Kioxia kicks off “massive buyback” – Is the “buyback bull market” for storage giants on the way?

Japanese NAND flash memory giant Kioxia has announced a stock buyback plan of up to 800 billion yen, making it the first company in the global storage chip industry to launch a large-scale repurchase, drawing widespread market attention. This move not only signals the arrival of a super-profitable cycle in the NAND industry but may also kick off a new wave of structurally driven valuation boosts for the storage sector fueled by corporate buybacks—a rally that could spread from Tokyo to Seoul.

According to a research report by JPMorgan on July 31, Kioxia's non-GAAP operating profit for the first fiscal quarter of FY2027 (1Q) reached 1.326 trillion yen, a year-on-year surge of more than 28 times, and its operating margin was as high as 75%. The single-quarter profit has already exceeded the entire FY2025 annual result.

Meanwhile, the company announced a buyback plan of up to 800 billion yen and set a target of about 50% total shareholder return—the first case of its kind in the storage industry ecosystem. UBS Securities Research pointed out that if half of the expected FY2028 net profit of 9.42 trillion yen is fully allocated to share buybacks, it would effectively reduce about 19% of the float, representing 19% of the company's current market cap of 25 trillion yen.

At the same time, a "buyback bull market" narrative is taking shape for Korea’s memory giants Samsung Electronics and SK Hynix. According to Nomura Securities' research report on July 28, after the KOSPI index went through both liquidity and leverage shocks, the market is switching from a "leverage bull" to a "buyback bull"—Nomura expects the buyback scale of listed Korean companies to reach a record 116 trillion won by 2026, with approximately 90% coming from the two semiconductor giants, further expanding to 274 trillion and 328 trillion won in 2027 and 2028 respectively.

Kioxia's earnings for FY2027 Q1 overall met expectations, but there was a clear divergence in the structure of volume versus price.

Kioxia’s Q1 revenue reached 1.767 trillion yen, up 415% year-on-year and 76% quarter-on-quarter; non-GAAP operating profit was 1.326 trillion yen with an operating margin of 75%, the highest among NAND manufacturers that have reported their results. The core driver of the results was price, not shipment volume—ASP soared by about 70% quarter-on-quarter, while bit shipments grew only in the low single-digit percentages, with some shipment volume deferred from Q1 to Q2.

In terms of applications, SSD and storage business recorded single-quarter sales of 1.175 trillion yen, up 440% year-on-year, accounting for 66% of total revenue. Data center and enterprise business contributed over 60%, being the main source of high ASPs. Sales for smartphone applications rose 56% quarter-on-quarter, while PC and server-related applications increased 96%. In addition, the company's latest BiCS 8 FLASH process now accounts for over 50% of total output.

UBS noted that Q1's operating profit was basically in line with both the guidance of 1.30 trillion yen and the consensus market expectation of 1.38 trillion yen, with about 2-3 percentage points of shipment discrepancies due to some end-of-quarter delivery delays.

Kioxia management has issued guidance for 2Q revenue at 2.39 trillion yen (up 35% quarter-on-quarter) and operating profit at 1.90 trillion yen, corresponding to an operating margin of around 79.5%. This matches UBS and JPMorgan consensus expectations but falls short of the more bullish 2.0–2.5 trillion yen forecasts from the buy-side.

According to UBS, Kioxia’s Q2 numbers will still be price-driven, with bit ASP expected to rise by about 30% in USD terms and 34% in JPY terms; bit shipments are expected to grow by about 10% quarter-on-quarter, higher than the previous +5% assumption, mainly due to the catch-up of shipments deferred from Q1. Management states that Apple’s demand will increase in Q2, possibly due to more competitive pricing.

More noteworthy is Kioxia’s view on medium-term supply and demand. According to JPMorgan, Kioxia expects industry bit demand growth for the full year 2026 to be around the high double-digit percentage range, and predicts the NAND market will move to a demand-exceeding-supply structure in 2027, driven largely by new compute workloads represented by Agentic AI—management clearly stated this trend remains in the "very early stages."

The core significance of Kioxia’s buyback plan lies not just in its scale, but in marking a systemic shift in the shareholder return framework for the storage industry.

Kioxia’s management announced a buyback plan tied to a roughly 50% total shareholder return target, coordinated with a plan for dividend payouts starting from FY2028. UBS estimates show: If half of projected FY2028 net profit of 9.42 trillion yen is allocated to share buybacks, about 19% of the float could be eliminated, and this buyback amount alone represents 19% of the company’s current 25 trillion yen market cap.

Based on this, UBS analysts switch their valuation framework from FY2029 BPS to FY2028 metrics, raising their FY2028–FY2031 average ROE estimate from 42% to 48%, and PBR multiple from 4.63x to 5.23x (using a 9.1% cost of capital). Notably, due to the reference year change, UBS slightly cut its target price from 144,000 yen to 126,000 yen but maintained a Buy rating; JPMorgan’s target is 155,000 yen, also reiterating Overweight. As of July 31, Kioxia’s share price was 46,500 yen, with both firms seeing significant upside potential.

UBS points out that highly profitable, undervalued companies initiating buybacks often trigger multiple expansion. According to their quantitative research, Kioxia’s industry structure and regulatory environment are expected to improve over the next six months, with the next major catalyst expected during the October 31, 2026 earnings season, when further shareholder return policy disclosures are anticipated.

Kioxia’s buyback is not an isolated incident, but could herald a broad “buyback bull” for the entire storage industry.

According to Nomura Securities’ July 28 research report, as KOSPI’s deleveraging process nears its end, the driver for re-rating in Korean equities is expected to switch from “liquidity and leverage” to “fundamentals and corporate buybacks.” Nomura projects that buybacks among listed Korean firms will hit 116 trillion won in 2026—about 2.2% of KOSPI’s market cap, well above the 0.2%–0.9% historical average from 2018–2025; expanding to 274 trillion won in 2027 and 328 trillion won in 2028. About 90% of the funds will come from the two main semiconductor giants, and their sustained and predictable buybacks will create structural market demand.

Nomura maintains a 2026 KOSPI target range of 10,000–11,000 points, and highlights the forthcoming "low PBR company list" due for release in November as the most direct stock-specific catalyst. Related companies are expected to use this opportunity to retire treasury shares, boost dividends, and dispose of non-core assets, driving Korean stocks to “recover lost ground.”

In summary, from Kioxia’s 800 billion yen buyback to the largest buyback cycle in history led by Korea’s two storage giants, a clear cross-market logic chain is forming in the storage sector: the AI compute cycle underpins earnings, profits convert into shareholder returns, buybacks reduce float and drive up valuations. Whether this “buyback bull market” can truly materialize will depend on this year’s Q4 earnings season—the details of Kioxia’s shareholder return policy and the rollout of Korean government governance policies will serve as the final validation of this thesis.