SK Hynix shares soar over 8% as profit beats, chipmaker to return $25 billion to investors

SK Hynix, the South Korean semiconductor manufacturer, reported a record quarterly profit on Wednesday, significantly exceeding analysts' expectations. Following the announcement, the company's shares surged by over 8%. In addition to its impressive financial results, SK Hynix disclosed plans to return approximately $25 billion to its investors through dividends and stock buybacks.

For the third quarter, SK Hynix generated a revenue of 104.62 trillion won (around $78.86 billion), surpassing the anticipated 98.34 trillion won. The operating profit also exceeded forecasts, coming in at 83.33 trillion won compared to the expected 76.72 trillion won. This marked an astounding year-on-year revenue increase of 327.9% and an operating profit growth of 632.1%. In comparison to the previous quarter, revenue rose by 31.9%, while operating profit saw a 37.6% jump.

SK Hynix's stock performance outpaced the broader market, with the Kospi index rising by 6.25%. This quarter marked a milestone for the company, as it achieved record revenue and operating profit, with sales exceeding 100 trillion won for the first time. The company announced plans to return about 100 trillion won to shareholders, which includes a minimum of 30 trillion won in cash dividends and 60 trillion won in stock buybacks and cancellations.

During the earnings call, CEO Kwak Noh-Jung attributed the company’s decision to pause its review of potential pre-IPO fundraising and IPO options for its U.S. subsidiary, Solidigm, to the current volatility in financial markets and a correction in semiconductor stocks. He emphasized that the company would continue to evaluate the timing and scale of investments to support Solidigm's growth while enhancing shareholder value.

Kwak also mentioned plans to distribute profits from its investment in the Japanese chipmaker Kioxia to shareholders, stating, "We intend to return the gains realized from our investment in Kioxia this year to our shareholders through a special dividend." The company approved a third-quarter dividend of 14 trillion won, which includes a special dividend funded by its Kioxia investment gains.

Additionally, SK Hynix plans to initiate a buyback of 20 trillion won worth of shares, with half of those shares set to be canceled this year. This move follows the completion of a previously announced 40 trillion won buyback, which is also slated for cancellation soon, as noted in the earnings call.

Looking ahead, SK Hynix aims to increase its shareholder return target to over 50% of cumulative free cash flow generated from 2025 to 2027. The company anticipates sustained momentum in investments related to artificial intelligence (AI), driven by the growing adoption of AI services and a more diverse investor base.

In terms of production, SK Hynix expects its HBM4 (high-bandwidth memory) to outpace HBM3E in shipments and revenue in the fourth quarter, as production ramps up at its M15X facility in Cheongju, South Korea. HBM technology is critical for AI processors, enabling them to process large amounts of data efficiently. HBM4, the sixth generation of this technology, began mass production and shipping in the third quarter.

The average selling prices for DRAM increased significantly, with a high-20s percentage rise compared to the prior quarter, fueled by higher prices for conventional DRAM and an increased share of sales from the more expensive HBM4. Furthermore, shipments of server DDR5 memory chips, utilized in data center servers, rose by over 40% from the previous quarter, according to the earnings call.

SK Hynix has secured long-term agreements with 14 major customers that cover more than half of its production capacity for the years 2027 and 2028. The company expects that memory demand will surpass supply through 2030 and plans to substantially increase its investments in the upcoming year.