A recent report from CITIC SEC indicates that the stock price pullback for major global memory companies in June and July was not driven by weak earnings, but rather a collective release of market concerns following the peak of price increases. Overall, second-quarter results for these companies met expectations, with products still in an upward pricing cycle and AI-driven growth steadily boosting the share of data center revenue.
Looking ahead, while the pace of price increases for memory products is slowing, the industry is expected to remain in a supply-constrained state through 2027, which should provide solid support for gross margins and profitability across the supply chain. Regarding the highly anticipated Long-Term Agreements (LTAs), companies are currently securing customer demand through 3-to-5-year LTAs. Flexible pricing mechanisms and price floors in these deals are expected to reduce earnings volatility and support higher valuations. Analysts recommend focusing on HDD, DRAM, and NAND segments.
Revenue continues to grow strongly, driven primarily by Average Selling Price (ASP). For the second quarter, revenue growth across relevant companies ranged from 12% to 76% quarter-over-quarter. NAND-focused companies significantly outperformed DRAM companies, followed by HDD companies. The sequential revenue growth was largely driven by ASP increases. Although memory price increases are expected to slow in the second quarter of 2026, sequential growth remains substantial. DRAM saw sequential price increases of over 30% to 45%, NAND saw increases of over 50%, and HDD saw high single-digit percentage increases.
Data center revenue is steadily increasing as a share of total revenue. Financial data for the second quarter shows a consistent rise in data center revenue contribution across companies. Micron Technology's data center DRAM and NAND revenue reached 61% of total revenue in the first quarter of 2026, while consumer segment revenue fell to 28%. SK Hynix's data center DRAM revenue (including HBM and traditional server DRAM) accounted for approximately 70% of total revenue, with mobile and consumer segments falling to around 20%. In the NAND segment, SanDisk and Kioxia saw their data center revenue shares rise to 33% and 41%, respectively, in the second quarter of 2026. In the HDD segment, Western Digital and Seagate maintained stable data center revenue shares of 80% to 90% in the second quarter of 2026.
Long-Term Agreements (LTAs) with Cloud Service Providers (CSPs) are continuing to close, reflecting high industry activity. Driven by AI and data center demand, major memory manufacturers are securing capacity through 3-to-5-year LTAs, with committed capacity under these agreements typically exceeding 50% (for companies like SanDisk, Samsung, and Kioxia). Most manufacturers employ flexible pricing mechanisms in their LTAs, with pricing differentiated based on customer situation and product. Some companies have set minimum prices to ensure future profitability. The signing of LTAs is primarily occurring with data center CSPs, reflecting the upward trend in AI and data center demand. Regarding industry outlook, all seven companies reported a highly consistent view: the memory industry is expected to remain in a supply-demand imbalance or even a widening gap for the next 1-2 years (DRAM/NAND through 2027, HBM through 2028 and beyond), with AI-related categories like HBM potentially facing longer shortages.
Comments