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The revenue and profit outlook announced by Kioxia for this quarter was not as good as expected, leading to a sharp decline in the share price in early trading. Analysts believe the short-term trend is conservative, but there is still room for a recovery in shipments and NAND demand early next year.
Kioxia’s profit outlook for this quarter is not as good as expected, and the price rise of NAND flash memory may also temporarily stop. The share price fell as much as 14% in early trading on Monday. Analysts believe that to expect a reversal in the share price, we still need to wait for the doubts about data center investment to subside or for the company to release positive news such as buying back treasury shares. However, some shipments may be postponed until early next year, when there will be a chance to resume profit growth.
Kioxia estimates operating profit in the fiscal third quarter from October to December will be 2 trillion yen (about US$12.7 billion), below the average analyst estimate of 2.35 trillion yen compiled by Bloomberg; Revenue is expected to be 2.5 trillion yen, below market expectations of 2.9 trillion yen; Net profit is expected to be 1.36 trillion yen, less than the expected 1.62 trillion yen.
Sumitomo Mitsui Nikko Securities estimates that Kioxia’s revenue for the quarter is expected to grow about 1% quarter-on-quarter. Exchange rate changes will reduce revenues by approximately 2.5%. Shipments will remain stable in terms of storage capacity, and the average selling price will increase only slightly.
Sumitomo Mitsui Nikko Securities believes that the financial report is not satisfactory at first glance, but the details are still worthy of attention. Compared to market trends and peer performance, Kioxia’s average selling price estimate is conservative; Increased shipments of smartphone products may also reduce the overall average selling price.
The agency said changes in customer demand could delay shipments of some data center and enterprise products from January to March next year. Therefore, shipments and average selling prices based on storage capacity may outperform early next year.
Citigroup believes that the financial report is disappointing and the outlook for October to December is worse than recent expectations, causing the stock market to become pessimistic. However, Kioxia expects its shipments from January to March next year to increase by about 10% quarter-on-quarter, which is different from the usual seasonal trend and is more reassuring.
Kioxia declared its first dividend, with an interim dividend of 90 yen per share, totaling approximately 48 billion yen. Sumitomo Mitsui Nikko Securities believes that the total dividend distribution is too small.
Citi reported that given the need to pay more capital expenditures, accumulate cash and pay corporate income tax in the second half of the year, it may be difficult for Kioxia to buy back 1 trillion yen of treasury shares this quarter or in the near future.
Citigroup believes that for the share price to rebound it will have to wait until the market’s doubts about the pace of data center investment subside, or Kioxia will implement treasury shares.
Bloomberg Industry Research believes that although the revenue and operating profit outlook this quarter is not as good as expected, Kioxia’s operating profit may still increase again from January to March next year. If NAND demand in 2027 is calculated based on storage capacity, the growth rate could reach more than 20%, which is expected to continue the strong growth of Kioxia’s shipments during the 2028 fiscal year.
Bloomberg Industry Research points out that NAND supply and demand remain low, along with an increased proportion of high-priced server products, which could still drive up the selling price per unit of storage capacity. Kioxia also expects that data center and enterprise demand can offset the impact of weak demand for smartphones and PCs, and demand will still grow strongly in 2028.
Summary FAQ
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The main reason is that the company’s revenue, operating profit and net profit forecasts for October to December are all below the market’s average expectations, making investors worried about the slowdown in profit momentum and suspecting that the price rise of NAND flash memory may temporarily stop.
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Analysts noted that Kioxia’s forecasts for average selling prices and shipments are conservative. Some data center and enterprise orders may be postponed until early next year, when there will be an opportunity for improvements in shipments and selling prices calculated based on capacity.
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Citi believes that for the stock price to reverse, it still needs to wait for the market’s doubts about data center investment to subside or for the company to implement treasury stocks; At the same time, the tight supply and demand of NAND and the increase in the proportion of high-value server products will also help mid- to long-term growth.
