The Real Story Inside SK Hynix’s Record Quarter.
A paper gain distorted the numbers, but the underlying HBM business delivered something remarkable—and its new contracts could matter even more.
Deep-dive, July 28, 2026. SK Hynix (NYSE American/Nasdaq: $SKHY, Korea: 000660) reported after the close July 28 US time (morning July 29 in Korea). A snapshot in time, not auto-updated. Educational only, not financial advice, we never predict where a stock is headed.
SK Hynix makes memory chips, the DRAM and NAND flash that go into every phone, laptop, and AI server on earth, plus HBM, the specialized high-bandwidth memory that sits right next to NVIDIA and AMD’s AI chips and is one of the tightest bottlenecks in the entire AI buildout. Tonight’s numbers look absurd on the surface: profit that’s larger than revenue. Here’s what’s actually real, what isn’t, and why it matters well beyond this one stock.
The number everyone will quote, and why it’s misleading
Net profit came in at 118% of revenue. That’s not a typo. The company made more in “profit” than it took in as sales.
Here’s why: roughly two-thirds of that profit didn’t come from selling a single memory chip. SK Hynix owns an 18-19% stake in Kioxia, a Japanese chip maker, bought years ago for about $2.7 billion. Kioxia’s own stock has shot up 12-14x since its IPO, riding the same AI-memory boom. Accounting rules require SK Hynix to mark that stake to its current market value every quarter, and this quarter that mark-up alone added the equivalent of roughly $43 billion to their profit.
That’s a real number on paper, but it’s not cash, and it’s not from the actual chip business. No money changed hands. It’s a paper gain on a stock they happen to own, and it will swing their reported profit up or down every quarter depending on what Kioxia’s stock does, completely separate from how many memory chips SK Hynix actually sells.
Ignore the 118% number for judging the business. Look at the real operating results instead, and those are genuinely excellent on their own.
The real business did very well
Revenue: roughly $54 billion, up 51% from last quarter, up 257% from a year ago. A record.
Operating profit: roughly $41 billion, a 76% operating margin. Also a record, the fifth record quarter in a row.
Prices, not just volume, drove this. Memory chip prices (DRAM) rose about 30% in a single quarter; flash storage prices (NAND) rose about 50%, even faster. The company sold somewhat more chips too, but the price increases did most of the work.
Almost all of the extra revenue turned into profit. Costs only grew 22% while revenue grew 51%, meaning the pricing gains weren’t eaten up by higher expenses.
But it actually missed expectations, here’s why that’s misleading too
Wall Street analysts expected roughly $57 billion in revenue and roughly $44 billion in operating profit. SK Hynix came in about 6% below both. On the surface, a miss.
But this was already priced in two weeks ago. On July 13, one Korean brokerage cut its own forecast after realizing that older long-term supply contracts capped how much SK Hynix could actually charge, even while the open market price kept climbing. That note alone caused the stock’s worst single-day drop on record (down over 15%). Tonight’s actual results landed almost exactly where that revised, lower forecast said they would.
So tonight isn’t really a surprise. It’s a confirmation of a reset the market already made. And today’s stock decline before the earnings came out (down about 9% during the day, then more after hours) was caused by a broad selloff across chip stocks generally, not by anything specific to SK Hynix.
The contract story, and why you asked about it
The reason SK Hynix couldn’t fully capture this quarter’s soaring prices: older supply contracts had built-in price caps. Think of it like a landlord who signed a 3-year lease before rents doubled, they’re stuck at the old rate until the lease is up.
SK Hynix just fixed this going forward. As of early July, they reportedly removed price caps from their newest contracts entirely, reportedly the only major memory maker to do this (their two biggest rivals still cap prices in exchange for guaranteed floors). The new contracts instead track the market price more closely, while still protecting SK Hynix’s downside with minimum-price guarantees and large upfront deposits from customers (10-30% of the contract’s total value, reportedly), for deals stretching 3-5 years with customers like Microsoft and Google.
The specific product that fixes this: HBM4, the newest generation of their AI memory chip, which just started shipping and ramps up through the rest of the year. As the old, capped-price contracts get replaced by this new generation (priced under the new, uncapped terms), the “drag” on pricing should partially go away. Not completely, and not overnight, but that’s the mechanism.
This cuts both ways, worth being honest about. Removing the price cap means SK Hynix keeps more upside while the shortage lasts. It also means less protection if the memory market ever turns down before these new, longer contracts expire. It’s a real trade-off, not a free upgrade.
Who else this actually affects
Micron and Samsung’s memory business: there are only three real players in this market. When one of them raises prices this much, it’s a signal about the whole industry, not just SK Hynix, good news for the other two, though how much they each benefit still depends on their own contracts and costs.
Kioxia: the Japanese company behind SK Hynix’s paper gain. Its own stock’s huge run confirms the AI flash-storage boom is bigger than just one company, and the two companies’ fortunes are now linked, permanently, through that stake.
NVIDIA, AMD, and every major AI company: SK Hynix is the leading supplier of HBM, the memory chips that sit directly next to AI processors. Locking in ~10 years’ worth of major customers on multi-year contracts confirms memory supply, not just chip supply, is a real bottleneck in building AI infrastructure.
PC and phone makers (Dell, HP, Lenovo, Apple, and Android phone makers): SK Hynix openly said it’s had to ration supply away from PCs and phones toward AI/server customers who pay more. That likely means higher memory costs, or supply headaches, for everyday laptops and phones in the months ahead.
Chip equipment makers (Applied Materials, Lam Research, KLA, Tokyo Electron): SK Hynix is accelerating its factory buildout, not just maintaining the old plan, but actually pulling construction timelines forward. That’s a likely tailwind for the companies that sell them the machines to do it.
The memory industry’s boom-bust reputation: memory chips have always been one of the most brutally cyclical businesses around, big booms followed by crushing busts. If more of the industry moves toward these longer, deposit-backed contracts, it could mean less of that historic boom-bust whiplash going forward. That’s a real possibility to watch, not a settled outcome yet.
What the stock costs and what’s next
The stock fell hard heading into tonight (down more than 30% over the past month, and a record-setting one-day crash on July 13), separate from tonight’s actual results, and a big chunk of that decline was already the market catching up to what tonight confirmed.
What to watch from here: how fast the new HBM4 chips ramp up (the thing that fixes the pricing problem), whether Kioxia’s stock keeps swinging SK Hynix’s reported profits around, whether Samsung catches up on AI memory technology, and whether SK Hynix, sitting on close to $47 billion in net cash, announces a bigger buyback or dividend.
Bottom line
Ignore the “118% profit margin” headline, that’s mostly a paper gain on a stock they own, not the memory business. The real story is a 76% operating margin and a fifth straight record profit quarter, which stand on their own.
The “miss” versus Wall Street’s expectations was real, but the market front-ran it two weeks ago. Tonight mostly confirmed what a July 13 analyst downgrade already priced in.
The actual structural story is the contract shift: price caps removed, replaced by deposits and price floors, with the newest AI memory chip (HBM4) doing the work of fixing the pricing problem through the rest of the year. More upside now, but real added risk if the cycle ever turns.
The ripple effects reach Micron, Samsung, NVIDIA, AMD, chip-equipment makers, and eventually your next laptop or phone’s price tag.
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Educational content, not financial advice. For informational purposes only. Do your own research.
Thanks Inder for the article. Well written. Sounds like you’re bullish based off this at the right price?