Kioxia Earnings Preview: Can Stock Rebound After 60% Pullback? NAND Supply-Demand and Buybacks Are Key

TradingKey - On July 31, Kioxia will release its first-quarter earnings report for fiscal year 2026. However, the backdrop for this report is already completely different from a month ago. On June 22, Kioxia's stock price topped Japan's market capitalization rankings at 112,700 yen (about $689) per share; as of the close on July 30, it stood at 39,500 yen per share, down nearly 66% from its peak. Compared with the profit figures of the past three months, the market is more focused on whether this earnings growth rate can be sustained.

[Source: TradingView]

Market Focus Shifts to NAND Pricing Logic as Earnings Suspense Ends

On May 15, Kioxia pre-released its Q1 earnings guidance: revenue of 1.75 trillion yen, operating profit of 1.298 trillion yen, and net income of 869 billion yen. A single quarter's profit surpassed that of the entire previous fiscal year (554.5 billion yen).

Institutions are even more optimistic than the company itself. Goldman Sachs ( GS) expects operating profit of 1.417 trillion yen, while Citi ( C) expects 1.40 trillion yen, with both institutions raising their target prices to 116,000 yen and 140,000 yen, respectively, at the end of June.

However, the positive catalyst of strong earnings growth has been fully priced in by the previous rally, and the market's focus has now shifted to the NAND price hike logic.

Kioxia Shares Slump More Than 60%; What Is the Market Panicking About?

The thesis for NAND price hikes is being tested. From a fundamental perspective, NAND supply and demand remain tight. Kioxia's May guidance clearly stated that AI data center demand continues to strengthen and supply will remain tight in fiscal 2027. TrendForce's latest July report also confirmed that the NAND supply-demand gap in 2026 will be around 4%-5%, maintaining a shortage trend.

With sound fundamentals, why did the stock price fall? The plunge on July 28 was not due to negative news specific to Kioxia itself, but rather a collective panic in the global AI memory sector. The Philadelphia Semiconductor Index fell 2.23%, and Nvidia ( NVDA) fell nearly 5%, and SanDisk ( SNDK) fell over 11%, while South Korea's KOSPI triggered a circuit breaker. The trigger was a collapse in confidence sparked by the controversy surrounding Nvidia's $750 billion revolving credit facility, making Kioxia—which had previously posted the largest gains—the natural first choice for capital flight.

Deeper concerns stem from the supply side. Samsung, SK Hynix, and Kioxia itself are all expanding capacity, and TrendForce expects supply growth to outpace demand in the second half of 2027. The China factor is accelerating this process; YMTC's Phase 3 fab has entered the equipment installation phase, with domestic equipment procurement exceeding 50% for the first time. It is expected to begin production by the end of 2026 and reach a monthly capacity of 50,000 wafers in 2027.

Meanwhile, YMTC also plans to build two more new fabs. Once all three new fabs are fully operational, its overall capacity will more than double current levels. TrendForce expects that China's share of global NAND bit output will rise to nearly 19% in 2027, presenting an additional supply pressure that cannot be ignored.

Bain Capital's exit is also a focal point of intense market discussion. The private equity firm, which led the acquisition of Toshiba Memory (Kioxia's predecessor) in 2018, liquidated all of its shares in early July, cashing out a total of approximately $17 billion, which represents the largest single return in the history of Japanese fund investing. From holding about a 55% stake at the time of the IPO to completely exiting, Bain took less than two years.

However, institutional interpretations of this signal are clearly divided. Some analysts believe that finding buyers to take over such a large block of shares indicates that buyer demand remains robust and eliminates the long-term overhang on the stock price from major shareholder selling, which is a positive signal. Yet, Bain's decision to exit completely after the company became Japan's largest by market capitalization has indeed prompted some investors to re-examine the medium-to-long-term value of this stock.

Three Earnings Signals to Watch: Q2 Guidance, Production Pace and Buyback Signals

Earnings delivery is no longer the main source of suspense, as actual figures are highly likely to land in the mid-to-upper range of the guidance. What will truly determine the stock price trajectory is how management addresses three core concerns:

First is the Q2 outlook. Goldman Sachs pointed out that when the guidance was released in May, prices for approximately 30% of Q2 shipments had not yet been locked in, and the actual transaction prices of these orders will directly affect Q2 performance. The market wants to hear management's latest assessment of NAND average selling price (ASP) and shipment trends, as well as whether enterprise SSD demand can offset the ongoing weakness in consumer electronics. TrendForce expects global smartphone production to decline by 15%-20% year-on-year in 2026.

Second is the supply outlook. Management's assessment of capacity and price trends from the second half of 2026 through 2027 is crucial. Signaling that the pace of capacity expansion remains controlled would help ease oversupply concerns. Goldman Sachs' channel checks indicate that major memory manufacturers continue to prioritize capital expenditure for DRAM, leaving new NAND capacity growth limited until at least 2028.

Third is shareholder returns. Against the backdrop of a deep correction in the stock price, share buyback plans have become a key variable influencing sentiment. Kioxia made it clear in May that dividend distribution is a priority while retaining flexibility for share buybacks. Whether management announces an official buyback during this briefing will serve as an important signal for the market to judge whether the company considers its stock undervalued. The signaling effect of a buyback may be just as important as the buyback itself.

An earnings report that merely meets expectations is highly unlikely to reverse the downward trend. On July 29, Kioxia's shares surged as much as 9.58% intraday on SK Hynix's better-than-expected earnings, only to reverse sharply and fall over 10%, indicating a strong inclination among investors to sell on the good news. Management's statements on price trends, capacity expansion pace, and buybacks will play a far greater role in determining whether the stock price can stabilize than the Q1 profit figures themselves. Against the backdrop of Bain Capital clearing its position, spreading concerns over refinancing, and the collapse of sector sentiment, this earnings report faces a tougher uphill battle than ever.