SK Hynix's Q3 revenue and operating profit both exceed expectations, but net profit unexpectedly falls short; unveils an epic shareholder return plan worth hundreds of trillions of Korean won

SK Hynix delivered a mixed set of results for the third quarter.

The world’s second-largest memory chip manufacturer announced on Wednesday (October 27) that its operating profit in Q3 skyrocketed sevenfold year-on-year to 83.33 trillion KRW, far exceeding market expectations of 76.27 trillion KRW—an outperformance of about 9%. Revenue also reached 104.62 trillion KRW, around 7% higher than analysts' anticipated 97.34 trillion KRW. However, net profit was a big disappointment—recording only 39.53 trillion KRW, far below the projected 60.73 trillion KRW, making it the biggest surprise of this season’s earnings report.

At the same time, SK Hynix launched an unprecedented shareholder return plan, announcing that it will return a total of approximately 100 trillion KRW (about $75 billion) to shareholders in FY2026, covering more than 30 trillion KRW in cash dividends and over 60 trillion KRW in share buybacks and cancellations. For the third quarter, the company will pay a dividend of 20,000 KRW per share, including a special dividend of 10,000 KRW per share from the investment income in Japan’s Kioxia. The company also approved a new 20 trillion KRW share repurchase plan, with about half to be canceled after fulfilling shareholder returns.

Regarding future outlook, SK Hynix maintains an optimistic stance. The company stated that the shortage in memory chip supply will persist until 2030, and that quarterly profits have not yet peaked; the current growth momentum is unlikely to reverse before at least 2027. The company also expects DRAM market demand to increase by around 20% year-over-year in 2027, while NAND growth will be at a high double-digit percentage range.

SK Hynix’s third-quarter revenue of 104.62 trillion KRW and operating profit of 83.33 trillion KRW offer a strong rebuttal to doubts about the sustainability of AI infrastructure investment.

The core driver behind these robust results comes from the dual engine of rising DRAM and NAND prices. The company disclosed that average DRAM prices rose by up to 20% quarter-over-quarter in Q3, while average NAND prices also rose by a high-teen percent. According to Hwang MS, Research Director at Counterpoint Research, “Although HBM has seen price increases, this quarter’s dramatic profit jump is mainly attributed to rapid price gains in traditional DRAM and NAND.”

From a broader perspective, memory spending in AI data centers is expanding rapidly. Macquarie Research data shows that memory now accounts for about one-third of total AI data center costs, a share that’s expected to rise further as HBM prices are projected to more than double by 2027. As Nvidia’s most important HBM supplier, SK Hynix is a core beneficiary of this AI infrastructure arms race.

Despite beating expectations across the operating side, net profit at 39.53 trillion KRW was about 21 trillion KRW lower than the expected 60.73 trillion KRW, a shortfall of 35% and the quarter’s biggest surprise for the market.

Judging from the financial structure, the significant gap between operating and net profit may be due to several overlapping factors: including tax treatment related to Kioxia investments, foreign exchange gains and losses, one-off non-operating items, and accounting impacts from the company’s large-scale shareholder return program.

This discrepancy serves as a reminder to investors that evaluating SK Hynix’s earnings quality requires examining operating profit and net profit separately. The company’s operating profit remains strong, but the large net profit miss could impact market sentiment in the short term.

The scale of this shareholder return program marks a milestone in SK Hynix’s history.

On cash dividends, the total annual cash dividend will exceed 30 trillion KRW. Of the 20,000 KRW per share dividend for Q3, 10,000 KRW reflects the quarter’s operating performance, while the other 10,000 KRW is a special dividend from Kioxia investment gains. The company stated that most of its Kioxia investment profits will be returned to shareholders via special dividends, split into two installments—included in the Q3 dividend and the year-end dividend of 2026.

Regarding share buybacks, the company plans to repurchase and cancel over 60 trillion KRW worth of shares. Of today’s newly approved 20 trillion KRW repurchase plan, about 10 trillion KRW will be canceled after shareholder returns, while the remaining 10 trillion KRW will go to employee compensation. The board will decide future repurchase amounts for each quarter based on market conditions and cash flow.

Overall, this trillion-KRW return commitment both compensates for the previously postponed Solidigm U.S. IPO (due to shareholder opposition and regulatory review) and expresses the company’s full confidence in its long-term profitability.

SK Hynix’s industry outlook is decidedly firm—the shortage of memory chips is expected to last throughout the latter half of the 2020s, until 2030.

As for demand projections, the company expects DRAM market demand to grow by around 20% year-on-year in 2027, while NAND demand will increase by a high double-digit percentage, showing both core product lines are in a strong demand cycle.

However, the company also cited a concern: With surging memory prices and growing shortages, PC and smartphone shipments are expected to decline. This means there’s some suppressed demand on the consumer electronics side and the price elasticity boundary of the end market is being tested.

From a broader industry perspective, SK Hynix, along with competitors Samsung Electronics and Micron, are shifting capacity towards HBM, tightening supply for traditional DRAM and NAND, creating structural support for higher prices. Against the backdrop of continuous investment in AI data centers, this supply-demand structure is unlikely to reverse in the near future.