Goldman Sachs Morning Briefing: SK Hynix Memory Prices Rise as Cloud Growth and Profit Recovery Diverge
SK Hynix’s third-quarter profit beat expectations, driven by memory prices; Microsoft and Alphabet posted strong cloud growth, but Alphabet’s search revenue and overall profit fell short of Goldman Sachs estimates. Goldman also expects the Federal Reserve to raise rates once more in December.
Original source：Goldman SachsFirst published on Unhidea：Original source date：
Key takeaway
Goldman Sachs sees continued strength in AI memory and cloud demand, but companies are translating that demand into profits at different speeds. It also expects the Fed’s rate-hiking cycle to be nearing its end.
Why did Goldman Sachs raise its earnings forecast for SK Hynix?
SK Hynix’s operating profit for the third quarter of 2026 exceeded expectations because prices for DRAM, NAND and high-bandwidth memory (HBM) were all stronger than Goldman Sachs had estimated. Goldman maintained its Buy rating and 12-month price target of 3.5 million South Korean won.
Goldman raised its earnings-per-share forecasts for 2027–2028 by 19%–22%, citing potential upside in conventional DRAM prices and sales volumes, as well as management’s proposed 100 trillion South Korean won shareholder return plan for 2026.
Management said the ramp-up of HBM4 mass production was proceeding smoothly, with yields exceeding targets; strong long-term agreements mean that DRAM and HBM are effectively sold out through 2029.
How is AI demand flowing through to equipment and materials?
Goldman expects DISCO to benefit from generative AI equipment demand and technology upgrades such as advanced packaging, with operating profit for the fiscal year ending in March 2028 exceeding the market consensus by more than 20%.
The bank believes that even if the number of layers in HBM is reduced, meeting the same bit demand would require more HBM stacks, increasing the volume of back-end processing.
Taiwanese copper-clad laminate makers Elite Material and Taiwan Union Technology posted better-than-expected third-quarter margins. Goldman raised its 2026–2028 net profit forecasts for the two companies by 13%–22% and 12%–27%, respectively, citing demand for high-end products, recent price increases of 5%–20%, and a shift to higher-grade products.
Elite Material’s management expects that even if capacity is expanded to 15.25 million sheets per month by 2030, it will still be insufficient to meet the volumes covered by signed long-term agreements. On that basis, Goldman is optimistic about both companies’ selling prices and margins in 2027.
With cloud growth strong, why did the two tech giants’ results receive different reactions?
Microsoft’s adjusted earnings per share for the first quarter of fiscal 2027 were 4.89 US dollars, above the market consensus of 4.73 US dollars. Azure grew 48%, while upgrades to high-end products and use of GitHub Copilot drove commercial cloud growth.
Alphabet’s third-quarter Google Cloud revenue rose 103% year on year to 30.71 billion US dollars, beating market consensus. But search and other revenue of 63.35 billion US dollars and operating profit of 40.58 billion US dollars both fell short of Goldman’s estimates, and the Google Services margin was also weak.
Alphabet’s capital expenditure for the quarter was 51.4 billion US dollars, below Goldman’s forecast of 60 billion US dollars. Goldman expects investors to focus on slowing search revenue growth and computing capacity constraints.
Why take a more measured view of Coupang’s profit recovery?
Goldman lowered its forecast for Coupang’s 2027 adjusted EBITDA margin in merchandise retail from 9.6% to 8.7%, and cut its 12-month price target from 29 US dollars to 28 US dollars, because operating leverage from fixed costs is expected to recover more slowly.
Channel checks show that customers who had left are returning because of delivery services, but their spending remains below historical levels, potentially weighing on near-term revenue growth. Goldman maintained its Buy rating and expects normalizing gross margins and marketing efficiency to support a V-shaped profit recovery in 2027.
How does Goldman see the rate path after the Fed paused its hikes?
The Fed held the federal funds rate unchanged at its October meeting. Goldman interpreted this as a compromise consistent with a pace of hikes at every other meeting, and still expects a second and final hike in December, taking the rate to 4%–4.25%.
If inflation is higher than expected, Goldman believes a third hike remains possible in March of the following year. Fed Chair Warsh said the economy and labor market remained strong, but inflation expectations were moving in a favorable direction and recent policy tightening had begun to take effect.
