Japanese flash memory manufacturer Kioxia Holdings has published its quarterly report, projecting an operating profit for October–December 2026 of 2 trillion yen (approx. $12.7 billion). This is about 15% below the analyst consensus forecast of 2.35 trillion yen. Moreover, the document explicitly suggests that after several quarters of rapid appreciation, the growth of NAND memory prices may slow down or stop altogether. For a market that has spent recent months expecting the price rally to continue, this statement came as a surprise.
Quarterly Figures: 22-Fold Profit Surge and First Dividend
For July–September 2026, Kioxia reported a 22-fold jump in operating profit to 1.99 trillion yen, perfectly matching analyst expectations. The company's average selling price for NAND chips during this period rose by approximately 25% compared to the previous quarter, whereas the prior quarter saw growth of about 70%. The forecast for October–December assumes virtually flat prices relative to the third quarter. Simultaneously, Kioxia announced its first-ever dividend—an interim payout of 90 yen per share—serving as a symbolic gesture to investors after a multi-year period of losses and volatile demand.
The Contradiction: Capacities Sold Out, Management Cautious
The main puzzle for analysts was the internal contradiction in the company's stance. On one hand, Kioxia's production capacities for the entire year of 2027 are already sold out, and memory shortages, according to management, will persist at least until the end of the next fiscal year. On the other hand, Chief Financial Officer Akira Manju stated: «Given how much selling prices have already risen, it remains unclear whether they will continue to increase in fiscal 2027, even at a moderate pace». Kenji Yasui, an analyst at UBS Securities Japan, directly asked management during a conference call whether the company was being overly cautious. Analysts noted that major memory makers are locking in multi-year contracts with Meta and Amazon and expanding capacity to capitalize on the shortage—making such pessimistic price expectations look dissonant.
Market Reaction: Kioxia Shares Fall 11%
Following the earnings release, Kioxia shares on Tradegate dropped by 11%. The market context was challenging: that same week, Alphabet reported difficulties in its core advertising business amid rising AI spending, and the financial results of Amazon and Intel also disappointed investors. Doubts about the sustainability of the so-called AI boom were mounting, and Kioxia's cautious tone was interpreted as confirmation that the memory price cycle might be nearing its peak. At the same time, the fact of a 22-fold profit surge and the first dividend indicates that the company has become a direct beneficiary of soaring demand from tech giants.
Strategic Pivot: Betting on AI and Data Centers
Kioxia, which for years faced volatile demand from consumer electronics manufacturers, is now focusing heavily on the artificial intelligence market. Although AI computations are handled by graphics and other accelerators, flash memory is increasingly utilized to store and feed the massive volumes of data required by these systems. Data center shipments are taking an increasingly significant share of the company's business: Kioxia expects such clients to account for over 60% of its revenue in the future. Long-term agreements have already been signed with major cloud providers, covering well over half of expected shipments for 2028, allowing for more accurate demand forecasting.
New SSDs Closer to Accelerators: Reducing HBM Dependency
In addition to ramping up volumes, Kioxia is developing a new generation of SSDs that will be placed closer to AI accelerators to create an additional memory tier. Such drives will reduce the volume of data that needs to be held in expensive DRAM-based HBM, making AI system architectures more cost-effective. Expanding production should eventually narrow the supply-demand gap, though investor opinions on the duration of the NAND shortage remain divided. For Kioxia, the current cycle has been a turning point: for the first time in years, the company is operating at full capacity with long-term contracts, but its management clearly wants to avoid repeating the mistake of 2021–2022, when over-optimism led to overproduction and a price collapse.
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