SK Hynix reported its second-quarter 2026 results with revenue, operating profit and margins all reaching record highs, driven by rising DRAM and NAND prices and continued expansion in AI server memory demand. The company also said HBM4 shipments started in Q2, while enterprise SSDs, server DRAM and SOCAMM2 kept gaining volume. In parallel, it completed negotiations on long-term supply agreements with about 10 customers, including key accounts, improving visibility on medium- to long-term orders.
Still, the report did not fully satisfy the market’s most bullish expectations. Revenue and operating profit both missed consensus forecasts, and the sharp increase in net profit was largely tied to investment-related gains rather than core operations. SK Hynix shares in Seoul had fallen 14.65% the day before the earnings release. After the report, the stock rose more than 4% at one point, then turned lower after the earnings call. By press time, it was down more than 11%.
Revenue and operating profit hit records, but both missed consensus
Second-quarter revenue came in at KRW 79.32 trillion, up 257% year over year and 51% from the previous quarter. That was below the market consensus of KRW 84.17 trillion.
Gross profit reached KRW 65.99 trillion, up 451% year over year and 58% quarter over quarter. Gross margin rose to 83% from 79% in Q1. Operating profit was KRW 60.54 trillion, up 557% from a year earlier and 61% from the previous quarter, but below the market forecast of KRW 64.31 trillion. Operating margin climbed from 72% to a record 76%. EBITDA totaled KRW 64.56 trillion, and the EBITDA margin rose to 81%.
Net profit increased 1,242% year over year to KRW 93.92 trillion, with a net margin of 118%. That figure included KRW 63.27 trillion in investment-related gains. The source said market analysis tied much of that gain to the sale of Kioxia-related investment interests. For that reason, operating profit, gross margin and operating cash flow provide a clearer read on the quarter’s core earnings quality.
One reason the results fell short of consensus is that SK Hynix has a higher share of revenue coming from HBM. HBM is usually sold under long-term pricing and supply arrangements, which means the company has less earnings sensitivity to the recent sharp increase in spot and short-term contract prices for conventional DRAM and NAND. Those agreements improve earnings stability, but they also reduce upside when prices in the broader memory market rise quickly.
Memory prices kept rising, and Q3 shipments are still expected to increase
Average selling prices across memory products rose about 30% quarter over quarter in Q2, while shipment volume grew by a high single-digit percentage. Price gains remained the main driver of both revenue growth and margin expansion. DRAM accounted for about 73% of product revenue, while NAND contributed about 27%.
The company expects global DRAM demand in 2026 to rise by about the mid-20% range year over year, while NAND demand is projected to increase by about the high-10% range. According to SK Hynix, upgrades in AI server architecture are expanding demand at the same time for HBM, server DRAM and enterprise SSDs. The spread of Agentic AI is also extending memory demand beyond model training into inference, data access and long-term storage.
For Q3, SK Hynix expects DRAM shipments to grow by about 10% from Q2, with NAND shipments up by a low single-digit percentage. The company did not provide specific quarterly guidance for revenue or operating profit. That leaves second-half growth dependent on DRAM and NAND contract prices, the pace of HBM4 volume expansion, and the share of revenue contributed by higher value-added products.
On the supply side, migration to advanced process nodes, higher wafer usage by HBM products and the long lead time required for new capacity are still limiting effective industry supply. At the same time, memory prices and margins are already at very high levels, so the market will be watching whether customer pull-ins could weigh on later demand and how supply-demand balances change once additional capacity begins to come online from 2027.
HBM4 moved into volume ramp, and HBM4E samples were delivered early
SK Hynix said HBM4 shipments started in Q2 and that it plans to raise output more broadly in the second half of the year. The company said the product has reached customer-required operating speeds and remains competitive on both power efficiency and cost.
HBM4E samples built on the 1c nanometer process were delivered to major customers in the first half, ahead of the previously planned second-half schedule. Earlier sample delivery gives the company more time in customer validation and joint development and sets up the path toward mass production in 2027.
