Original | Odaily Planet Daily (@OdailyChina)
Author | Azuma (@azuma_eth)
On July 29, Beijing time, SK Hynix announced its financial results for the second quarter of 2026.
The financial report data shows that SK Hynix achieved revenue of 79.32 trillion won in the second quarter, a year-on-year increase of 257% and a quarter-on-quarter increase of 51%; operating profit was 60.54 trillion won, a year-on-year increase of 557% and a quarter-on-quarter increase of 61%. The operating profit margin further rose to 76%, reaching a historical high; if the one-time investment income of 62.166 trillion won from the sale of part of its equity in Kioxia is included, the company's net profit could reach 93.92 trillion won.
In any industry, this would be considered a report card shocking enough to stun the market.
However, the initial reaction from the capital market was completely opposite. Due to both revenue (actual 79.32 trillion won, market expectation 84 trillion won) and operating profit (actual 60.54 trillion won, market expectation 64 trillion won) slightly falling short of previous market expectations, coupled with SK Hynix's stock price having already corrected over 40% cumulatively in the previous month, under intertwined pessimistic sentiment, SK Hynix's US-listed ADR price fell by about 9% in after-hours trading following the earnings release (it had already plunged nearly 9% at yesterday's US market close). However, as investors gradually digested the details of the report, the stock price quickly recovered all its losses and even turned positive.
At the same time, after the Korean stock market opened this morning, SK Hynix's stock price first opened higher, rising by up to 4%, but then gradually weakened. As of 10:00, it had fallen again by over 9%.
A record-breaking financial report: why was it first sold off frantically, then rapidly recovered its losses, and then suddenly turned downward again? The answer perhaps lies in the fact that what the market truly cares about is far more than just how much money SK Hynix made in the second quarter, but how to reprice the future growth space — and obviously, bulls and bears have not yet reached a consensus on this point.
The Most Profitable Quarter Ever: Why Still Below Expectations?
Looking solely at the numbers, SK Hynix remains in one of its most profitable phases.
In the second quarter, the company's gross profit margin reached 83%, and its operating profit margin reached 76%. This means that for every 100 won of products sold, about 76 won is converted into operating profit. This level of profitability even exceeds that of the vast majority of global semiconductor manufacturers. At the same time, the company's cash and short-term financial assets continued to grow rapidly to 87.96 trillion won, and its net cash position further expanded, providing ample ammunition for subsequent capacity expansion.
But the problem is, the market had already set its expectations much higher. Previously, market consensus expected SK Hynix's second-quarter revenue to be around 84 trillion won and operating profit around 64 trillion won. The final actual figures were about 5% and 6% lower than expectations, respectively.
For a company, such a deviation is not significant. However, for SK Hynix, which has been labeled the "biggest beneficiary of AI" and whose valuation is built on high growth expectations, any data falling short of expectations will be amplified by the market.
Upon closer inspection of the financial report, this "miss" is actually not due to a deterioration in market demand, but rather stems more from changes in the profit structure.
First, a counterintuitive point is that the continuous increase in the proportion of HBM products has actually weakened profit elasticity. Over the past few quarters, an important driver for the rapid expansion of profits across the memory industry has been the continuous rise in spot prices for traditional DRAM and NAND. However, because SK Hynix itself has a much higher proportion of HBM revenue than its peers, and HBM is more often priced under long-term supply agreements (LTAs), it cannot fully enjoy all the benefits from the rapid rise in spot prices like ordinary DRAM.
Furthermore, SK Hynix disclosed that the average selling price (ASP) of ordinary DRAM in the second quarter increased by approximately 30% quarter-on-quarter. Although growth was maintained, it was significantly lower than the first quarter; NAND ASP increased by 50%-55% quarter-on-quarter, also slowing down compared to the first quarter.
In other words, more AI products were sold, but the pace of price increases for traditional products slowed down; long-term orders locked in future revenue but also limited short-term profit elasticity. This is also why record-breaking profits still did not meet the numbers the market had previously "fantasized" about.
Is the Memory Super Cycle Still On? How the Earnings Report Answers
If the operating data answers how much money SK Hynix made in the second quarter, then the information provided by management in the financial report and subsequent conference call answers another question the market cares more about — Has the AI memory super cycle already begun to cool down?
From the current perspective, the answer SK Hynix provides remains optimistic.
First, regarding the demand outlook, the company did not release any clear signals of caution as the market had feared. SK Hynix expects that global DRAM demand in 2026 will still grow year-on-year in the mid-20% range (Mid-20%), and NAND demand will grow year-on-year in the high-teen percentage range (High-Teen%). Management also stated during the post-earnings conference call that they have not yet observed any signs of a slowdown in AI investment and expect AI infrastructure investment to maintain steady growth even after 2027.
Secondly, another key piece of information worth noting is the further advancement of long-term supply agreements (LTAs). SK Hynix disclosed that the company has currently completed long-term supply agreement negotiations with about 10 customers and is still in continuous discussions with other major industry customers. The new generation of long-term agreements will adopt pricing mechanisms that can cope with price fluctuations and ensure contract performance through corresponding financial mechanisms, thereby enhancing the stability and predictability of future demand.
For the memory industry, this change is significant. In the past, products like DRAM and NAND relied more on spot market pricing, with severe price fluctuations causing the entire industry to remain stuck with the label of a "cyclical stock." However, as the proportion of HBM products increases in the AI era, more and more large cloud providers are beginning to lock in supply capacity for several years in advance. Supply-demand relationships are also gradually evolving from short-term games to longer-term, more stable cooperative partnerships. Although long-term agreements, like this quarter, somewhat compress profit elasticity during phases of rapid spot price increases, what is gained in return is higher revenue certainty for the coming years.
Thirdly, SK Hynix's progress on next-generation products has not encountered any surprises. The financial report shows that SK Hynix began shipping HBM4 products in the second quarter and plans to fully ramp up volume in the second half of the year; the next-generation HBM4E has also completed sampling to major customers in the first half of the year. Additionally, SOCAMM2 products based on the 1cnm process have officially begun shipping.
This means SK Hynix's product cadence for the next-generation AI GPU platforms remains leading. Considering that HBM4 will be a key companion memory for next-generation AI platforms like NVIDIA's Rubin, its smooth ramp-up also indicates that the company currently firmly holds a leading position in the high-end AI memory market.
Finally, in terms of capital expenditure (CapEx), which most accurately reflects management's true judgment, SK Hynix not only maintained its expectation for 2026 capital expenditure to be in the high range of over 40 trillion won, but also plans to advance the mass production of the M15X fab ahead of schedule, accelerate the construction of Phase 1 of the Yongin Fab, and continue to advance medium- to long-term projects such as P&T7, M17, and new semiconductor clusters in South Korea.
For a company that has experienced multiple memory cycles, such an aggressive capacity expansion plan is, in itself, a statement — management still believes that AI memory demand in the coming years is sufficient to absorb these new capacities.
The Focal Point of Bulls vs. Bears
Today's SK Hynix has become a core battleground for bulls and bears in the AI memory cycle.
For bulls, the record profits, continuously expanding HBM demand, and the AI infrastructure investment cycle still support the company's long-term growth thesis. For bears, the earnings miss, valuation pressure, and market concerns about the sustainability of AI capital expenditures are also amplifying short-term adjustment pressures. Bulls are betting that AI infrastructure expansion will continue, while bears worry that the market has already priced in future growth.
Heavy is the head that wears the crown. SK Hynix enjoys the valuation of an industry leader and must inevitably bear the pressure of a leader — when the market already believes your story, excellent performance is no longer enough; only continuously surpassing higher expectations can drive valuations further upward.
