SK Hynix shares fall; earnings jump fails to satisfy AI expectations

SK Hynix Shares fell Wednesday as exponential second-quarter earnings and revenue growth still failed to meet analysts’ outsized expectations for the AI ​​darling.

Here are SK Hynix’s second-quarter results compared to LSEG SmartEstimates, which are weighted by analysts’ estimates, which are more consistently accurate:

• Revenue: 79.32 trillion won ($54.55 billion) vs. 84 trillion won expected
• Operating profit: 60.54 trillion won, expected 64 trillion won

The company’s shares fell 6.5% on Thursday.

The company’s statement showed that revenue rose 257% year-over-year in the quarter ending in June, while operating profit rose nearly 557% year over year.

Compared to the previous quarter, revenue increased by 51%, while operating profit increased by 61%.

The company said it has seen continued demand growth from expanding AI infrastructure investments, while high-performance products for AI servers have led to price increases that set a new record.

For the first time in the company’s history, its cumulative revenue in the first half of the year exceeded 100 trillion won, underlining the strong demand for artificial intelligence.

SK Hynix said it expects capital expenditures this year to reach a range as high as 40 trillion won and plans to increase its Nasdaq-listed ADR earlier this month.

The company emphasized that it will prioritize growth-oriented investments and work to ensure a solid financial structure. It also continues to review shareholder return policies.

Going forward, the company aims to maximize production using existing manufacturing centers in Icheon and Yongin, while also increasing NAND production and advanced packaging in Cheongju.

Josh Gilbert, eToro’s chief analyst for Asia Pacific, said the company’s 83% gross margin shows its pricing power is still alive and well. “This doesn’t exist in a market where demand is declining; it exists in a market where customers are fighting over supply,” he said.

Both DRAM and NAND flash memory prices increased compared to the previous quarter; The company achieved top-line profitability by expanding sales focused on high value-added products including HBM, DRAM for AI servers, and enterprise SSDs.

Memory demand momentum is expected to continue as supply demands continue to increase, driven by revenues from artificial intelligence services and increasing infrastructure investments by major technology companies.

SK Hynix said that HBM4 demonstrates a distinct technological superiority by highlighting power efficiency and cost competitiveness. The company began bulk shipments of HBM4 in the second quarter to increase production in the second half, and also completed sample shipments of HBM4E in the first half.

Regarding NAND, SK Hynix is ​​accelerating its migration to advanced process nodes to strengthen its portfolio around high-capacity and high-performance products; 321-layer products currently account for the largest share of total production and aim to reach approximately 50% of domestic production capacity by the end of the year.

The South Korean tech giant, which makes memory chips and supplies components for hardware from data centers to consumer electronics like smartphones, counts among the US mega-majors. Nvidia Its major clients include a recently expanded partnership with a multi-year deal valued at more than $500 billion.