- Fair Value Estimate
: JPY 65,000.00 - Morningstar Rating
: ★★★★ - Morningstar Economic Moat Rating
: None - Morningstar Uncertainty Rating
: Very High
Kioxia’s 285A June-quarter revenue and operating margin grew 76% and 1,236 basis points sequentially to JPY 1.8 trillion and 72%. Management guided for JPY 450 billion in capital expenditures for fiscal 2026 and average annual capex of JPY 470 billion between fiscal 2026 and 2028.
Why it matters: Revenue missed our forecasts by 7%. Bit shipments came in 4% below our estimates due to temporary shipment delays toward the end of the quarter, while NAND prices also fell slightly short, likely driven by stronger resistance to price hikes from device customers.
- Device leaders such as Apple and Samsung saw significant margin compression in the latest quarter, implying that brands are struggling to pass on rising memory costs to consumers without materially destroying demand. We foresee rising pushback on future pricing negotiations.
- Kioxia’s capex guide was more restrained than expected, as it reiterated its plans to increase volumes through process advancement. We like management’s investment discipline, as we believe this reduces the extent of fixed-cost overhang in downcycles.
The bottom line: We keep our fair value estimate of Kioxia at JPY 65,000 per share. Our view of long-term cyclicality remains, but the recent selloff on softer memory price hikes looks overdone. NAND remains in deep shortage, and we expect near-term pricing and profitability to stay resilient. Shares look attractive.
- We lower our fiscal 2027 and fiscal 2028 revenue and operating margin by 5%-6% and 45-255 basis points on lower peak NAND prices. We maintain our view of a second-half 2028 cycle turn, but raise our midcycle operating margin by 199 basis points to underscore Kioxia’s disciplined capex approach.
Coming up: Kioxia announced a JPY 800 billion buyback program and aims to return 50% of excess free cash flow to shareholders. We like that the firm is unlocking value on its balance sheet by directing cash to investors rather than undertaking aggressive expansion that could weigh on longer-term returns.
Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.
The author or authors do not own shares in any securities mentioned in this article.
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