SK Hynix reported record third-quarter results, with revenue of 104.6 trillion won (almost $78 billion), up 328% from a year earlier, and operating profit of 83.3 trillion won ($65.5 billion), up 632%, as demand for memory chips used in AI systems overwhelms supply and the company says its production through 2029 is effectively sold out.
The South Korean memory chip maker's quarterly sales topped 100 trillion won for the first time, it said on Wednesday, delivering an 80% operating margin, meaning it kept about 80 won of profit from its core business for every 100 won of sales. Operating profit beat the 77.5 trillion won expected by analysts surveyed by Bloomberg.
Net income came in at 39.8 trillion won, up 216% from a year earlier but down 58% from the second quarter. CFO Kim Woo-hyun said the gap came from net non-operating expenses of 32.6 trillion won, charges outside chip sales led by an 11.6 trillion won currency loss and a 22.9 trillion won valuation loss on investments.
SK Hynix told investors that demand for memory will keep outrunning supply through 2030, and that its DRAM and HBM volumes through 2029 are effectively sold out. DRAM is the standard memory in servers, phones and PCs, while high-bandwidth memory, or HBM, is the stacked memory that sits beside AI processors and feeds them data.
"Given the complexities involved in implementing leading-edge processes and the lead times required to construct new production facilities," Kim Woo-hyun said, "a situation where supply cannot keep up with demand is expected to persist for some time, a constraint projected to continue through 2030."
The company said some customers have recently adjusted their HBM specifications, which it reads as proof that demand is overwhelming supply, since they must build more AI accelerators from a limited quantity of chips. "Demand remains so strong that customers' volume requirement is more than double that of what we can supply today," the company said on a call.
To lock in demand, SK Hynix has signed long-term agreements with 14 key customers, including leading global cloud providers, covering more than 50% of its 2027 and 2028 production capacity. The contracts typically run five years, let prices move within an agreed range and include safeguards such as deposits. Investment is expected to rise significantly in 2027 as the first phase of its Yongin chip complex enters full-scale operation.
Not everyone shares the company's confidence. Citigroup analyst Peter Lee opened the earnings Q&A by asking what supports confidence in AI investment when monetization looks slow, a doubt the Citadel founder raised eight days earlier when he said investors are "almost certainly" in an AI bubble. CEO Kwak Noh-Jung answered that major cloud customers reported year-over-year cloud revenue growth of 30% to 80% and cloud order backlogs up two-fold to five-fold. He added that AI spending, once concentrated among a few big tech companies, is broadening to non-tech firms, sovereign AI projects and on-premises setups, so one buyer slowing down would hurt less.
Financing is tightening for AI infrastructure players. Decrypt reported on Oct. 25 that debt markets have almost entirely shut off access to money for firms without large non-AI revenue.
SK Hynix expects weaker demand from PC and smartphone makers because of higher memory prices and tight supply, but says AI infrastructure demand should offset the decline.
Analysis
Why This Matters
- SK Hynix says its DRAM and HBM volumes are effectively sold out through 2029, which means the physical supply of memory chips could constrain how much AI infrastructure can be built, and at what price, for years.
- The quarter sharpens the central disagreement in markets: the company says AI demand is broadening and durable, while the Citadel founder warns that investors are "almost certainly" in an AI bubble.
- The shortage is expected to reach beyond AI: the company forecasts weaker PC and smartphone demand as memory prices rise, a possible signal for consumer device costs.
Background
SK Hynix is one of the world's largest memory chip makers, producing DRAM, the standard memory in phones, servers and PCs, and high-bandwidth memory (HBM), the stacked memory that sits beside AI processors and feeds them data. The record quarter comes amid a surge in spending on AI data centres by cloud providers and technology companies, which has made HBM one of the most tightly supplied components in the industry. SK Hynix is building the Yongin chip complex in South Korea, whose first phase is expected to add capacity from 2027.
Key Perspectives
SK Hynix: says demand for memory will keep outrunning supply through 2030 and its DRAM and HBM volumes through 2029 are effectively sold out, with customer volume requirements more than double what it can supply today.
CFO Kim Woo-hyun: says supply constraints will persist through 2030 because of the complexity of leading-edge processes and the lead times required to build new production facilities.
CEO Kwak Noh-Jung: says AI investment is justified, citing major cloud customers with year-over-year cloud revenue growth of 30% to 80% and order backlogs up two-fold to five-fold, and says spending is broadening to non-tech firms, sovereign AI projects and on-premises setups.
The Citadel founder: says investors are "almost certainly" in an AI bubble.
Citigroup analyst Peter Lee: asked what supports confidence in AI investment when monetization looks slow.
What to Watch
- Investment: SK Hynix expects spending to rise significantly in 2027 as the first phase of its Yongin chip complex enters full-scale operation, a test of whether supply can eventually catch up with demand.
- Financing: Decrypt reported on Oct. 25 that debt markets have almost entirely shut off access to money for AI infrastructure firms without large non-AI revenue, a factor that could slow the build-out.
- Consumer demand: the company expects PC and smartphone makers to buy less as memory prices rise, which could surface in device pricing and sales.
Checked
12 claims in this story checked against 1 source: 10 supported.
Show each claim
- SupportedSK Hynix posted a record third-quarter result.Decrypt: “SK Hynix reported record third-quarter results on Wednesday”
- SupportedSK Hynix expects memory demand to exceed supply through 2030.Decrypt: “SK Hynix told investors that demand for memory will keep outrunning supply through 2030”
- Partly supportedThe summary says SK Hynix’s DRAM and HBM are sold out through 2029, without qualifying that as “effectively” sold out.Decrypt: “its DRAM and HBM volumes through 2029 are effectively sold out.”
- SupportedSK Hynix reported revenue of 104.6 trillion won, almost $78 billion.Decrypt: “revenue of 104.6 trillion won (almost $78 billion)”
- SupportedRevenue was up 328% from a year earlier.Decrypt: “Revenue rose 328% from a year earlier”
- SupportedOperating profit was 83.3 trillion won ($65.5 billion), up 632%.Decrypt: “operating profit of 83.3 trillion won ($65.5 billion)”
- Partly supportedThe company says its production through 2029 is effectively sold out.Decrypt: “its DRAM and HBM volumes through 2029 are effectively sold out.”
- SupportedKim Woo-hyun said: “Given the complexities involved in implementing leading-edge processes and the lead times required to construct new production facilities,” and “a situation where supply cannot keep up with demand is expected to persist for some time, a constraint projected to continue through 2030.”Decrypt: ““Given the complexities involved in implementing leading-edge processes and the lead times required to construct new production facilities,” Kim Woo-hyun said, “a situation where supply cannot keep up with demand is expected to persist for some time, a constraint projected to continue through 2030.””
- SupportedThe company said customers’ volume requirement is more than double what it can supply today.Decrypt: ““Demand remains so strong that customers’ volume requirement is more than double that of what we can supply today,” the company said on the call.”
- SupportedLong-term agreements with 14 key customers cover more than 50% of SK Hynix’s 2027 and 2028 production capacity.Decrypt: “They cover more than 50% of its 2027 and 2028 production capacity”
- SupportedCitadel’s founder said investors are “almost certainly” in an AI bubble.Decrypt: “when he said investors are “almost certainly” in an AI bubble.”
- SupportedDecrypt reported on Oct. 25 that debt markets had almost entirely shut off access to money for firms without large non-AI revenue.Decrypt: “wrote on Oct. 25 that “debt markets have almost entirely shut off access to money” for firms without large non-AI revenue.”
