The market expects the company's operating profit margin in Q2 to reach 75%–77%, surpassing Taiwan Semiconductor for the third consecutive quarter. The key drivers of growth are its leadership in HBM and surging demand from AI data centers. SK hynix will announce its second-quarter earnings on July 29. Analysts believe the strong performance has significantly strengthened its financial structure, marking a new AI-driven phase for South Korea’s memory industry.
The AI-driven memory supercycle is propelling South Korea's semiconductor industry toward an unprecedented peak in profitability. $SK hynix (SKHY.US)$ Second-quarter earnings will be announced on July 29, with Q2 operating profit expected to reach a record high.
According to market consensus compiled by Yonhap Infomax from reports issued by 14 securities firms over the past month, SK Hynix’s second-quarter revenue is projected to reach KRW 84.06 trillion, with operating profit forecast at KRW 64.09 trillion—an increase of nearly 600% year-over-year—potentially setting a new historical record. Meanwhile, the operating profit margin is expected to rise further from 72% in the previous quarter to between 75% and 77%, a rarity among manufacturing companies.
Earlier this month, Samsung Electronics released preliminary earnings figures, reporting second-quarter operating profit of KRW 89.4 trillion, driven by strong performance from its Device Solutions (DS) division. If SK Hynix meets expectations, the combined second-quarter operating profit of the two companies will exceed KRW 150 trillion. Samsung Electronics will disclose detailed financial data for each business segment on July 30—the day after SK Hynix’s earnings announcement.
Despite persistently strong fundamentals, the company’s share price has declined by more than 30% from its peak, making whether the earnings results can reignite market confidence a key focus for investors. Given the divergence between market capitalization and earnings performance, investors are now closely watching the Q2 earnings release on the 29th and management’s guidance for the second half of the year to assess whether there is room for valuation recovery.
Prolonged supercycle; leadership in HBM is the core driver
Analysts attribute SK Hynix’s stellar performance to the memory supercycle, which began in the second half of last year, entering a prolonged phase.
Specifically, continued price increases in commodity DRAM, expanded sales of HBM, and surging demand for enterprise SSDs—fueled by heightened AI data center investments from North American cloud service providers (CSPs)—which in turn drove significant NAND price appreciation, collectively underpinned this earnings surge.
Kim Dong-won, Head of Research at KB Securities, noted that as HBM capacity expands, supply capabilities for commodity memory will remain constrained. Additionally, with the share of long-term agreements (LTAs) rising, sales to large technology firms and AI data centers are expected to account for 70% of total revenue. He further stated that as earnings volatility decreases and predictability improves, SK Hynix’s valuation is likely to rise accordingly.
Notably, B2B sales accounted for only 30% of revenue in 2017 but are projected to reach 70% by 2027. Analysts believe the memory upcycle from 2026 to 2027 will differ significantly from the 2017–2018 cycle in terms of revenue composition. The substantial increase in B2B sales—centered on large tech companies and AI data centers—is expected to markedly enhance earnings quality and stability.
Profit margins poised to surpass those of Taiwan Semiconductor, with ongoing financial structure optimization
If the above forecast materializes, SK Hynix’s operating profit margin of 75% to 77% would mean that for every 10,000 Korean won in sales, the company retains over 7,500 won in profit—a level exceptionally rare in the manufacturing sector and one that would surpass Taiwan Semiconductor, the leading foundry, for the third consecutive quarter.
SK Hynix surpassed Taiwan Semiconductor for the first time in the fourth quarter of last year, reporting an operating profit margin of 58% compared to Taiwan Semiconductor’s 54%. Given that Taiwan Semiconductor’s operating profit margin stood at 60.3% in the second quarter of this year, the gap between the two is expected to widen further to approximately 15–17 percentage points.
In terms of financial structure, SK Hynix returned to a net cash position (cash assets exceeding borrowings) starting in the third quarter of last year—the first time since 2019. By the end of the first quarter of this year, its net cash had grown to KRW 35 trillion. Analysts expect net cash to expand further in the second quarter, reinforcing the company’s financial resilience.
Additionally, SK Hynix plans to disburse its Productivity Incentive (PI) on July 30. The PI, alongside the Profit Sharing (PS) bonus, constitutes one of the company’s two flagship performance-based bonus schemes, both distributed twice annually. Based on the payout criteria tied to operating profit margin, the PI for the first half of this year is expected to reach 150% of employees’ monthly base salary—the maximum allowable under the scheme.
Analysts estimate that if SK Hynix achieves an operating profit of KRW 64 trillion in the second quarter—adding to the KRW 37.61 trillion recorded in the first quarter—the company’s total operating profit for the first half alone will exceed KRW 100 trillion. This figure would also surpass SK Hynix’s full-year operating profit for last year (KRW 47.2 trillion) by approximately KRW 17 trillion.
Combined quarterly operating profits exceeding KRW 150 trillion from Samsung Electronics and SK Hynix mark a new historical phase for South Korea’s memory industry, driven by the AI boom.
Editor/rice