Will the 'Buyback Bull Market' Arrive for Memory Giants? Kioxia Kicks Off with 800 Billion Yen Stock Repurchase Plan

Japanese flash memory giant Kioxia has recently made a shocking announcement, revealing a stock repurchase plan worth up to 800 billion yen—marking the first time a major player in the global memory chip industry has initiated such a large-scale treasury stock operation. This move is widely interpreted by the market as a signal that the super-cycle for NAND flash memory has officially begun, sparking investor speculation over whether a buyback-driven rally in memory stocks will spread from Japan to South Korea.

According to a research report released by JPMorgan on Friday (31st), Kioxia achieved a non-GAAP operating profit of 1.326 trillion yen in the first quarter of its fiscal year 2027, representing a year-on-year increase of over 28 times. The operating margin surged to 75%, with quarterly profits surpassing the company’s full-year earnings for fiscal year 2025.

Analysts attribute this explosive growth primarily to a 'volume-price divergence.' While Kioxia’s revenue for the quarter reached 1.767 trillion yen—a 76% increase quarter-on-quarter and a 415% year-on-year rise—the real driver of profit growth was price, not shipment volume.

The average selling price (ASP) surged approximately 70% in a single quarter, while bit shipments grew only in the low single digits, with some orders delayed into the second quarter.

From a business structure perspective, the solid-state drive (SSD) and storage solutions segment contributed the most, generating 1.175 trillion yen in quarterly revenue, a 440% year-on-year increase, raising its share of total revenue to 66%. Over 60% of this came from data center and enterprise applications, which were the primary drivers behind the ASP surge. Smartphone-related revenue rose 56% quarter-on-quarter, while PC and server applications surged 96%.

Additionally, the company’s latest-generation BiCS 8 process products now account for more than half of total output.

UBS Securities noted that the first-quarter operating profit aligns closely with the company’s prior guidance of 1.30 trillion yen and the market consensus of 1.38 trillion yen. Minor discrepancies were mainly due to shipment delays at the end of the quarter.

Kioxia’s Second-Quarter Outlook Conservative, but Demand Remains Optimistic

Looking ahead to the second quarter, Kioxia’s management forecasts revenue of 2.39 trillion yen, a 35% increase from the previous quarter, and operating profit of up to 1.90 trillion yen, corresponding to a margin of approximately 79.5%. While this is in line with estimates from UBS and JPMorgan, it falls short of some buy-side institutions’ optimistic projections of 2.0 to 2.5 trillion yen.

UBS further analyzed that price will continue to drive second-quarter performance, with the dollar-denominated bit ASP expected to rise 30% and yen-denominated ASP up 34%. With delayed orders from Q1 being fulfilled, shipment volume is expected to grow by around 10% quarter-on-quarter—better than the previously assumed conservative 5%.

Management also revealed that Apple’s (AAPL-US) procurement demand will rebound in the second quarter, possibly due to relatively favorable pricing.

Notably, Kioxia remains bullish on medium-term supply and demand.

JPMorgan cited company commentary indicating that NAND industry bit demand growth for 2026 is expected to reach high single-digit to double-digit percentages, with a supply shortage anticipated in 2027—primarily driven by emerging computing demand, such as AI agents.

Kioxia’s management described this trend as still being in an 'extremely early stage.'

Kioxia’s 800 Billion Yen Buyback—Valuation Framework Also Revamped

Beyond the quarterly profit figures, the market is more focused on the strategic significance of Kioxia’s buyback plan—potentially setting a new benchmark for shareholder returns in the memory industry.

The plan links the buyback to a target of approximately 50% total shareholder return and is accompanied by a dividend policy starting from fiscal year 2028.

UBS estimates that if half of the projected net profit of 9.42 trillion yen in FY2028 is allocated entirely to buybacks, the company could theoretically reduce its outstanding shares by about 19%. The buyback amount itself represents 19% of the company’s current 25 trillion yen market capitalization.

As a result, UBS analysts have shifted their valuation benchmark from the previously used FY2029 book value per share to FY2028 metrics. They have also raised their average return on equity (ROE) forecast for FY2028 to FY2031 from 42% to 48%, and increased the price-to-book (P/B) ratio from 4.63x to 5.23x (assuming a cost of capital of 9.1%).

However, due to the base-year shift, UBS’s target price was slightly lowered to 126,000 yen (from 144,000 yen), though the 'Buy' rating was maintained. JPMorgan, meanwhile, set a target price of 155,000 yen, maintaining an 'Overweight' rating. With Friday’s closing price at 46,500 yen, both institutions believe the stock has significant upside potential.

UBS noted that once high-earning, relatively undervalued companies initiate buybacks, valuation multiples often expand.

Their quantitative assessment also suggests that the industry structure and regulatory environment surrounding Kioxia are expected to continue improving over the next six months. The next key milestone will be the financial results announcement on October 31, 2026, when the company is expected to further disclose details of its shareholder return policy.

South Korea Also Brewing a 'Buyback Bull Market'—Samsung and SK Hynix to Play Key Roles

More importantly, analysts suggest that Kioxia’s buyback move may only be the beginning of a broader buyback wave across the memory industry.

Nomura Securities’ report on July 28 indicated that as deleveraging pressure on South Korea’s KOSPI index gradually subsides, the re-rating momentum in the Korean stock market is shifting from previously reliance on 'liquidity and leverage' to 'fundamentals and corporate buybacks.'

Nomura forecasts that South Korean listed companies’ total buyback volume will reach 116 trillion won in 2026—about 2.2% of KOSPI’s total market cap—far exceeding the historical average of 0.2% to 0.9% from 2018 to 2025. By 2027 and 2028, buyback volumes are projected to expand further to 274 trillion won and 328 trillion won, respectively.

Approximately 90% of these funds are expected to come from two semiconductor giants—Samsung Electronics and SK Hynix (KR000660). Their stable and predictable buyback behavior is expected to provide structural buying support to the market.

Nomura maintains its KOSPI index target range of 10,000 to 11,000 points for 2026 and lists the upcoming 'low P/B ratio company list'—expected to be released in November—as the most direct catalyst for individual stocks.

Analysts believe that related companies could accelerate treasury stock cancellation, increase dividends, and divest non-core assets, helping the Korean stock market 'regain lost ground.'

Overall, from Kioxia’s 800 billion yen buyback to the potential for the two South Korean memory giants to lead the largest buyback wave in history, a clear cross-market logic is emerging in the memory industry: AI computing demand supports profit growth, profits are converted into shareholder returns, and buybacks reduce outstanding shares, driving up overall valuations.

Whether this 'buyback bull market' will truly materialize hinges on the upcoming Q4 earnings season. At that time, the details of Kioxia’s shareholder return policy and the progress of South Korea’s corporate governance reforms will serve as key indicators of whether this logic holds.