[News] Kioxia 1QFY26 Gross Margin Hits 80%; Reaffirms 50% LTA Target for 2028

Kioxia announced its fiscal 2026 first-quarter results today, reporting revenue of JPY 1.767 trillion, up 76.2% quarter over quarter and 415.5% year over year, exceeding the company’s guidance. Profitability also improved significantly, with gross margin reaching 80%, or 82% excluding JV items, while operating margin rose to 75%. According to Nikkei, net profit for the April–June quarter reached JPY 842.1 billion, but fell short of both the market consensus of JPY 968.7 billion and the company’s own guidance of JPY 869.0 billion.

The company said the widespread adoption of agentic AI is driving strong NAND demand growth, which it believes is still in its early stages. It also highlighted progress on its long-term agreement (LTA) strategy, saying it remains on track to secure 50% LTA volume coverage for calendar 2028 with key customers, providing long-term revenue visibility while deepening engagement with high-value customer segments.

However, according to Newspim, the market believes Kioxia’s disclosure on long-term contracts is more limited than that of global memory makers, noting that Samsung Electronics and SK hynix disclose details such as the number of long-term contract customers, contract terms, and advance payments during their earnings calls.

Outlook and Capacity Expansion

AI data centers continue to drive growth in Kioxia’s NAND flash business. According to Nikkei, sales from data centers and related segments reached JPY 1.1747 trillion in the April–June quarter, more than five times higher than a year earlier. The company generated nearly as much revenue in a single quarter as it did during the entire fiscal year ended March 2026.

Kioxia said NAND demand continued to outpace supply, driving a roughly 70% quarter-over-quarter increase in average selling prices (ASPs), while bit shipment growth remained in the low single digits. Looking ahead, the company expects bit demand to grow in the high teens in calendar 2026, with its own bit shipment growth in line with the broader market. It also expects demand to continue outpacing supply in calendar 2027.

However, the broader industry outlook is less favorable. According to TrendForce, NAND Flash is projected to enter a looser supply environment in 2H27 as new production capacity comes online while consumer electronics demand remains weak, increasing downward pressure on prices.

Meanwhile, for the fiscal second quarter, Kioxia expects the strong momentum to continue, guiding for revenue of JPY 2.390 trillion, up 35.2% quarter over quarter, and Non-GAAP net income of JPY 1.280 trillion, up 44.3% sequentially. Still, Nikkei notes that the company’s net profit forecast fell short of the consensus estimate of JPY 1.3431 trillion.

On the technology front, Kioxia said it is advancing next-generation NAND technology through production of BiCS10 at its Kitakami plant and development of BiCS11, Investing.com notes. The company is also developing AI inference SSDs and UFS 5.0 solutions for edge AI devices. It plans average annual capital expenditures of JPY 470 billion from FY2026 through FY2028, along with approximately JPY 200 billion in R&D spending for FY2026, the report adds.

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(Photo credit: Kioxia)