SK Hynix shares jump 11% after record quarterly profit, outperforming broader market

South Korean chipmaker SK Hynix shares closed 10.89% higher on Wednesday after the company reported record quarterly profit that sharply beating estimates, and announced over $25 billion in dividends and buybacks.

Here are SK Hynix's third-quarter results compared with LSEG SmartEstimates, which are weighted toward forecasts from analysts who are more consistently accurate:

Revenue: 104.62 trillion won ($78.86 billion) vs. 98.34 trillion won expected

Operating profit: 83.33 trillion won vs. 76.72 trillion won expected

Revenue rose 327.9% from a year earlier, while operating profit climbed 632.1% year on year.

Compared with the previous quarter, revenue climbed 31.9%, while operating profit surged 37.6%.

The gains outpaced the benchmark Kospi index, which closed 6.63% higher.

The company posted record quarterly revenue and operating profit, with sales exceeding 100 trillion won for the first time, as it announced plans to return about 100 trillion won to shareholders — including at least 30 trillion won in cash dividends and 60 trillion won in share buybacks and cancellations.

In the earnings call, SK Hynix CEO Kwak Noh-Jung cited financial market volatility and a correction in semiconductor stocks as the main reasons to halt its review of potential pre-IPO fundraising and IPO options for its U.S. subsidiary Solidigm.

Solidigm has concluded that an IPO would not fully deliver the anticipated benefits at this time.

The company had said it would continue to assess investment timing, scale and financing options to support Solidigm's growth and enhance shareholder value.

Kwak also outlined plans to return gains from its investment in Japanese chipmaker Kioxia to shareholders, saying that, "We intend to return the gains realized from our investment in Kioxia this year to our shareholders through a special dividend."

The chipmaker approved a third-quarter dividend of 14 trillion won, including a special dividend funded by gains from its investment in Kioxia.

SK Hynix will also buyback 20 trillion won in shares, half of which will be cancelled this year, after completing its previously announced 40 trillion won shares buyback last week — which will be cancelled shortly — as mentioned in the earnings call.

The company also plans to raise its shareholder return target to more than 50% of cumulative free cash flow generated between 2025 and 2027, as it expects AI investment momentum to continue due to greater adoption of AI services and a more diverse investor base.

The company added that it expects the structural supply-demand imbalance in the memory market, where demand outpaces supply, to continue for the time being.

Mehdi Hosseini, senior equity research analyst at Susquehanna International Group, reiterated his neutral rating on SK Hynix following its third-quarter earnings, saying he preferred Micron and Samsung Electronics over the South Korean chipmaker.

He cited Micron's more diversified memory portfolio and Samsung's foundry business as offering a better risk-reward profile.

Hosseini added that SK Hynix shares were undervalued and that he preferred its U.S.-traded American depositary receipts (ADRs) over its South Korean-listed shares, citing the larger pool of potential investors in the U.S.

"I would prefer the ADR in U.S.," he told CNBC's "Squawk Box Asia," adding that he was unsure whether there were enough additional buyers in the Korean market.

SK Hynix expects HBM4 to surpass HBM3E in both shipments and revenue in the fourth quarter, as it ramps up production at its M15X facility in Cheongju, South Korea.

HBM, or high-bandwidth memory, is a type of advanced memory used alongside AI processors to handle large amounts of data. HBM4 is the sixth generation of the technology, which started mass productions and shipments in the third quarter.

Average selling prices for DRAM rose by a high-20s percentage from the previous quarter, driven by higher conventional DRAM prices and a growing share of higher-priced HBM4 sales.

Meanwhile, shipments of server DDR5 memory chips — a type of memory used in data center servers — rose more than 40% from the previous quarter, as said in the call.

The company has secured long-term agreements with 14 major customers covering more than 50% of its production capacity for 2027 and 2028, expecting memory demand to outpace supply through 2030 and plans to significantly increase investment next year.