SK hynix Posts Quarterly Revenue of KRW 104 Trillion, Plans KRW 100 Trillion in Shareholder Returns; KOSPI Breaks 6,000 Intraday

KOSPI Surges on SK hynix Results, Breaks 6,000 Intraday The KOSPI rose 5.7% to 5,959 after breaking above 6,003 intraday. It later extended its gains, reaching 6,017, up 6.7%. The KOSDAQ advanced about 2.9% to 765–766. On the exchange, 608 stocks rose, more than twice the number of decliners, while more than 160 KOSDAQ stocks also gained. Foreign investors were net buyers of about KRW 600 billion in the main board market and made net purchases worth trillions of won in the futures market, buying both cash equities and futures. By contrast, foreign selling on the KOSDAQ continued at about KRW 120 billion. Buying was strong enough to trigger a KOSPI buy-sidecar, with semiconductor blue chips including SK hynix and Samsung Electronics leading the index higher. Ahead of Samsung Electronics' results the following day, U.S. megacap tech earnings, and the FOMC decision, the market was watching to see whether gains would spread across semiconductor stocks. SK hynix Reports KRW 104 Trillion in Revenue and KRW 83 Trillion in Operating Profit SK hynix reported quarterly revenue of KRW 104.6 trillion, up 32% from the previous quarter. It was the first time quarterly revenue had topped KRW 100 trillion and exceeded market forecasts of around KRW 97 trillion. Operating profit came to KRW 83.3 trillion, also surpassing the market's already high estimate of about KRW 81 trillion. Gross margin reached 86%, up 3 percentage points from the previous quarter, while the operating margin rose 4 percentage points to 80%. The results were seen as exceeding prior market expectations, with profitability improving alongside revenue growth. Net income reflected foreign-currency translation losses on foreign-currency assets following the decline in exchange rates, as well as losses on investment valuations. Net foreign-exchange-related losses totaled more than KRW 11 trillion, while other non-operating losses came to about KRW 21 trillion; valuation losses on the Kioxia stake were cited as one contributing factor. It was also emphasized that these were valuation losses and did not indicate deterioration in operating cash flow from the core business. SK hynix Gross Margin and Operating Margin — SK hynix’s gross margin was 86%, higher than its operating margin of 80%. SK hynix Targets KRW 100 Trillion in Shareholder Returns, Combining Buybacks with a Special Dividend SK hynix said it aims to deliver KRW 100 trillion in shareholder returns in 2026. Under a policy of returning at least 50% of free cash flow, the company will combine share repurchases and cancellations with cash dividends. It plans to cancel shares previously repurchased for KRW 40 trillion, and put the annual share-repurchase amount at about KRW 60 trillion. The additional KRW 20 trillion in share repurchases will be split between KRW 10 trillion for shareholder returns and KRW 10 trillion for employee compensation. The purchases are scheduled to run from October 29, 2026, to January 28, 2027. The company said it would determine the amount repurchased each quarter based on its share price, market conditions, and cash flow, and continue buying back shares. The third-quarter dividend was set at KRW 20,000 per share. This comprises a KRW 10,000 dividend based on operating performance and a KRW 10,000 special dividend to share returns from the Kioxia investment. The company said it would continue to share meaningful investment gains with shareholders through special dividends. The market noted the shift in its shareholder-return policy compared with past dividends of around KRW 300 per share. AI Demand and Long-Term Contracts Support SK hynix's Earnings Outlook SK hynix expects memory-market growth to continue, driven by a virtuous cycle in which wider use of AI services fuels investment in data-center infrastructure. Supply growth is limited by the technological complexity of leading-edge processes and construction timelines, and the company expects demand to outstrip supply through 2030. Capital expenditure by hyperscalers is projected to rise by more than 60% in 2027 from the previous year. The number of customers with long-term supply contracts has increased from 10 to 14. Some customers want to extend contract terms, which are typically five years, and the company said more than 50% of its production capacity for 2027–2028 has been secured through long-term contracts. It said it evaluates not only customers' investment plans but also their financial capacity and actual data-center demand before signing contracts, and receives deposits to support contract fulfillment. The company plans to increase investment substantially