Kioxia's second-quarter operating profit hits a record, with an operating margin of 80.4%
Japan's Kioxia announced that its revenue for the second quarter of fiscal year 2026 (July-September) was 2.48 trillion yen and its operating profit was 1.9947 trillion yen, both records, with an operating margin of 80.4%, higher than the 72% of Samsung Electronics' DS division and the 79.7% of SK hynix. Revenue increased 453.2% year-on-year, and operating profit increased 2222% year-on-year, mainly driven by a quarter-on-quarter increase of more than 20% in the average selling price of NAND and a 560.8% increase in revenue from the SSD business. Kioxia expects third-quarter revenue of 2.5 trillion yen and operating profit of 2 trillion yen, essentially flat, and said that its 2027 production capacity has been fully allocated to customers.
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Japan's Kioxia reported record quarterly revenue and operating profit, driven by growing demand for products used in artificial intelligence (AI) data centers. Its operating margin also exceeded 80%, supported by rising NAND flash memory prices.
Kioxia said on Oct. 30 that revenue for the second quarter of fiscal 2026 (July-September) reached 2.48 trillion yen, while operating profit totaled 1.9947 trillion yen. Revenue rose 453.2% from a year earlier, while operating profit surged 2,222%.
The results marked a second consecutive quarter of record performance following the April-June period. Revenue rose 40.3% from the previous quarter, while operating profit increased 57.1%. Higher NAND average selling prices (ASPs) drove the gains. NAND ASPs rose by more than 20% quarter on quarter in US dollar terms, while bit shipments increased by more than 10%.
Growth was particularly strong in the solid-state drive (SSD) and storage segment. Revenue surged 560.8% from a year earlier to 1.616 trillion yen. The segment includes SSDs for PCs, data centers and enterprises (eSSDs), with data center and enterprise products accounting for more than 60% of segment revenue. Revenue from the smart devices segment, which includes smartphones, tablets, TVs and automobiles, rose 401.5% to 788.9 billion yen.
The operating margin reached 80.4%, up 61.2 percentage points from a year earlier and 8.5 percentage points from the previous quarter. That exceeded the margins reported for July-September by Samsung Electronics' Device Solutions (DS) division, at 72%, and SK hynix, at 79.7%.
Kioxia expects NAND demand to continue expanding, supported by the spread of agentic AI, growing demand for key-value (KV) caching and a surge in AI-generated data. The company anticipates increased adoption of high-capacity quad-level cell (QLC) SSDs, particularly in data centers. By contrast, it expects relatively weak demand in the smartphone and PC markets.
The medium- to long-term outlook remains positive. Kioxia said its entire production capacity for 2027 has already been allocated to customers. More than half of its projected shipments for 2028 have been reserved under multiyear long-term agreements (LTAs).
The company also plans to expand production capacity at its existing Yokkaichi and Kitakami plants while preparing a site for a third facility in Kitakami, known as K3. The new plant is targeted to begin operations in fiscal 2029.
Kioxia, however, expects earnings growth to slow in the third quarter (October-December). Its fiscal 2026 third-quarter forecast calls for revenue of 2.5 trillion yen and operating profit of 2 trillion yen, both virtually unchanged from the previous quarter. The company attributed the slowdown to foreign exchange pressures stemming from a stronger yen. It expects currency fluctuations to have a negative impact of about 55 billion yen.