Kioxia announced its FY2026 second-quarter results for the quarter ended September 30, 2026. Its revenue reached 2.48 trillion yen (approximately US$15.73 billion), surging 453.2% year-over-year and up 40.3% quarter-over-quarter. Non-GAAP operating profit reached 1.988 trillion yen (approximately US$12.61 billion), jumping more than 21.8x year-over-year and up 49.9% quarter-over-quarter. Non-GAAP net profit reached 1.349 trillion yen (approximately US$8.56 billion), soaring 31.4x year-over-year and up 52.1% quarter-over-quarter. All metrics hit record highs and significantly beat previously issued guidance.
Business Breakdown: ASP Rises sharply, Data Center and Enterprise Business Accounted for Approximately 65%
Growth in the quarter was driven primarily by a significant increase in average selling prices (ASP), which rose in the mid-20% range quarter-over-quarter, rather than relying solely on shipment expansion. NAND Flash bit growth was only in the low-teens percentage range quarter-over-quarter, yet all business segments still achieved record revenue.
SSD & Storage business: Revenue reached 1.616 trillion yen (approximately US$10.04 billion), accounting for 65% of total revenue, surging 560.8% year-over-year and up 37.6% quarter-over-quarter. Among this, data center and enterprise segment accounted for approximately 65% of revenue. Driven by robust AI server demand, SSD shipments hit a new high, while the high-ASP product mix further boosted margins. PC and others business accounted for approximately 35%.
Smart Devices business: Revenue has reached 788.9 billion yen (approximately US$4.90 billion), up 401.5% year-over-year and 50.1% quarter-over-quarter. Significantly higher selling prices were the main driver of the segment's record revenue.
Other business: Sales were 75.2 billion yen (approximately US$470 million), up 61.7% year-over-year and 12.6% quarter-over-quarter.
End demand: Data Center Supports Growth, Consumer Performance Diverges
From the end-demand perspective, data center & enterprise demand remained the strongest support. With the gradual adoption of Agentic AI applications, AI-related demand remains strong, KV Cache demand continues to grow, and the explosion of AI-generated data is also accelerating the adoption of high-capacity QLC SSDs.
In smartphones, units moderate at a faster pace for low priced models, while remain resilient for premium models. No significant changes in NAND demand are expected through CY27.
On the PC side, shipments are under pressure by higher BOM costs, and NAND demand is expected to decline through 2027.
NAND Supply-demand Landscape: AI Demand Offsets Consumer Weakness, 2027 Capacity Sold Out
In terms of NAND industry supply and demand, DC/Enterprise demand offsets softer Smartphone/PC demand, with robust demand growth expected in CY2028 as well.
CY26: Bit growth rate in high-teens %;
CY27: Bit growth rate in the low-20% range. Kioxia's bit shipment growth expected to be in line with market outlook. Production capacity has been fully allocated (SOLD OUT).
Cash Flow and Capacity Expansion: Operating Cash Flow Hits Record High, K3 Fab Under Construction
In the quarter, driven by higher selling prices and growth in consumer and enterprise SSD sales, combined with BiCS8 FLASH line expansion, Kioxia's operating cash flow reached 1.513 trillion yen (approximately US$9.59 billion), up nearly 1.7x quarter-over-quarter and a record high. Inventory turnover days fell to 94 days (including strategic DRAM inventory), down 8 days from the prior quarter.
In terms of capital expenditure, capex in the quarter was 84.6 billion yen (approximately US$540 million), mainly for BiCS8/BiCS10 FLASH expansion equipment; the company also received 9.3 billion yen (approximately US$60 million) in government subsidies.
On capacity expansion, Kioxia is enhancing stable supply of cutting-edge BiCS FLASH through expansion at existing fabs (Y7/K2) and construction of a new fab (K3). Site preparation work for Fab 3 at Kitakami (K3) is underway, with production planned to begin in fiscal 2029. Kioxia will make full use of available space within existing fabs and advance the K3 expansion in phases, aligning capacity expansion with market demand growth.
Outlook: Fourth Consecutive Record Quarter Expected
Looking to the next quarter (October–December 2026), Kioxia expects FY26 Q3 revenue of 2.5 trillion yen (approximately US$15.86 billion), up 1% quarter-over-quarter; Non-GAAP operating profit is expected at 2 trillion yen (approximately US$12.68 billion), up 1% quarter-over-quarter, with margins maintained at a high level of 80%. Despite absorbing approximately 55 billion yen (approximately US$350 million) in foreign exchange headwinds, Non-GAAP operating profit is still expected to set a record high for the fourth consecutive quarter.
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