in 2027 compared with 2026, citing a higher share of leading-edge processes, the production ramp-up at Yongin Phase 1, and infrastructure investment in Korea and overseas. However, it does not intend for investment spending to translate immediately into higher supply, saying it will adjust investment in stages in line with demand. It also said it would prepare equipment and production space in advance while keeping the pace of actual capacity expansion flexible. HBM is expected to reach full production capacity by the end of 2026. In the fourth quarter, HBM4 shipments and revenue are forecast to exceed HBM3E, and the company said negotiations on HBM transaction terms for 2027 have been completed. It said adjustments to HBM stack heights have not changed the medium- to long-term demand outlook, with demand continuing at more than twice the volume it can supply. Increase in Long-Term Supply Contract Customers — The number of long-term supply contract customers rose from 10 to 14. Expectations for Samsung Electronics' Results and Reports of a Possible Mirasia Securities Acquisition in Japan Samsung Electronics rose 7–9%, while its preferred shares gained 9–10% on dividend expectations. SK Square also advanced. After SK hynix announced its KRW 100 trillion shareholder-return plan, expectations grew over the scale of Samsung Electronics' shareholder returns and its explanation of results. Samsung Electronics has already completed about KRW 15 trillion in share cancellations. The market has forecast that its shareholder returns in 2026 could reach KRW 90 trillion to KRW 110 trillion. Samsung Electronics is scheduled to report results and hold an earnings call the following day, and investors were watching its dividend and share-repurchase plans. Mirae Asset Chairman Park Hyeon-joo said he would announce merger and acquisition plans, including the acquisition of a Japanese securities firm. As Korean financial companies have had limited overseas expansion, attention focused on whether the deal could help broaden the business scope of Korean financial firms internationally. Robotics Supply Chain Draws Attention as Humanoid Mass Production Comes into View Robotics stocks, which had attracted relatively little attention during earnings season, advanced. Rainbow Robotics rose more than 12% intraday, and expectations for business expansion increased as Robotis also began reporting results in the previous quarter. News that Madison Huang, the daughter of Nvidia CEO Jensen Huang, was visiting Korea also affected investor sentiment toward related stocks. Reports said domestic suppliers had received orders in preparation for mass production related to Hyundai Motor's Atlas. In camera modules, MCNEX and Namuga were said to have joined the supply chain, replacing LG Innotek. The extent to which Korea's supply chain—including cameras, components, and actuators, as well as finished robots—participates was cited as crucial to the industry's growth. Some argued that domestic companies need to join the supply chain and build up their technical capabilities as Chinese manufacturers rapidly improve their competitiveness in components. However, a cautious view was also presented: many companies in the robotics industry have yet to demonstrate sufficient earnings, and share prices are volatile, so it is important to verify that mass-production volumes and actual results materialize. Won-Dollar Exchange Rate Rises to 1,337 The won-dollar exchange rate rose intraday to 1,336–1,337, gaining about KRW 9.90 over the day. Hedging demand in the offshore market and an increase in trading volume were reported to have heightened exchange-rate volatility. The rise in the exchange rate diverged from the stock market's strong appetite for risk assets. The market noted the need to examine the drivers of exchange-rate movements alongside whether foreign investor trading would continue. FOMC, Megacap Tech, and Samsung Electronics Earnings on the Calendar The U.S. FOMC decision will be released at 3 a.m. Korea time the following day, followed by the chair's press conference at 3:30 a.m. The rate decision and remarks on the future policy direction were cited as key market factors. After the U.S. market closes on Wednesday, Microsoft, Alphabet, ServiceNow, and others will report earnings. The results are expected around 6 a.m. Korea time on Thursday, and Samsung Electronics' earnings call will begin at 10 a.m. Big Tech's AI investment and Samsung Electronics' results and shareholder-return plans are set to affect the market in quick succession. [Noon Salon] Memory Companies' Undervaluation and IR Challenges Memory semiconductor companies are seen as capable of outperforming the broader memory market, supported by HBM and