On October 28, SK Hynix announced its third-quarter financial results. Demand for memory chips from AI servers pushed the South Korean company's revenue and operating profit to new quarterly records.

According to the Korea JoongAng Daily, operating profit exceeded market expectations, but net profit fell short of forecasts compiled by data provider FnGuide. The market is facing two different performance signals.

But there is a detail in the earnings report that is easily overshadowed by the record highs. Operating profit continued to rise, while net profit fell by more than half compared with the previous quarter.

One quarter, more than all of last year

According to SK Hynix's third-quarter results announcement, the company's quarterly revenue reached KRW 104.62 trillion, crossing the KRW 100 trillion mark for a single quarter for the first time. This figure is even higher than the company's full-year 2025 revenue.

Hynix's single-quarter revenue exceeds all of last year

The change came quickly. In the final quarter of last year, Hynix's revenue was still KRW 32.83 trillion. It has grown for three consecutive quarters since then, and the latest quarter is already more than three times that level.

The company attributed the growth to rising prices for major products driven by AI memory demand, as well as the competitiveness of high-value-added products. The product mix is also changing. Sales of DDR5 used in servers increased significantly, the new-generation high-bandwidth memory HBM4 began official shipments, and sales of enterprise-grade solid-state drives used in data centers are also expanding.

HBM is often seen as the main driver of this memory market cycle, but HBM is not the only growth source listed by the company. Servers need high-speed memory and also other types of memory and storage devices. Looking at any single type of chip alone makes it difficult to fully explain this income statement.

For every 100 Korean won sold, how much operating profit is retained?

Beyond revenue growth, SK Hynix's profit margin is also rising. Calculated by dividing operating profit by revenue in the company's financial reports, a year ago approximately 47 Korean won of operating profit was retained for every 100 Korean won sold. In the latest quarter, this figure approached 80 Korean won.

Changes in SK Hynix's operating profit margin

Operating profit has already deducted operating costs and operating expenses, but it is not yet the net profit that shareholders ultimately receive. It provides a window into core operations, allowing comparison between the revenue from products sold and the profit at the operating level.

Over the past several quarters, revenue and operating profit have risen together, with the latter growing faster. This means growth is not just about production lines selling more products—the operating profit generated per unit of revenue is also increasing.

The order information disclosed by the company explains why it dares to plan capacity expansion. According to this announcement, SK Hynix has signed long-term agreements with 14 major customers, locking in volumes equivalent to more than half of total capacity for 2027 and 2028.

This ratio describes the company's future capacity and contracted volumes; it does not mean orders have all been delivered, nor that future revenue has been recognized. Contracts are typically five years in duration, with prices reflecting market conditions within agreed ranges—not permanently fixing today's prices.

SK Hynix plans to expand capacity at its M15X fab by year-end to increase HBM4 supply. The company expects HBM4 shipments and revenue in the fourth quarter to exceed those of the previous-generation HBM3E. This is a company forecast; actual results still need to be verified in subsequent financial reports.

Why did net profit decline instead?

Third-quarter operating profit reached 83.33 trillion Korean won, up 38% quarter-over-quarter. Net profit during the same period was 39.78 trillion Korean won, down 58% quarter-over-quarter.

Divergence between operating profit and net profit

The difference between the two does not mean chip sales suddenly weakened. Operating profit reflects results at the operating level, while net profit is also affected by investment income, financing items, and income tax, among other factors. To explain the change in net profit, one needs to look at the line items below operating profit, not just revenue and gross profit.

Net profit was unusually high in the previous quarter. Yonhap News TV, affiliated with Yonhap News Agency, reported at the time that second-quarter net profit included investment gains from Japanese memory chip company Kioxia. The third-quarter announcement also mentioned that the company would share Kioxia investment gains through a special dividend.

However, SK Hynix's latest earnings announcement did not fully list changes in non-operating items and tax items for the third quarter, so it is impossible to attribute the entire quarter-on-quarter decline in net profit to Kioxia investment gains based solely on the announcement. What can be confirmed is that the investment gains in the previous quarter made the net profit comparison base more unusual, while operating profit continued to grow this quarter.

Investment income also appears in the shareholder return plan. SK Hynix said it plans to return about KRW 100 trillion to shareholders in fiscal 2026, including no less than KRW 30 trillion in cash dividends and no less than KRW 60 trillion in share buybacks and cancellation. Both the former and the latter are company plans, and execution progress should be viewed separately from the planned amounts. The company said the previously announced KRW 40 trillion buyback was completed last week, and the relevant shares will be cancelled soon.

The board also decided at this meeting to carry out another buyback, of which shares used for employee compensation are not included in the above total shareholder return amount. Of the third-quarter dividend per share, half corresponds to improved operating performance, and the other half is a special dividend to share Kioxia investment gains.

Welcome to join the official BlockBeats community:

Telegram Subscription Group: https://t.me/theblockbeats

Telegram Discussion Group: https://t.me/BlockBeats_App

Official Twitter Account: https://twitter.com/BlockBeatsAsia