SK Hynix posts record results on AI demand

SK Hynix reported record second-quarter results for 2026, propelled by rising memory-chip contract prices and demand from AI server operators, but its revenue and operating profit fell short of the most optimistic market forecasts. The gap, the company said, partly reflected its growing sales of high-bandwidth memory, or HBM, which is commonly sold through longer-term agreements that do not immediately capture sharp increases in spot prices for conventional memory.

The South Korean chipmaker posted revenue of 79.32 trillion won and operating profit of 60.54 trillion won for the quarter. Those were both company records, according to SK Hynix, yet below the 84.17 trillion won revenue consensus and 64.31 trillion won operating-profit consensus cited in the earnings materials.

The market reaction underscored concern over whether the memory upcycle can keep delivering upside surprises after an extraordinary run in pricing and margins. SK Hynix shares fell 14.65% in the session before the release, then rose more than 4% after the results were announced before reversing following the earnings call. The stock was down more than 11% at the point cited in the materials.

Record margins follow 30% rise in memory prices

SK Hynix said its blended memory average selling price rose by about 30% from the first quarter, while bit shipments increased by a high single-digit percentage. DRAM accounted for roughly 73% of product revenue, with NAND flash representing the remaining 27%.

That pricing environment lifted gross profit to 65.99 trillion won, up 451% from a year earlier and 58% from the prior quarter. Gross margin reached 83%, compared with 79% in the first quarter.

Operating margin climbed to a record 76%, from 72% in the previous quarter, while EBITDA reached 64.56 trillion won and its margin increased to 81%. The figures show how rapidly higher contract prices have translated into earnings for suppliers able to deliver advanced server memory at scale.

Net profit was 93.92 trillion won, up 1,242% year on year. The figure included 63.27 trillion won in gains related to investment assets, which lifted net margin to 118%. Pretax profit came to 122 trillion won, while corporate tax expense totaled 28.7 trillion won.

The unusually large contribution from investment-related gains means operating profit remains the cleaner measure of the quarter’s performance in memory manufacturing. Even on that basis, SK Hynix’s earnings were well above levels typically seen in the cyclical chip sector.

HBM contracts temper exposure to spot-price spikes

SK Hynix attributed part of the earnings miss against consensus to a higher proportion of HBM revenue. HBM stacks memory chips vertically to supply the high data throughput required by AI accelerators and advanced server systems.

Unlike standard DRAM and NAND products, HBM is generally supplied through longer-term arrangements, where pricing is set earlier in the procurement cycle. That structure gives SK Hynix more predictable orders and can support capacity planning, but it also reduces the company’s ability to immediately reprice product during a sudden surge in short-term memory prices.

The company said it completed negotiations for long-term supply agreements with about 10 customers. Some contracts include pricing structures intended to manage memory-price volatility, as well as prepayment or deposit mechanisms in certain cases.

Those arrangements give SK Hynix greater visibility over demand for high-value memory products while placing some limits on near-term profit expansion when conventional memory pricing accelerates. The trade-off has become more visible as DRAM and NAND contract prices rise sharply.

HBM4 and advanced NAND output expand

SK Hynix began shipments of HBM4 in the second quarter and plans to raise output during the second half of the year. It also delivered samples of 1c-nanometer-process HBM4E to major customers during the first half, ahead of its previous schedule for the second half. Mass production of HBM4E remains targeted for 2027.

The company also said SOCAMM2 had entered full-scale supply. The product adds another memory option for AI servers alongside server DRAM, HBM and enterprise solid-state drives.

In NAND, SK Hynix said its 321-layer products became the largest portion of output in the first quarter. It plans to increase their share to around 50% of domestic NAND production capacity by the end of 2026. Higher-layer NAND allows more storage to be packed into a chip, a capability that is increasingly relevant for enterprise systems handling AI training data, inference workloads and longer-term storage.

For the third quarter, SK Hynix forecast DRAM bit shipments would rise by about 10% from the second quarter. NAND shipments are expected to increase by a low single-digit percentage. The company did not issue quarterly revenue or operating-profit guidance, leaving the outcome dependent on contract pricing, the pace of the HBM4 ramp and the share of premium products in total sales.

Expansion plans test the durability of margins

SK Hynix expects capital expenditure of 40 trillion won in 2026. The spending is directed toward additional capacity, advanced process migrations, HBM back-end packaging and preparations for the Cheongju M15X production ramp. The company is also preparing for the Yongin Fab 1 expansion, which is scheduled to begin in early 2027.

Second-quarter operating cash flow was 65.71 trillion won, while purchases of property, plant and equipment totaled 10.67 trillion won. On that measure, quarterly free cash flow was approximately 55.04 trillion won.

Cash and short-term financial assets rose to 87.96 trillion won at the end of the quarter, an increase of 33.63 trillion won from the first quarter. Interest-bearing debt declined to 18.59 trillion won, leaving net cash of about 69.37 trillion won. The company reported a debt-to-equity ratio of 7% and a net debt-to-equity ratio of negative 26%.

That balance-sheet position gives SK Hynix considerable room to fund new plants and packaging capacity without relying heavily on borrowing. The larger question for traders is whether industry supply additions expected from 2027 will arrive while current pricing remains elevated.

SK Hynix expects global DRAM bit demand to grow by a mid-teens percentage in 2026, while NAND bit demand is forecast to rise by a high-teens percentage. The company cited AI server upgrades as the main demand driver across HBM, server DRAM and enterprise SSDs, extending the memory cycle beyond AI model training into inference systems and data storage.