SK hynix earnings surge 557% but miss market expectations, shares fall again by more than 7%

SK Hynix’s operating profit in the second quarter surged 557% year over year, yet still fell short of market expectations. After the earnings report was released, the ADR plunged 6% in after-hours trading, sliding to $121. Profits keep hitting new highs—so why isn’t the stock getting the memo?

(Background: SK Hynix’s ADR dipped below its issuance price; this week’s earnings estimate for the strongest profit in history couldn’t stop selling pressure.) (Background addition: Crazy! SK Hynix’s ADR traded at a premium that shot up to 51% in three days after listing. Barclays called a target price of $330: the memory shortage is only just beginning.)

Profit growth of 557%—this is SK Hynix’s second-quarter performance. The numbers look gorgeous: it’s one quarter ahead of an entire year. But after the earnings were announced, the company’s ADR still tumbled 6% in after-hours, even as profits logged yet another record high volume. Investors are left wondering: what exactly is the market counting?

Where the results fall short

According to the official earnings report, SK Hynix’s second-quarter operating profit was 60.54 trillion won, up 557% year over year. Revenue came in at 79.32 trillion won, up 257% year over year. In the first half, revenue for the first time surpassed 100 trillion won, setting a company record.

But analysts had previously expected operating profit to land around 64.2 trillion won. The actual figure came in short by nearly 4 trillion won. The revenue consensus was 83.9 trillion won as well, which also didn’t keep pace. The gap between 60.5 trillion and 64.2 trillion won is still under 10%, yet the ADR still dropped 6% after the report—clearly investor tolerance is lower than expected.

Net profit brought a surprise positive—up as much as 1,242% year over year, far above market expectations. However, the company said this was mainly driven by one-time investment gains, not by ongoing profitability from its core business. SK Hynix also disclosed that it has already agreed multi-year contracts with about 10 customers. Traditionally, this is seen as a signal that order visibility is being lifted—yet it still failed to calm the stock price.

Earlier, after trading opened on the Korean market, Hynix’s share price first rebounded and then probed back to new lows. As of the time of writing, the decline was already 7.68%. Samsung Electronics’ share price was also down 3.68% intraday.

How much you earn isn’t the point—how long you can keep earning is

The reason SK Hynix can deliver such financial results is HBM. It’s one of the most sought-after components in this AI boom. Along with AI server DRAM and enterprise-class solid-state drives (eSSD), the three together support this quarter’s high value-added revenue mix.

But the market is no longer satisfied with “how much you made this quarter.” It cares more about “how long these profits can last.” That’s exactly why the company’s multi-year contract deals are being talked up and leveraged heavily. In simple terms, multi-year contracts mean that cloud providers stop placing orders batch by batch for procurement, and instead lock up production capacity for the coming years in exchange for stable supply. For suppliers, that extends order visibility from a single quarter out to several years—information that’s more valuable than the quarterly earnings figures. SK Hynix’s decision this time to seal contracts with 10 customers at once is essentially a pre-allocation of revenue for the next few years.

But the bear camp is tracking a different ledger. Including multiple brokerages such as Mirae Asset Securities, several firms have in recent weeks cut their earnings estimates for SK Hynix’s second quarter. The rationale points to the slowdown in the growth of average selling prices for chips. On top of that, tech companies’ overall leverage levels are elevated. If downstream cloud providers and equipment makers sense cost pressure, there’s a risk of reduced production in end products like personal computers and smartphones—so memory demand may not be as rigid as people expect.