SK hynix (SKHY) Q3 2026 earnings review
SK hynix sales top 100 trillion won, but net profit falls
SK hynix, the Korean memory-chip maker, sold its chips at much higher prices while losing money on its investments. Sales passed 100 trillion won for the first time, and finance chief Kim Woo-Hyun said prices rose by more than a quarter for both DRAM and NAND. Net profit still fell because the company wrote down investment assets and booked currency losses. For the fourth quarter the plan shifts from price to volume, with DRAM shipments set to rise by a mid-20s percentage.
| Revenue | 104.6 trillion won +32% from last quarter |
|---|---|
| Operating profit as a share of sales | 80% 76% last quarter |
| Net profit | 39.8 trillion won −58% from last quarter |
| Fourth-quarter DRAM shipment plan | Mid-20s % growth about 10% this quarter |
⚖️ Verdict: 🟢 Bullish
The story got better because SK hynix turned a price boom into contracts: 14 customers have now signed supply agreements covering more than half of its 2027 and 2028 output. One caution: the record profit still came from prices rising faster than volume, and those contracts set price ranges rather than fixed prices, so a weaker market would still cut revenue.
The question now is whether next year's much larger spending builds plants that run full or plants that wait for demand. Either the contracts fill the new capacity and prices hold, or extra supply from SK hynix and its rivals meets shrinking PC and phone demand and prices turn. The size of the 2027 spending plan, due with the fourth-quarter results in January, will tell.
🐂 Bull Case
Higher Prices, Not Volume, Drove the Quarter
SK hynix sells two kinds of memory chip: DRAM, the working memory in servers and phones, and NAND, the storage chips inside solid-state drives. This quarter the money came from price. Finance chief Kim Woo-Hyun said DRAM prices rose by a high-20s percentage from last quarter, while shipments grew about 10%.
NAND prices rose by a mid-20s percentage, but Kim said shipments fell slightly because the Korean chipmaker steered sales toward 321-layer enterprise drives, its newest storage chips for data centres. A stronger won then cut into the gain, so revenue in won rose less than price and volume together imply.
- DRAM revenue: about 78 trillion won by our math, up 36% from last quarter
- NAND revenue: about 25 trillion won by our math, up 17%
- DRAM share of total revenue: 75%, from 73% a quarter earlier
The fourth-quarter plan shifts the source of growth to volume. Kim expects DRAM shipments to rise by a mid-20s percentage from the third quarter as the 1c process, its newest production technology, spreads and the M15X plant reaches full capacity. That would be the largest volume step in the quarters we track.
What to watch: DRAM shipment growth in the January results, set against the mid-20s plan. Reaching it would show SK hynix can grow on volume once prices stop rising.
Costs Rose Far Slower Than Prices
The cost of making the chips (cost of goods sold) rose 12% from last quarter while revenue rose 32%. Almost every extra won of sales therefore became profit, and the operating margin reached a record. By our math cost of goods fell to 14.3% of revenue from 16.8% a quarter earlier.
Selling and administrative costs fell to 6.0% of revenue from 6.9%, so both cost lines moved the same way. The company said the stronger won worked against it, because it sells in dollars and reports in won. Prices still rose much faster than costs.
What to watch: cost of goods as a share of revenue in the fourth quarter, when volume rather than price is set to carry growth. A rising share would mean the extra chips come at lower prices or at a higher cost per bit.
Half of 2027–28 Output Is Under Contract
A long-term agreement (LTA) is a multi-year supply contract in which a customer commits to buy set volumes. SK hynix now has them with 14 major customers, including the big cloud providers, up from about 10 three months ago. The company said the volumes cover "more than 50% of total production capacity for 2027 and 2028".
Prices inside these contracts are not fixed. The release describes "a mechanism that reflects market conditions within a price range agreed upon with customers", and Kim said deposits now back the purchase plans. On the call an executive went further: DRAM and HBM volumes through 2029 are "effectively sold out".
