating profit.
Why results missed expectations
The report highlighted three structural reasons the company failed to meet market expectations.
First, SK Hynix’s high HBM exposure limited upside to earnings growth in this phase of the cycle. A major driver of the broader semiconductor industry’s profit expansion has been the sharp rise in prices for conventional memory, and SK Hynix benefited less from that move because of its larger HBM mix.
Second, memory price gains slowed in the second quarter. According to the company, quarter-on-quarter price increases were about 30% for commodity DRAM and in the mid-point of the 50% to 60% range for NAND flash. That was below the roughly 60% increase for DRAM and roughly 70% for NAND in the first quarter.
Third, long-term supply agreements with major customers locked in selling prices and reduced the earnings sensitivity to higher spot prices.
According to the report, citing people familiar with the matter, sales locked in through long-term agreements account for about 50% of the total. SK Hynix said it has completed negotiations on long-term contracts with about 10 customers and has also secured additional supply demand from multiple large technology companies.
Josh Gilbert, chief market analyst for Asia Pacific and the Middle East at eToro, said: “When you are the dominant supplier of the high-bandwidth memory that powers Nvidia chips, the AI boom runs straight through your income statement. That means the market is unlikely to focus only on the headline figures. The more important question is whether margins and guidance can support the recent stock performance.”
HBM4 entered mass shipments in Q2
AI memory remains the company’s central growth driver. SK Hynix said HBM4 has achieved the operating speeds customers require and offers industry-leading energy efficiency and cost competitiveness. The product began mass shipments in the second quarter, and output will expand further in the second half.
The next-generation HBM4E was also sampled to major customers in the first half. The company said it used a process that balances technological maturity with mass-production stability.
That matters for SK Hynix because HBM4 will serve as a key memory component for the next wave of AI accelerator platforms. The article said the market broadly expects a volume ramp in Nvidia’s next-generation AI accelerator platform to become an important catalyst for HBM4 demand in the second half. As a core Nvidia supplier, SK Hynix’s ability to deliver HBM4 steadily will directly affect its leadership in the AI memory market.
NAND and eSSD also gained ground
Outside HBM, the NAND business is also benefiting from the recovery cycle. The company said it is accelerating the shift to advanced process nodes to strengthen its portfolio of high-capacity, high-performance products.
Its 321-layer product has become the largest product by share of total output, and SK Hynix plans to raise that to about 50% of domestic Korean production capacity by the end of the year.
Enterprise SSDs remain another key growth area. AI data centers need not only HBM and server DRAM, but also large-scale, high-performance and highly reliable storage devices. As cloud providers and large technology companies expand AI clusters, eSSD demand is rising in parallel and improving the company’s NAND mix.
The article noted that this cycle differs from past memory upcycles. Earlier cycles were often driven by consumer electronics such as smartphones and PCs. This time, AI server demand is supporting DRAM, HBM and eSSD at the same time, making the supply-demand tightness more structural.
Cash climbed, debt fell, capex is still going higher
SK Hynix’s financial position improved noticeably in the second quarter. As of the end of the quarter, cash and cash equivalents stood at KRW 88 trillion, up KRW 33.6 trillion from the prior quarter. Total debt declined by KRW 0.7 trillion to KRW 18.6 trillion, and net cash expanded to KRW 69.4 trillion.
The company said record profit and strong cash generation have significantly improved its financial flexibility.
Still, stronger demand also means heavier capital spending. SK Hynix expects 2026 capital expenditure to come in at the upper end of the KRW 40 trillion to KRW 50 trillion range. The company is speeding up mass production at M15X and preparing to expand capacity quickly after the first-phase Yongin clean room comes online in early 2027.
It also referenced longer-term investment projects including the P&T7 advanced packaging facility, the M17 NAND production base and a new semiconductor cluster. Those projects will be rolled out in phases based on customer demand and investment efficiency.
For investors, the key issue in the article is whether SK Hynix can maintain capex discipline and avoid expanding supply too quickly while AI demand remains strong, so that the next phase of margin performance is not undermined.