SK hynix held its second-quarter earnings conference call on July 29, where management addressed key market concerns. The company's Q2 operating profit surged 557% year-on-year to 6.054 trillion won, while revenue jumped 257% to 7.93 trillion won. Both figures hit record highs but fell short of market expectations, causing its ADR to drop over 5% in after-hours trading. Following the call, however, SK hynix shares turned positive in pre-market trading, rising over 2%, while Samsung Electronics gained nearly 3%, signaling a clear improvement in market sentiment.
Where the focus lies
During the call, SK hynix explicitly stated, "We see no signs of a slowdown in AI investment. AI infrastructure spending is expected to remain robust well beyond 2027." This statement directly addresses the core market anxiety—whether AI capital expenditure can sustain the high demand for HBM. Management's answer was a definitive yes.
Long-term contracts: 5-year commitments, no excess supply risk
SK hynix pledged to "strengthen its leadership in HBM through long-term contracts." Management disclosed that the terms of these contracts "vary, but are typically for five years." The company has already signed long-term agreements with around ten clients and is currently negotiating with other major customers. Addressing concerns that these locked-in contracts could lead to future oversupply, management clarified, "We do not expect long-term contracts to result in oversupply."
Accelerated shipments in H2, HBM4E mass production in 2027
On volume, SK hynix expects "bit shipment growth in the second half of the year to be higher than in the first half," signaling an acceleration. Management also explained the pressure on average selling prices in Q2, attributing it to "the product sales mix affecting the average selling price," rather than weak demand. On the product roadmap, SK hynix confirmed it is "on track to mass-produce HBM4E starting in 2027" and has already begun "discussions with major clients for HBM supply in 2027." HBM4E is the enhanced version of HBM4, representing the next generation of HBM technology.
Earnings context: The miss was already priced in
SK hynix's Q2 operating profit of 6.054 trillion won, up 557% year-on-year, with an operating margin of approximately 76%, both set new records. However, the revenue of 7.9 trillion won and operating profit fell short of the consensus (revenue of about 8.4 trillion won, operating profit of about 6.47 trillion won). The two main reasons for the profit miss were a weaker HBM product mix and a decline in DRAM average selling prices, partly due to a long-term supply agreement with Microsoft. Citigroup noted, "Given that buy-side operating profit expectations had already been revised down to between 6.0 trillion and 6.2 trillion won, the actual result was at the lower end of that range, but not significantly below market expectations." Yuanta Securities Korea Research Center also pointed out that many brokerages had lowered their earnings forecasts to just over 6.0 trillion won in the past two to three weeks, indicating that the miss was not new negative news and had already been largely priced in. Following the earnings release, SK hynix's ADR initially fell over 5% in after-hours trading but later recovered. Korean shares turned to a gain of over 2% in pre-market trading, with Samsung Electronics rising nearly 3% and the KOSPI index opening 1.1% higher.
What the market is still waiting for
Yuanta Securities Korea Research Center outlined five key topics the market was focused on before the call: the timeline and customer demand for HBM4 and HBM4E; the outlook for AI memory demand in the second half of 2026; updates on long-term supply agreements with major clients like NVIDIA; DRAM and NAND price trends and gross margin outlook; and the industry supply-demand balance and capital expenditure plans for 2027. Based on management's disclosures, the three core issues of AI demand outlook, HBM4E mass production timeline, and long-term contracts not causing oversupply have received positive responses. More details on DRAM/NAND price trends and the 2027 supply-demand landscape are still pending the full transcript of the conference call, which is ongoing.
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