SK Hynix: Flawless financial report, insatiable expectations
```
After SK Hynix released its Q1 report, the market first focused on the gap between expectations. The company reported operating profit in Q1 of 37.6 trillion won, roughly in line with LSEG’s high-frequency estimate of about 37.9 trillion won.
After the results were released, the stock price rose more than 3% intraday, slightly outperforming the concurrent KOSPI increase of 2.3%. Before the earnings report, SK Hynix's stock price had already risen nearly 90% year-to-date. The price has surged ahead, so the focus on the earnings day naturally shifts to the coming quarters.
The report itself is almost flawless
Q1 revenue was 52.5763 trillion won, operating profit 37.6103 trillion won, net profit 40.3459 trillion won, and operating margin 72%.
This is the first time revenue in a single quarter has exceeded 50 trillion won. Both operating profit and margin hit new highs, all happening during what was usually a subdued Q1. The company attributes this to expanded investment in AI infrastructure, which boosted sales of HBM, high-capacity server DRAM modules, and eSSD.
How profits grew: 90% of new revenue dropped to the bottom line
Even more significant is the pattern of profit growth.
According to the company’s disclosures, revenue increased by about 19.75 trillion won from the previous quarter; operating profit increased by about 18.44 trillion won—nearly 90% of new revenue flowed directly into new operating profit.
For a storage company with heavy assets, this kind of profit elasticity is rare. Operating margin rose from 58% in the previous quarter to 72%. High-end product mix, pricing environment, and supply positioning all contributed, giving the report a clear cutting edge.
Not just “HBM boom”
Management’s remarks this time are much broader than a simple “HBM boom.”
The company extended the demand logic from training to more frequent real-time inference, and clearly mentioned that memory demand is now expanding to both DRAM and NAND. Upcoming product releases are packed: LPDDR6, 192GB SOCAMM2, 321-layer QLC, and eSSD all took the stage.
What SK Hynix has captured is no longer just an individual HBM profit curve, but high profitability across the entire AI storage chain.
Expectations are “never satisfied”—the bar has been set too high
The reason expectations remain “never satisfied” is not because the earnings report was weak, but because the bar has been raised too high.
Operating profit of 37.6 trillion won is strong enough, but it didn’t push the already high market expectations up another notch. Net profit of 40.3 trillion won is higher than operating profit, reminding us that this quarter’s bottom-line profits also include gains from non-operating items. What truly reflects the quarter’s operational strength is still operating profit and the 72% operating margin.
Sustainability: Profits are starting to flow into equipment and capacity
Sustainability is what really determines the stock’s future upside.
SK Hynix has clearly stated that its investment scale in 2026 will be significantly higher than the 30.2 trillion won in 2025, mainly directed at M15X, Yongin campus infrastructure, and EUV equipment. At the end of Q1, the company’s cash and cash equivalents rose to 54.3 trillion won, interest-bearing liabilities fell to 19.3 trillion won, resulting in 35 trillion won net cash.
In addition, SK Hynix is advancing investment in an advanced packaging plant of about 19 trillion won, and will procure about 11.95 trillion won worth of EUV equipment from ASML by 2027. Profits are already beginning to flow from the income statement into equipment, packaging, and capacity.
How long can high profits last?
The pricing rhythm will also determine how long this round of high profits can last.
TrendForce data shows contract prices for some DRAM products in Q1 rose nearly 83% quarter-on-quarter, and some NAND products rose about 160%. Some analysts expect the pace of price increases to slow after Q2, but supply tightness will persist until new capacity is actually launched.
In the coming quarters, what’s worth watching is how long profit margins remain elevated, and whether server DRAM and eSSD can continue to capture AI demand.
Risk warning and disclaimerThe market involves risks, and investments should be made cautiously. This article does not constitute personal investment advice and does not take into account individual users’ unique investment objectives, financial situation or needs. Users should assess whether any opinions, views or conclusions in this article are appropriate for their particular circumstances. Investing accordingly is at your own risk. ```