high-performance products. HBM boosts revenue through its high selling price, and a larger HBM share can increase overall earnings. Prices for server DDR5 also vary considerably by speed, including 7,200 Mbps, so competitiveness in high-performance products can determine results. Figures were cited showing that about 63% of Micron's revenue and about 68% of TSMC's revenue are related to data centers. The explanation was that data-center demand, HBM, and high-performance memory can offset relatively moderate consumer demand. Another analysis suggested that if ASML and Lam Research results and conference calls confirm equipment-supply constraints, equipment shipments to China may also be limited, potentially improving supply conditions for major memory companies. One view was that the low price-to-book ratios of Samsung Electronics and SK hynix, despite high earnings, indicate that investors do not yet fully trust the sustainability of profitability. Investor relations (IR), the argument went, should do more than communicate strong results: companies should explain in concrete figures and plans how long earnings can last and how shareholder returns will be delivered. Rather than waiting for investors to react only after results are confirmed, companies need proactive communication to address market doubts. It was emphasized that AI investment is expanding beyond frontier-model companies and hyperscalers to include neoclouds, businesses, and sovereign AI initiatives at the national level. With bottlenecks still present in data centers and equipment supply, demand may continue to exceed supply rather than disappear in the short term. Memory companies were advised to explain both their strategies for a slowdown in price increases and the share of premium products. The view was also expressed that sharing investment returns and free cash flow with shareholders could help address undervaluation and lead to a reassessment of corporate value. Data Center-Related Share of Revenue at Micron and TSMC — TSMC’s data center-related revenue share was about 68%, higher than Micron’s roughly 63%. [Kwangsoo's Take] Avoid Selling Hastily During Rallies and Rebounds Lee Kwang-soo said investors should guard against selling hastily out of anxiety when share prices rise or rebound after a sharp fall. Rather than changing long-term investment principles based on the possibility of a one- or two-day pullback, investors should first review their investment horizon and reasons for holding a position. He stressed that investors may consider adding to positions in a falling market, but should be cautious about putting all their assets to work at once. The possibility of a short-term correction tomorrow should be distinguished from long-term investment principles, and investors should not be swept up in the idea that they must exit the market as soon as prices rise. [Kwangsoo's Take] Shareholder Returns Support Sustainable Corporate Growth Lee Kwang-soo rejected the view that dividends and share repurchases necessarily undermine a company's capacity to invest. If semiconductor companies accumulate excessive cash internally, he said, that could lead to inefficient decisions such as excessive capacity expansion ahead of demand. Shareholder returns impose discipline on companies to use capital efficiently and can support sustainable growth. He explained that the appropriate balance between dividends and reinvestment differs by company. Some companies, such as Amazon, choose not to pay dividends because they believe they have investment opportunities that can generate high returns. But if that capital cannot be converted into meaningful growth, companies should reconsider their shareholder-return policies. The quality of capital allocation, rather than the presence or absence of a dividend alone, should be used to assess a company's commitment to investment. He said Korean financial companies should build global competitiveness through overseas mergers and acquisitions and business expansion rather than limiting themselves to domestic operations. Korea's financial sector has talent and capital but relatively little experience expanding overseas, he said, adding that he hoped Mirae Asset's planned acquisition of a Japanese securities firm would encourage other financial companies. Lee Kwang-soo said he would continue giving stock-market lectures and sharing his market outlook and long-term investment methods. The lectures are free events that include time for sponsor promotion. He also outlined plans to donate part of any sponsor revenue and use it to help establish a progressive economic media outlet. He announced plans for a weekday lecture next week in Mapo, Seoul, as well as events in the Yeongdeungpo and Gwangjin areas.