To The Moon

SKHY vs. STX: Why Record Earnings Sent One Down and the Other Up

SKHY's record quarter was broadly in line with Korea Investment & Securities' latest preview, while STX delivered the cleaner beat-and-raise. 

The earnings calls reveal why HDD currently has the better tactical setup: longer demand visibility, lighter capital intensity and lower expectation risk.

SKHY: Record Results, but Mostly as Expected

SK hynix reported Q2 FY2026 revenue of $54.1 billion and operating profit of $41.3 billion, with operating margin reaching 76.3%.

The figures look spectacular year over year, but the quarter itself was not a major positive surprise for investors following the latest Korean sell-side previews.

Korea Investment & Securities had forecast revenue of KRW80.906 trillion and operating profit of KRW60.422 trillion. Against those estimates, actual revenue was only 2.0% lower, while operating profit was 0.2% higher and operating margin was 1.6 percentage points better. The broker had already expected SK hynix to fall below the older market consensus because its high HBM mix limited its exposure to the fastest increases in conventional-memory pricing.

Pricing Was Strong, but DRAM Mix Was Slightly Softer

Revenue increased 51% sequentially as DRAM bit shipments rose by a high-single-digit percentage and DRAM ASP increased approximately 30%. NAND bit shipments grew by a mid-teens percentage, while NAND ASP rose by the mid-50% range.

On the call, management explained why DRAM ASP growth was somewhat below market expectations: some high-value products were pushed into the second half, while product-mix changes diluted the blended ASP.

That should partly reverse. Management expects stronger second-half bit growth as HBM4 ramps and 1c-nanometer conventional DRAM shipments increase. The combination of higher HBM4 sales and a richer value-added mix should support both blended ASP and earnings.

What the SKHY Call Added

AI efficiency is not weakening memory demand. Management argued that more efficient models allow the same infrastructure to serve more users and applications, lowering the cost of AI services and increasing total consumption. 

The LTAs are stronger than ordinary supply agreements. SK hynix said the typical contract period is around five years, although terms vary by customer and product. Agreements can incorporate long-term volume commitments, variable pricing mechanisms and customer deposits designed to improve enforceability and demand visibility. Around ten customer negotiations have already been concluded. 

HBM4 execution appears on track. Management said HBM4 yield and quality are already approaching the levels of mature HBM3E products. Production shipments began in Q2, with the main ramp scheduled for the second half. HBM4E samples have been delivered, and volume production is targeted for 2027. 

Pricing negotiations for 2027 are progressing smoothly. SK hynix said strong conventional DRAM pricing could influence HBM negotiations, but HBM prices also need to reflect additional wafer consumption, TSV and packaging capacity, technical complexity, qualification requirements and the value delivered to customers. 

Capacity expansion will be staged against confirmed demand. Management rejected the idea that its investment roadmap automatically implies oversupply, arguing that equipment installation and production ramp-up will be phased according to customer visibility and investment returns.  

Finally, management said it intends to communicate additional shareholder-return plans within 2026, although no details on format, size or timing were disclosed. 

STX: A Cleaner Beat and a Much Stronger Guide

Seagate's quarter provided a clearer positive surprise.

Q4 FY2026 revenue reached $3.63 billion, versus the previous guidance midpoint of $3.45 billion, representing an upside of approximately 5%. Non-GAAP EPS reached $5.71, versus the prior midpoint of $5.00, an upside of roughly 14%.

Non-GAAP gross margin reached 52.7%, operating margin reached 44.6%, and free cash flow was $1.12 billion, equivalent to approximately 31% of quarterly revenue.

Nearline HDD supply is largely allocated through calendar 2028, while customers are already extending their planning horizons into 2029 and beyond. 

The guide was the real catalyst. For Q1 FY2027, Seagate guided to:

– Revenue of $4.1 billion, plus or minus $100 million

– Non-GAAP operating margin of approximately 50%

– Non-GAAP diluted EPS of $7.30, plus or minus $0.20

Why the Market Currently Prefers the HDD Setup

HDD supply is harder to accelerate. Adding DRAM or NAND capacity is expensive and slow, but current profits are already encouraging SK hynix, Samsung and Micron to commit very large sums to new capacity. Investors are therefore debating when supply growth will catch up. Seagate's capacity is largely allocated through 2028, while its capital spending remains comparatively restrained. Concerns about memory-sector investment and eventual oversupply have been one driver of the recent semiconductor selloff.

The competitive narrative is less crowded. The DRAM/HBM trade carries concerns about Samsung's recovery, Micron's expansion and China's progress in conventional memory. Nearline HDD remains concentrated among a very small number of suppliers, with long qualification cycles and barriers across heads, media, firmware and HAMR manufacturing.

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