Chief executive Kwak Noh-Jung said the business now has "earnings stability and mid-to-long term demand visibility". The deposits do make a downturn harder for customers to walk away from. But the price ranges mean a falling market still lowers revenue, only within a band SK hynix has not disclosed.
What to watch: the number of contracted customers and the covered share in January, plus any disclosure of the price bands. A wide band would mean the contracts protect volume more than price.
HBM4 Becomes the Main HBM Product in Q4
HBM is high-bandwidth memory, the stacked DRAM packaged next to AI processors, and HBM4 is the newest generation. Volume shipments began this quarter, and Kim said HBM4 will pass HBM3E in both shipment volume and revenue in the fourth quarter. SK hynix has also finished next year's volume and price talks with major customers.
An executive said on the call that HBM4 "already exceeded its planned yield", so the target was raised, and that customer requirements are "more than double that of what we can supply today". Kim wrote that "we expect the profitability gap between HBM and conventional DRAM to narrow meaningfully" next year, which he tied to HBM4's higher value.
What to watch: the HBM4 share of HBM shipments and revenue in January. A crossover on schedule would confirm the 2027 contracts rest on a product already shipping at scale.
🐻 Bear Case
An Investment Write-Down Halved Net Profit
Kwak told shareholders that SK hynix shares "the majority of the gains from successful strategic investments with our shareholders", and this quarter's special dividend passes on the Kioxia gain. Yet the same quarter booked a 22.9 trillion won loss on investment assets and an 11.6 trillion won currency loss. The materials do not name the assets.
Net profit fell 58% from last quarter even though operating profit rose 38%. Three months earlier the swing ran the other way, when a 63 trillion won gain on investment assets lifted net profit above operating profit. So the bottom line now moves with asset markets as much as with chip sales.
What to watch: the non-operating line in the fourth quarter and the name of the asset behind the loss. A second quarter of losses would mean the investment portfolio weighs on reported earnings while the special-dividend base counts only realised gains.
Capital Spending Jumps Next Year, Solidigm Included
SK hynix spent 12.7 trillion won on plant and equipment this quarter, 12% of revenue. Kim said 2027 spending will "increase significantly compared to 2026" as the first Yongin fab ramps, new equipment arrives and infrastructure work speeds up at home and abroad. He gave no figure.
Solidigm, the group's NAND storage subsidiary, had planned to raise outside money for its own plants through a listing. Kwak said of that listing: "We have therefore discontinued our review", after weighing market conditions, so SK hynix funds Solidigm's expansion itself.
By our math the 2026 plan set in July leaves about 18 trillion won for the fourth quarter alone, roughly 40% more than this quarter. An executive argued that "more investment or more fabs does not necessarily mean more supply", because "clean rooms will be opened in phases". But the cash leaves either way, and memory makers have over-built before.
What to watch: the 2027 spending figure in January and whether 2026 lands inside the 48–50 trillion won plan. A number far above this year's would test the promise that Yongin fills only as demand arrives.
Rising Memory Prices Shrink PC and Phone Demand
SK hynix's own outlook says PC and smartphone shipments will "decrease due to cost burdens from rising memory prices and supply shortages". A year ago PC and mobile together took 25% of DRAM revenue, the last breakdown the company printed in figures, so the memory maker is pricing part of its own market out.
Management expects AI infrastructure demand to "more than offset this decline", and an executive pointed to cloud providers' revenue growing 30% to 80% with order backlogs up two to five times. But those are customers' numbers, and the same executive allowed that "there is some discussion about pacing investment in AI". Demand resting on a few cloud budgets is narrower than demand spread across consumer devices.
What to watch: the DRAM revenue split by application in the fourth-quarter report, alongside the 2027 view of mid-20s DRAM demand growth. A falling PC and mobile share with that demand figure intact would confirm AI servers absorb what consumers drop.
