Kioxia has released its second-quarter results for fiscal year 2026 (July to September): revenue came in at 2.4800 trillion yen, up 40.3% quarter-on-quarter; IFRS operating profit reached 1.9947 trillion yen, up 57.1% quarter-on-quarter and above the market expectation of 1.95 trillion yen; net profit attributable to shareholders was 1.3557 trillion yen, up 61.0% quarter-on-quarter but slightly below the expected 1.37 trillion yen. Converted at the quarterly average exchange rate of 161 yen per dollar, revenue amounted to approximately $15.4 billion. The company attributed the revenue growth primarily to a substantial increase in average selling prices (ASP) driven by generative AI data center demand, as well as higher bit shipments.
Breaking down by application, SSD and storage business revenue totaled 1.6160 trillion yen, up 441.3 billion yen quarter-on-quarter, while smart device business revenue reached 788.9 billion yen, up 263.2 billion yen quarter-on-quarter; the quarterly operating margin stood at approximately 80%.
The real shortfall lies in the guidance. Kioxia expects third-quarter (October to December) revenue of 2.50 trillion yen, operating profit of 1.9950 trillion yen, and net profit attributable to shareholders of 1.3600 trillion yen, representing quarter-on-quarter growth of merely 0.8%, 0.0%, and 0.3% respectively — essentially flat compared with the second quarter. However, market expectations were 2.90 trillion, 2.35 trillion, and 1.62 trillion yen respectively — meaning the guidance came in 14% to 16% below expectations. The company attributed this to negative factors including exchange rates, assuming an exchange rate of 157 yen per dollar for the third quarter, which represents a 4-yen appreciation from 161 yen in the second quarter, while also stating that data center demand is expected to remain strong.
The company did not disclose progress on long-term supply agreements (LTA) with hyperscale customers or visibility into enterprise SSD orders in its earnings release, and these two points were precisely the focus of investor attention during the earnings call.
On shareholder returns, the company announced its first dividend since listing: an interim dividend of 90 yen per share, with a record date of September 30 and payment starting December 8. In the first half, the company also used 800.3 billion yen for share buybacks and prepaid 523.1 billion yen in long-term borrowings, with the equity ratio rising from 37.9% at the end of March to 49.8%.
As the market worries about whether large technology companies can continue funding AI research and development, global chipmakers have faced a brutal selloff, and Kioxia's stock has been caught up in the turmoil. Additionally, given the market advantages of South Korean competitors and the growing threat from China, Kioxia also faces fierce competition. As of Thursday, the company's Tokyo-listed shares had fallen 60% from their June high, making it the worst-performing major global memory and storage stock in Citic CLSA's portfolio over the same period.
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