SOCAMM2 has also entered full-scale supply. The product targets AI servers and CPU-side demand for high-capacity, low-power memory, complementing HBM, which mainly serves GPUs and AI accelerators. As AI server memory bottlenecks expand from single GPUs to full system configurations, SK Hynix is broadening its growth base from HBM into server DRAM, SOCAMM2 and enterprise SSDs.
On the NAND side, 321-layer products became the largest portion of the company’s NAND output in Q1. SK Hynix plans to raise that share to about 50% of domestic NAND capacity in Korea by the end of 2026. The process transition should lower unit costs and improve supply capacity for high-capacity enterprise SSDs.
Long-term agreements now cover about 10 customers
SK Hynix said it has completed negotiations on long-term supply agreements with about 10 customers, including key accounts, and is still in talks with other major customers. The new round of contracts includes pricing structures designed to address memory price volatility. Some also introduce prepayment or deposit mechanisms to strengthen customer commitment and support capacity investment.
According to the source, the value of these long-term agreements goes beyond locking in orders. They also improve visibility for capital expenditure decisions. In the past, memory makers often expanded capacity based on short-term pricing and inventory cycles, a pattern that could lead to oversupply and falling prices. Multi-year contracts, prepayments and joint development arrangements can shift part of that expansion risk to customers and reduce earnings volatility.
There is a trade-off. When conventional DRAM and NAND prices rise quickly, products sold under locked-in long-term pricing may not capture the full benefit of spot market gains. The gap between stable demand and short-term price upside was already visible this quarter, with revenue and operating profit falling short of the most optimistic expectations.
Capital expenditure heads toward KRW 40 trillion, supported by cash flow
SK Hynix expects 2026 capital expenditure to reach the high end of the KRW 40 trillion range. Spending will focus on moving up mass production at Cheongju M15X, advanced process migration, HBM back-end packaging and the start of expansion at Yongin Fab 1 in early 2027.
Operating cash flow in Q2 totaled KRW 65.71 trillion, while fixed-asset purchases came to KRW 10.67 trillion. On a rough basis, operating cash flow minus fixed-asset purchases implies quarterly free cash flow of about KRW 55.04 trillion.
At the end of Q2, cash and short-term financial assets stood at KRW 87.96 trillion, up KRW 33.63 trillion from Q1. Interest-bearing debt fell to KRW 18.59 trillion, leaving net cash at about KRW 69.37 trillion. The debt-to-equity ratio declined to 7%, while the net debt-to-equity ratio was negative 26%.
That cash generation means the company currently has room to expand capacity, reduce debt and increase shareholder returns at the same time. But depreciation and fixed costs are likely to rise as M15X, Yongin, P&T7 and other long-term production sites expand. The source noted that current margins would face pressure if AI capital spending slows, if Samsung and Micron increase HBM4 supply, or if Chinese memory producers accelerate expansion in conventional DRAM and NAND.
Earnings call: no visible slowdown in AI demand, but valuation debate remains
Management said on the earnings call that it has not seen a clear slowdown in AI investment from major customers. Large technology companies are still expanding data center construction and memory procurement, citing growth in AI services, insufficient existing compute capacity and higher server memory and storage requirements tied to Agentic AI. Management also said better model efficiency could lower AI usage costs and broaden adoption, which in turn could increase total infrastructure demand.
The main message from the call was that SK Hynix remains confident in orders and tight supply conditions over the coming quarters. HBM4 volume expansion in the second half, early HBM4E sampling, long-term agreements with about 10 customers and continued shipment growth in both DRAM and NAND during Q3 all point to AI demand continuing to convert into actual memory orders.
The report eased fears of a sudden reversal in AI memory demand, but it did not settle the valuation debate. Revenue and operating profit below consensus show that the market had already priced in more aggressive assumptions for pricing and earnings. A 76% operating margin also leaves investors focused on how long peak profitability can last.
The source concluded that the next phase of SK Hynix valuation will depend on three factors: whether HBM4 can sustain the company’s technology and market share edge, whether long-term agreements can turn demand visibility into stable returns, and whether expanded capital spending can meet customer needs without creating oversupply. Q2 showed that AI memory demand remains strong. The sharp swing in the share price showed that the market’s focus has shifted from whether profits can still rise to whether record margins can hold.