SK Hynix's record profit misses forecasts, shares slump 10% despite robust AI chip demand

The company reported an operating profit of 60.5 trillion won ($41.62 billion) for the April-June period, compared with 9.2 trillion won a year earlier and short of a 64 trillion won forecast by LSEG SmartEstimate, which is weighted toward analysts who are more consistently accurate. Quarterly revenue rose 257% to 79.3 trillion won. Net profit rose more than 13-fold to 93.9 trillion won, driven in part by 63.3 trillion won in gains related to investment assets, it said, without providing further details. Analysts estimated that the company recognized cumulative investment gains following the completion last month of the sale of its stake in Japanese NAND flash memory maker Kioxia. SK Hynix invested about 4 trillion won in Kioxia 285A.T in 2018 through a Bain Capital-led consortium of U.S., Japanese and South Korean investors, participating via two special purpose vehicles. ($1 = 1,453.7200 won) Reflecting its confidence in future demand, SK Hynix said it plans to raise capital spending this year to the high-40 trillion won range, up from 30.173 trillion won in 2025, to expand chip production capacity. The company downplayed concerns that its capacity expansion could lead to oversupply, saying it would adjust investments in line with market demand. Buoyed by its strong earnings, SK Hynix's net cash reached 88 trillion won at the end of June. It aims to increase that to more than 100 trillion won to better respond to customer demand and stabilise business operations. With the company's cash balance approaching its long-term target, investors are increasingly focused on how that cash will be deployed, said Kim Sunwoo, a senior analyst at Meritz Securities. SK Hynix said it could not yet provide details on the timing, size or structure of its shareholder return policy, but planned to disclose the plan later this year. "SK needs to come up with a concrete shareholder return policy to turn around investor sentiment," said Greg Roh, head of research at Hyundai Motor Securities. SEOUL, July 29 (Reuters) - South Korean chipmaker SK Hynix 000660.KS reported bumper quarterly results on Wednesday but fell short of lofty investor expectations fuelled by the AI boom, with the company racing to secure long-term supply deals to cushion the memory industry's volatile demand cycles. The Nvidia NVDA.O supplier's quarterly operating profit soared more than sixfold to a record high, but it said delays in shipments of some advanced products limited price gains for its mainstay dynamic random access memory (DRAM) chips. Shares in SK Hynix tumbled 10% as the weaker-than-expected earnings heightened investor concerns about the sustainability of aggressive AI spending by tech firms. "There are concerns that tech firms will take a breather in infrastructure spending," Lee Min-hee, an analyst at BNK Investment & Securities, said. Investor sentiment was further hurt by the company's failure to provide detailed plans for sharing the benefits of the AI boom through higher shareholder returns, analysts said. While disappointing investors, the company said memory chip demand remained strong. "Major customers are still requesting more memory supply," SK Hynix President Song Hyun-jong said on an earnings call, adding that it was seeking more long-term supply agreements to better manage chip price volatility. The move underscores how chipmakers are trying to convert today's AI-driven boom into longer-term demand certainty amid concerns that spending on AI infrastructure could eventually cool. Long-term agreements include financial safeguards such as deposits to ensure contract implementation. The company has concluded talks on around 10 such deals and is continuing discussions with other major industry players, it said. The move comes as worries about the ability of "hyperscalers" like Microsoft MSFT.O, Alphabet GOOGL.O, Amazon AMZN.O, Meta Platforms META.O and Oracle ORCL.N to fund hundreds of billions of dollars of planned investment in AI infrastructure have driven down chip shares globally in recent weeks. Despite those concerns, SK Hynix struck an optimistic note on AI memory demand, saying major technology companies continue to expand investments in AI infrastructure. "With major tech companies increasing their AI infrastructure investments, additional supply requests continue to mount," the company said. "As these investments are supported by revenue generated from AI services, the momentum in memory demand is expected to persist." While long-term deals improve visibility over future demand, they may also temper near-term pricing gains, contributing to the earnings miss, analysts said. SK Hynix also has higher exposure to high-bandwidth memory (HBM) chips, whose prices rose less than conventional memory, they said. Bigger rival Samsung Electronics 005930.KS has estimated a 19-fold jump in second-quarter operating profit and is due to report its results on Thursday. "Samsung has greater pricing power and has raised prices more aggressively than SK Hynix," said Lee Su-rim, an analyst at DS Investment & Securities.

SK Hynix's record profit misses forecasts, shares slump 10% despite robust AI chip demand

Quarterly results

Capex, cash and shareholder return plans

Record quarterly profit misses forecasts

Long-term supply deals and AI demand outlook

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