SK Hynix Q2 Earnings Exceed Expectations Amid DRAM and NAND Price Increases

Author: Rita

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HSBC has just released a research report on SK Hynix, raising its target price from KRW 2.9 million to KRW 4 million, a 56.6% increase, while maintaining a "Buy" rating. The core rationale is surprisingly straightforward: DRAM and NAND prices are surging, and HBM prices are following suit—sufficient to support strong growth for SK Hynix in the second half of 2026 and into 2027. Coupled with the upcoming listing of its U.S. ADRs at the end of June, this Korean memory leader is entering a golden period of rising volume and prices.

Recent earnings season data has demonstrated what "beating expectations" truly means.

SK Hynix is expected to generate revenue of 81.94 trillion KRW in the second quarter, representing a 56% sequential increase and a 269% year-over-year increase. Even more remarkable is the operating profit, which is forecast to reach 66.1 trillion KRW—a 76% sequential rise and a 618% year-over-year surge, indicating explosive growth.

The reason is that both DRAM and NAND prices rose simultaneously. The average price of DRAM increased by 40% quarter-over-quarter, while the average price of NAND rose by 50%. These two products account for over 90% of SK Hynix’s revenue, so any price movement directly leads to a sharp increase in profits. From a cost perspective, memory chip costs are relatively fixed, meaning price increases translate directly into expanded profits.

More importantly, the product structure is also improving. SK Hynix has just completed its upgrade to 321-layer NAND, enabling the same production capacity to store more data. Combined with a 2% depreciation of the Korean won, which provides a favorable exchange rate advantage, NAND profit margins surged directly from 30% in the fourth quarter of 2025 to 65% in the second quarter of this year. Going from 30% to 65% represents a qualitative leap, indicating that not only are prices rising, but the unit cost of the product is also declining.

The story with DRAM is similar. Although the numbers aren't as dramatic as with NAND, a 40% quarter-over-quarter price increase means profits are expanding significantly, even without increased production.

The short-term price increase is the result of demand shocks and supply constraints, but HSBC believes there is further growth potential in the second half of the year.

HBM is critical. HBM is a memory product specifically designed for AI chips, with significantly higher costs and technical complexity than standard DRAM. Over the past few months, HBM has lost its price advantage over standard DRAM due to certain chip defects. However, HSBC expects memory manufacturers to adjust their strategies by the second half of the year, raising prices for HBM3E 12-layer products to reestablish a premium. This price adjustment comes against a backdrop of continued supply constraints and demand for high-performance memory that remains far from saturated.

Looking ahead to 2027, HBM4 will become a new growth driver. HSBC estimates that HBM4 will command a 40% to 50% premium over standard products. This implies that SK Hynix’s average selling price in 2027 could rise by 35% year-over-year. A 35% increase in average selling price means profits will grow significantly even if chip shipment volumes remain unchanged. This type of profit growth, driven by product upgrades rather than production expansion, represents the highest-quality growth model in the memory industry.

HSBC compares the current memory cycle to the supercycle from 1990 to 1995. This comparison is intriguing because that era was driven by the explosive growth of personal computers boosting chip demand, while today it is AI driving demand.

Growth comes from two sources. First is the advancement of Agentic AI. This new AI application model demands unprecedented computing power for servers, with general-purpose server shipments expected to increase by 20% in 2026 and 21% in 2027. More servers mean greater memory demand.

Second, there has been a sharp increase in capital expenditures by major cloud service providers. According to HSBC, the capital expenditures of the four largest cloud service providers are projected to reach $643 billion in 2026, a 71% year-over-year increase. These cloud providers are SK Hynix’s largest customers, and their capital spending directly translates into sales opportunities for SK Hynix. As these giants invest hundreds of billions of dollars annually to deploy AI chips and related infrastructure, demand for memory remains relentless.

Moreover, AI's memory requirements are becoming more diverse. While everyone initially competed for high-end HBM, as deployment deepens, demand for lower-cost alternatives is growing. This expands the entire market and provides memory manufacturers with greater growth opportunities.

HSBC raised its target price from 2.9 million KRW to 4 million KRW, implying a 56.6% upside. This upgrade is supported by three key rationale.

First, there is the growth in performance itself. SK Hynix’s operating profit is expected to increase fivefold to KRW 284 trillion in 2026, and continue growing to KRW 452 trillion in 2027. Earnings per share are projected to rise from KRW 62,300 in 2025 to KRW 324,700 in 2026, and further to KRW 516,800 in 2027. This rapid growth rate is sufficient to support a high valuation multiple.

Second, the expansion of valuation multiples. SK Hynix’s current price-to-book ratio is 5.4x, which is not unreasonable for the memory industry. However, HSBC believes there is still room for further upside. For reference, Micron, a U.S.-based memory manufacturer, has historically enjoyed a valuation premium of 35% over SK Hynix on average over the past 13 years. As a result, HSBC has raised its target price-to-book ratio for SK Hynix by 20% from 2.8x to 3.4x. While this adjustment may seem conservative, the key point is that the upcoming ADR listing is expected to drive this premium.

Third, ADR listing serves as a catalyst. SK Hynix formally submitted its plan to list ADRs on Nasdaq on June 24. While the listing itself does not alter the company’s fundamentals, it enables more international investors to invest directly in the company. Historical experience shows that once U.S. investors can more easily purchase shares, a valuation premium often emerges.

HSBC's report bets on a simple narrative: memory is transitioning definitively from a period of oversupply to one of undersupply.

The fundamental reason for this shift is AI. Before AI, memory manufacturers could stabilize prices by increasing production, but profits were slim. However, AI has changed this. Demand for memory from AI servers far exceeds any previous cycle. Cloud service providers are rapidly expanding their AI server capacity, and memory supply cannot keep up with demand. Under these conditions, SK Hynix and its peers have little incentive to significantly lower prices, so prices remain high—or continue to rise.

How long can this logic last? HSBC believes it can hold until at least 2027. The launch of HBM4 in 2027 will create new premium space. What about 2028? HSBC’s projections show margins declining from 81.3% in 2027 to 73% in 2028. This suggests that competitive pressures will begin to emerge by 2028, potentially leading to price declines—but that’s a concern for later.

HSBC also listed downside risks: U.S. interest rate hikes could prompt cloud providers to tighten capital expenditures, overexpansion by memory manufacturers might depress prices, and the spread of geopolitical tensions in the Middle East could disrupt supply chains. However, these risks are not the primary concerns at present.

SK Hynix’s story is a classic example of a memory manufacturer being driven by demand during a supercycle. With high certainty in the AI cycle, strong pricing logic, and the catalyst of an ADR listing, the three positive factors align to support the 4 million KRW target price.

Disclaimer

This article is a compilation and interpretation by Chaoxiang Research of third-party brokerage research reports. The ratings, target prices, earnings forecasts, and related judgments cited herein are the views of HSBC analysts and represent the position of their respective institution, not the views of Chaoxiang Research, nor do they constitute any investment advice.

When reading, please note three points: First, target prices represent analysts’ expectations for approximately the next 12 months and are forecasts, not guarantees; they are subject to revision based on performance and market conditions. Second, sell-side research reports are inherently bullish, and some covered companies may have investment banking relationships with the issuing brokerage. Third, the value of a report lies in its core logic and underlying assumptions, not in any single target price—focus on the reasoning, not just the price.

The market carries risks; make decisions independently. This article should not be used as a basis for buying or selling any securities.

Source: HSBC Research by Ricky Seo & Han Kil Chang, June 25, 2026 · SEC Filings

TideResearch · June 2026