👓 Other Themes
Shareholder Returns Set at 100 Trillion Won
SK hynix will return about 100 trillion won for 2026. The plan has cash dividends of 30 trillion won or more and share buybacks and cancellations of 60 trillion or more. That includes the 40 trillion buyback finished last week, after the quarter closed. By our math the total equals 86% of free cash flow earned so far this year. A further 10 trillion of shares bought this quarter goes to employee pay and sits outside the total.
Customers Are Asking for Shorter HBM Stacks
Some customers are moving from 12-high HBM4 to 8-high HBM4E to get more memory cubes from a limited supply, an executive said on the call. Lower stacks do not cut bit demand in proportion, because each die holds more, but they need more base dies and back-end processing. SK hynix has built this into its supply plan and left its medium-term HBM outlook unchanged.
💲 Other KPIs
Net cash — cash minus borrowings — rose 29 trillion won in the quarter by our math. The company added 26.5 trillion of cash and repaid 2.8 trillion of debt. It has risen every quarter since SK hynix first moved into net cash a year ago, and now sits just short of the 100 trillion won target set in April.
Free cash flow — operating cash flow minus plant spending — was 40% of revenue, down from 69% last quarter. Operating cash flow of 54.8 trillion won came in well below operating profit. Customers owed 11.3 trillion more at quarter-end than three months earlier, which explains part of the gap. The cash still covers the quarter's dividends and buybacks.
Inventories rose 7.6% from last quarter, far slower than revenue. By our math stock covers about 118 days of cost of goods, down from 123 days. Inventory has stayed between 13 and 19 trillion won for five quarters while revenue quadrupled, which fits a company that says it cannot meet demand.
🔮 Guidance
New. The plan calls for DRAM volume to rise by a mid-20s percentage from the third quarter, more than double this quarter's roughly 10%. Kim attributes it to the 1c process spreading and the M15X plant reaching full capacity by year-end. The record on DRAM volume plans is exact: in every quarter where both the plan and the result are printed, the result landed on the stated figure.
New. Kim plans NAND shipments to rise by a mid-single-digit percentage after a slight fall this quarter, as 321-layer production reaches more than half of domestic capacity. The NAND record is loose: this quarter's planned small rise ended as a small fall, and the first quarter's planned slight decrease became about 10%.
New. Capital spending next year will "increase significantly compared to 2026", with equipment for leading-edge nodes, the first Yongin fab and infrastructure at home and abroad. No figure yet. By our math the 2026 plan set in July leaves about 18 trillion won for the fourth quarter, about 40% more than this quarter, so the step-up starts now.
Raised. The August plan of a 40 trillion won buyback becomes about 100 trillion of total returns for the year. This quarter's part is 24 trillion won, mostly dividends, half of them a special payout from the Kioxia stake. Dividends will follow results, special dividends will follow realised investment gains, and buybacks continue every quarter.
New. SK hynix sees achievable demand growing at the same pace as this year: mid-20s for DRAM bits, high teens for NAND. "Achievable" means limited by what the industry can make, so these are supply figures as much as demand figures, and Kim said customers will not get all they ask for. On the company's view the shortage runs through 2030.
❓ Key Questions
How large is the 2027 spending plan, and is 2026 still 48–50 trillion?
The company said 2027 spending rises significantly but gave no number and did not restate the July plan for this year. Both decide how much of the 100 trillion won of returns is repeatable.
Which investment assets lost 22.9 trillion won in value?
The quarter's largest non-operating item is unnamed. If it is the Kioxia stake, the special dividend shares a gain the market has since reduced.
How wide are the price ranges inside the long-term agreements?
Contracts covering half of 2027–28 output protect volume, but prices move within agreed bands. The width of the bands says how much revenue a price fall would still take.
How will Solidigm's expansion be funded now the listing is off?
The listing was meant to raise outside money for Solidigm's plants. Without it the parent pays, on top of its own rising spending.
What share of HBM revenue did HBM4 reach this quarter?
Management expects HBM4 to pass HBM3E in the fourth quarter but gave no third-quarter share, so the starting point for that crossover is unknown.