SK hynix reports sevenfold surge in operating profit on AI chip demand

Record results and new shareholder payouts

South Korean chipmaker SK hynix on Wednesday, October 28, reported a 632% surge in operating profit for the third quarter, to 83.33 trillion won (about $62.8 billion), roughly seven times the level a year earlier. This was reported by AFP. Net profit rose 215.7% to 39.77 trillion won, while revenue came to 104.61 trillion won. The company noted that it has posted record revenue and operating profit for six consecutive quarters since April–June of last year.

What is behind the growth

SK hynix is a specialized supplier of high-speed HBM memory chips to the US-based Nvidia and one of the pillars of South Korea's high-tech economy. The company said a 'virtuous cycle' has taken shape: rising productivity and new revenue in software development, customer service and search thanks to AI are driving further AI adoption. Analysts attribute the record figures to rising DRAM prices amid a global shortage and to growing sales of high-margin HBM memory; the AI boom has also lifted prices and shipments of conventional NAND chips. Counterpoint analyst MS Hwang noted that long-term agreements with major customers, including Nvidia, signal a 'new phase of price increases' for conventional DRAM, NAND and HBM, and, in his words, the upward trajectory is likely to persist at least through 2027.

Net profit below expectations and risks

Despite the records, net profit fell short of market expectations: the average analyst forecast was 59.67 trillion won, the Yonhap agency reported citing its own data. Omdia analyst Sheng Win Chow pointed to opposing risks in the company's two business segments: conventional memory for smartphones, PCs and tablets delivers lower margins but a more predictable cash flow, while high-margin HBM is increasingly tied to an AI infrastructure boom financed with borrowed money. According to Omdia, global smartphone shipments fell 20% in the third quarter due to capacity being reallocated toward HBM and rising conventional memory prices. 'As lending for this construction tightens, the balance between reliable low-margin conventional memory and high-margin but credit-dependent HBM becomes a matter not of margins but of risk management,' he told AFP.

Shareholder returns and market reaction

At the same time, the company announced plans to return an additional 60 trillion won to shareholders after completing its previous 40 trillion won program. The decision came amid calls to increase shareholder payouts, which intensified after the company's shares fell noticeably from their June record on concerns about US tech companies' AI spending. SK hynix also said it would return most of the proceeds from its investment in Japan's Kioxia through special dividends in the third quarter and at the end of the fiscal year. A week earlier, the company abandoned a planned US listing of its Solidigm unit, citing market volatility — after South Korean authorities expressed concern about shareholders' interests. On Wednesday, SK hynix shares rose 10.9%, lifting the Kospi index by more than 6%. Kim Dae-jong, a professor of business administration at Sejong University, told AFP that share prices 'tend to anticipate future conditions rather than simply reflect current earnings,' and that concerns that the current extraordinary level of profits may prove unsustainable in a year or two are already priced in.