Q1 Profit Surges 405%! SK Hynix Margin Overtakes TSMC

According to SK Hynix, the company reported record-breaking financial results for the first quarter of fiscal year 2026, ended March 31, driven by sustained demand for AI computing. All major financial metrics reached historic highs, with quarterly revenue surpassing KRW 50 trillion for the first time and operating margin climbing to an exceptional 72%, significantly outperforming global semiconductor peers such as TSMC and Micron Technology.

In Q1 2026, SK Hynix posted revenue of KRW 52.58 trillion, representing a 198% year-on-year increase and a 60% rise quarter-on-quarter, marking the first time a Korean chipmaker has exceeded the KRW 50 trillion threshold in a single quarter. Operating profit surged to KRW 37.61 trillion, up 405% year-on-year and 96% sequentially, translating into a record-high operating margin of 72%. Net profit reached KRW 40.35 trillion, a 398% increase compared to the same period last year, significantly exceeding market expectations of KRW 31.95 trillion, with a net margin of 77%.

From a product perspective, DRAM accounted for 78% of total revenue, while NAND contributed 21%. The strong performance was primarily driven by two key factors: robust demand for high-value-added products such as High Bandwidth Memory (HBM), high-capacity server DRAM modules, and enterprise SSDs; and an unprecedented surge in contract prices for commodity DRAM and NAND during the quarter. Industry data indicates that certain DRAM contract prices rose by nearly 83% quarter-on-quarter, while some NAND prices surged by approximately 160%. SK Hynix reported average selling price increases of around 60% for DRAM and 70% for NAND compared to the previous quarter.

The company’s profitability now leads the global semiconductor industry. Its 72% operating margin not only sets a new internal benchmark but also exceeds that of TSMC (approximately 58%), Micron Technology (around 67.6%), and Samsung Electronics (approximately 43% overall). Notably, the margin gap between SK Hynix and TSMC widened from 4 percentage points in Q4 2025 to 14 percentage points in Q1 2026.

This turnaround is particularly striking given that SK Hynix recorded a negative operating margin of -67% in Q1 2023. Following a recovery in memory market supply-demand dynamics and the rapid expansion of AI-driven demand, the company returned to profitability in Q4 2023 and has since achieved consistent margin expansion, reaching 72% in the latest quarter.

Strong earnings have also significantly improved the company’s balance sheet. As of the end of Q1, cash and cash equivalents stood at KRW 54.3 trillion, up KRW 19.4 trillion from the previous quarter, while interest-bearing debt declined to KRW 19.3 trillion. This resulted in a net cash position of KRW 35 trillion. Earlier this year, CEO Kwak Noh-Jung emphasized the importance of financial stability to support long-term investment, setting a target of exceeding KRW 100 trillion in net cash.

Looking ahead, SK Hynix expressed optimism about market conditions. As AI evolves from large-scale model training to “agentic AI” applications requiring continuous real-time inference, demand for both DRAM and NAND is expected to expand further. Despite the typical seasonal slowdown in Q1, the company noted that demand remained strong due to ongoing investments in AI infrastructure and expects favorable pricing conditions to persist.

The company also highlighted that future demand for HBM far exceeds current supply capacity. It is actively maximizing HBM output under existing constraints while carefully balancing production allocation between HBM and conventional DRAM. Reports indicate that SK Hynix is transitioning from short-term contracts to long-term agreements (three to five years) and is in discussions with major AI companies such as Microsoft and Google for long-term DRAM supply, while expanding HBM4 supply to NVIDIA.

To support growing demand, SK Hynix is accelerating capacity expansion. The company plans to significantly increase capital expenditures in 2026, focusing on ramping up mass production at its M15X fab in Cheongju and advancing infrastructure development at the Yongin semiconductor cluster, part of South Korea’s broader initiative to build the world’s largest semiconductor hub.

On the technology front, SK Hynix announced that it has begun mass production of 192GB SOCAMM2 AI server memory modules based on its industry-first 10nm-class sixth-generation (1c) process. These modules deliver more than double the bandwidth of traditional RDIMMs and improve energy efficiency by over 75%.

In NAND, the company has started supplying its consumer SSD “PQC21,” built on 321-layer QLC charge trap flash (CTF) technology. By leveraging a portfolio combining cost-effective TLC and high-capacity QLC products, along with synergies from its subsidiary Solidigm, SK Hynix aims to strengthen its competitiveness in AI data centers and emerging AI PC storage markets.