SK Hynix (SKHY.US) Q3 revenue surpasses 100 trillion KRW for the first time, why did net profit drop by half quarter-on-quarter?

According to Woofun AI, on October 28, SK hynix (SKHY.US) released its third-quarter financial report, presenting a complex picture of diverging revenue and net profit. Although demand for AI servers drove revenue and operating profit to new quarterly records—both surpassing LSEG’s consolidated forecasts of 98.34 trillion and 76.72 trillion KRW respectively—net profit fell short of consensus expectations compiled by data provider FnGuide, drawing market attention.

The revenue side showed explosive growth, reaching 104.62 trillion KRW for the quarter, surpassing the 100 trillion KRW threshold for the first time in a single quarter. This figure is even higher than the company's total projected full-year revenue for 2025 (97.15 trillion KRW). Looking back at last year’s final quarter, SK hynix’s revenue was only 32.83 trillion KRW; after three consecutive quarters of growth, the latest figure more than triples that amount.

This structural shift was driven by rising prices for primary products due to increased AI storage demand and improved competitiveness of high value-added products. In terms of product mix, sales of DDR5 for servers increased significantly, shipments of the next-generation high-bandwidth memory HBM4 officially began, and sales of enterprise-grade SSDs for data centers are also expanding.

It is noteworthy that HBM is not the only growth engine; the combined demand for high-speed memory and other types of storage devices for servers also supports performance. In terms of order locking, SK hynix has signed long-term agreements with 14 major clients, securing amounts equivalent to over half of its total capacity for 2027 and 2028. These five-year contracts reflect market conditions within the agreed price ranges and are not permanently fixed at today’s prices. Regarding capacity planning, the company plans to ramp up production at the M15X factory by year-end to boost HBM4 supply, and expects HBM4 shipments and revenue in the fourth quarter to surpass those of the previous generation HBM3E. However, actual results still await verification in subsequent financial reports.

The sharp rise in profit margins further demonstrates operational strength. Calculated as operating profit divided by revenue, a year ago 47 KRW of every 100 KRW sold was operating profit; in the latest quarter, this figure climbed to 80 KRW. Operating profit, after deducting operating costs and expenses, provides a window to observe core operations. In recent quarters, both revenue and operating profit have risen in tandem, with the latter growing even faster—indicating increasing profits per revenue unit.

However, net profit performed quite differently. Third-quarter operating profit reached 83.33 trillion KRW, up 38% quarter-on-quarter, but net profit was only 39.78 trillion KRW—a 58% drop from the second quarter’s 93.92 trillion KRW. This difference was not due to weakening chip sales, but rather non-operating factors such as investment gains. Yonhap News TV, a subsidiary of Yonhap News Agency, previously reported that second-quarter net profit included investment income from Japanese memory chip company Kioxia, resulting in an abnormally high base. While the third-quarter announcement mentioned sharing Kioxia investment gains through a special dividend, it did not fully detail non-operating items or tax changes, so the net profit decline cannot be attributed solely to this. What is clear is that the previous quarter’s investment gains created a unique basis for comparison, while operating profits continued to grow this quarter.

According to data compiled by Woofun AI, these financial fluctuations reflect the significant impact of non-recurring gains and losses on net profit.

Shareholder return plans have become another focus. SK hynix stated that it will return approximately 100 trillion KRW to shareholders in fiscal 2026, including no less than 30 trillion KRW in cash dividends and no less than 60 trillion KRW in share buybacks and cancellations. The previously announced 40 trillion KRW buyback was completed last week, with the relevant shares set to be canceled soon. The board also decided on a new buyback that excludes shares allocated for employee compensation from the total shareholder return amount. For dividends, half of the per-share payout for the third quarter is attributed to improved operating performance, and the other half is a special dividend sharing Kioxia investment gains.

This arrangement reflects the company’s confidence in its core business growth while also demonstrating its strategy to enhance shareholder value via investment returns. With the scale-up of HBM4 and long-term orders locked in, SK hynix is well positioned in the upward trend of the storage cycle, but volatility in net profit reminds investors to distinguish between recurring and non-recurring income when assessing long-term profitability. This represents another important practice in transparency of financial disclosures and shareholder return mechanisms among semiconductor giants following the AI-driven surge in storage demand.