SK hynix's AI memory 'sold out' through 2029 as profits soar

SK hynix said Wednesday its DRAM and high-bandwidth memory chips were effectively sold out through 2029, underscoring the strength of AI-driven demand as the chipmaker posted record quarterly earnings, with revenue surpassing 100 trillion won ($75.5 billion) for the first time.

The memory giant also unveiled additional shareholder returns, bringing its planned dividends and share buybacks and cancellations for this year to about 100 trillion won.

In a rare appearance on the company's third-quarter earnings call, SK hynix CEO Kwak Noh-jung pledged to share the gains from successful strategic investments with shareholders while maintaining aggressive spending on future growth.

"Our principle has been to share most of the gains with shareholders when our strategic investments bear fruit," Kwak said.

He said the gains would help replenish funds available for shareholder returns when investment in future growth temporarily constrains them, allowing the company to "continue investing boldly in sustainable growth while protecting shareholder interests."

Operating profit surged 632.1 percent from a year earlier to 83.33 trillion won in the July-September period, beating market expectations of around 77 trillion won. Revenue jumped 327.9 percent to 104.62 trillion won, while net profit totaled 39.78 trillion won.

The operating margin reached a record 79.7 percent, up from 76.3 percent in the previous quarter.

The company attributed the earnings growth to rising sales of HBM4, advanced memory used in AI processors, and server DDR5. It expects HBM4 to overtake HBM3E in both shipment volume and revenue in the fourth quarter.

Buoyed by record profits, SK hynix plans about 100 trillion won in shareholder returns this year, including at least 30 trillion won in dividends and at least 60 trillion won in share buybacks and cancellations, fulfilling its pledge to return at least 50 percent of free cash flow.

The buyback total includes the 40 trillion won program announced in August and completed last week. Those shares will be canceled shortly.

The board on Wednesday approved another 20 trillion won in buybacks. Half will be canceled for shareholder returns, while the remainder is earmarked for employee compensation and excluded from the shareholder return total.

It also approved a third-quarter dividend of 20,000 won per share, split equally between an earnings-based dividend and a special payout tied to gains from its investment in Japanese NAND flash memory maker Kioxia. SK hynix said it would distribute most of this year's realized Kioxia gains, in line with its policy of sharing the bulk of successful strategic investment gains with shareholders.

"The current share price does not fully reflect our earnings and cash flow," SK hynix CFO Kim Woo-hyun said, calling buybacks and cancellations an effective way to enhance per-share value.

Buybacks will continue every quarter under the annual program, with the board determining purchase amounts based on share price, valuation and cash flow, he said.

SK hynix said its DRAM and HBM output was effectively "sold out" through 2029, based on secured long-term agreements and demand under discussion with customers. The prospective orders reflect concrete purchasing plans and are highly likely to materialize, it said.

Signed agreements cover more than 50 percent of production capacity for 2027 and 2028. The company plans to maintain a similar share over the longer term, leaving the remaining capacity available to respond to market changes and demand for next-generation products.

"Customers are requesting more than twice the volume we can supply," said Kim Ki-tae, head of HBM sales and marketing at SK hynix.

Kim said HBM4 and HBM3E production yields had exceeded targets, with HBM4 expected to overtake HBM3E in shipment volume and revenue share in the fourth quarter. Higher prices and improving yields are expected to push HBM4 profitability well above previous cycle peaks next year.

HBM4E development and testing are progressing smoothly, alongside custom HBM projects, Kim said. As hyperscalers reportedly seek eight-layer HBM4 instead of 12-layer products, SK hynix said the shift reflects efforts to build more AI accelerators from limited memory supplies.

"Our medium- to long-term HBM demand outlook remains unchanged," he said.

SK hynix pushed back against concerns that the AI boom was peaking, forecasting memory shortages through 2030 as demand outpaces supply amid increasingly complex manufacturing processes and long lead times for new plants.

DRAM marketing head Park Joon-deok cited rising paid AI subscriptions and investment expanding beyond Big Tech to other businesses and national initiatives as signs of sustained growth.

"Major customers' AI revenue and cash flow will continue improving, easing concerns over their investment burden," Park said. "Tangible business results and a broader range of investors will sustain AI investment and demand, with memory demand continuing to far outstrip supply."

The chipmaker expects investment to rise sharply next year as its first Yongin fab enters full-scale operation and it expands production capacity at home and abroad. It will adjust spending and timing based on customer demand, profitability and investment efficiency.

Separately, Kwak explained the decision to shelve a potential Nasdaq listing for NAND flash subsidiary Solidigm, a plan that had raised concerns over its impact on SK hynix shareholders and drawn regulatory scrutiny of parent-subsidiary listings.

The IPO was intended to fund Solidigm's capacity expansion with outside capital, easing SK hynix's investment burden and creating more room for shareholder returns, he said.

"Considering recent financial market conditions and other factors, we concluded that it would be difficult to fully achieve the anticipated benefits at this point," Kwak said.