Operating profit: KRW 83tn. Why is net income only KRW 40tn?
SK hynix reported third-quarter operating profit of
KRW 83.3338 trillion—a record high.
But net income for the same quarter was KRW 39.7756 trillion,
down 58% from the previous quarter.
About 8 min · 1 quiz · 1 interactive exercise
- Operating profit is what a company earns from its core business. Net income is the bottom line after non-operating gains and losses and income tax expense.
- SK hynix earned more than KRW 62tn outside its core business in Q2. In Q3, that swung to a KRW 32.6tn loss. This is the main reason net income fell by over half even as operating profit rose.
- A decline in the reported value of shares you still own creates a valuation loss. It does not necessarily mean cash has left the company . Net income alone can give a misleading picture of a business.
Hover over or tap a dotted-underlined term for its definition.
Between KRW 83tn
and KRW 40tn
We begin with a question. These figures come from the company's actual disclosuresA disclosure is information a company is required to make public for investors, including financial results. Korean companies file disclosures through the Financial Supervisory Service's DART system..
SK hynix announced its third-quarter results on October 28. What was its net incomeNet income is the profit left over for a reporting period, such as a quarter or year, after non-operating gains and losses and income tax expense are reflected. for that quarter?
- Q3 revenue (July–September)KRW 104.6155tn
- Q3 operating profitKRW 83.3338tn · Record high
- Q2 net income (previous quarter)KRW 93.9226tn
Q3 net income was KRW 39.7756tn. Operating profit—the core business result—rose 38%, yet net income fell 58%. More than KRW 43.5tn disappeared between the two lines of the Q3 income statement. Let's trace where it went.
Q1–Q3 2026 · As reportedThree quarters, side by side
Values in KRW trillions · Consolidated results, including subsidiaries · Based on company releases and reporting
In Q1 and Q2, net income exceeded operating profit. That was largely thanks to gains on an investment in KioxiaKioxia is a Japanese NAND flash memory manufacturer. SK hynix has held an investment in the company since 2018., the Japanese memory-chip maker.
In Q3, the relationship reversed: net income was less than half of operating profit.
Same earnings, two headlines
- Net income fell 58%
- from KRW 93.9226tn in Q2 to KRW 39.7756tn in Q3. Headlines asked why net profit plunged despite a 38% rise in operating profit.
- Quarterly revenue topped KRW 100tn for the first time, while operating profit set a record for the sixth consecutive quarter.
- Operating marginOperating profit as a percentage of revenue. An operating margin of 79.7% means KRW 79.7 in operating profit for every KRW 100 in revenue. was 79.7%.
Both headlines are accurate. They simply focus on different lines of the income statementAn income statement reports a company's revenue, expenses and profit over a period, moving from the top line to the bottom line..
SK hynix shares rose more than 10% on the announcement day. The KOSPI closed up 6.63% at 6,012.44. A simultaneous announcement of greater shareholder returnsCash or capital returned to shareholders through dividends, share buybacks or share cancellations. and strength in U.S. semiconductor shares also mattered. The share-price move cannot be attributed to any single earnings figure.
Where did the 58% decline come from?
Comparing Q2 and Q3 line by line gives us the answer.
Core operating profit improved by KRW 22.8tn. But non-operating results deteriorated by KRW 94.8tn. Lower income tax expense could not offset that swing. And because non-operating gains had been so large in Q2, the percentage decline in net income looked especially steep.
What is the difference between
operating profit and net income?
Both are measures of profit. The difference is where you stop the calculation.
The income statement
works like a staircase
An income statement starts with revenue and works down, subtracting costs along the way. We'll begin with a small bakery.
- Money from selling bread · RevenueKRW 10m
- Flour, wages and rent · Expenses−KRW 7m
- Profit from baking and selling · Operating profitKRW 3m
- Decline in shares held · Non-operating loss−KRW 1m
- Before income tax expense · Profit before taxKRW 2m
- Income tax expense (assumed 20%)−KRW 0.4m
- Profit after all these items · Net incomeKRW 1.6m
The bakery earns the same operating profit from selling bread, but a loss on an unrelated stock investment reduces its net income. SK hynix's Q3 follows the same structure. Only the scale changes—from millions to trillions of won.
SK hynix Q3: from KRW 104tn to KRW 40tn
- Operating profitRevenue minus cost of goods sold and selling, general and administrative expenses. This is the profit generated by the core business. · Revenue minus cost of goods sold (COGS)Direct costs of producing goods sold, such as materials, factory labor and production equipment costs. and selling, general and administrative (SG&A) expensesCosts of selling products and running the company, including head-office payroll and advertising.. For a memory-chip manufacturer, it is the profit earned from making and selling chips.
- Non-operating gains and lossesGains or losses from activities outside core operations, such as currency movements, changes in investment or financial-instrument values, and interest. · Gains and losses outside the core business. SK hynix recorded a roughly KRW 32.6tn net loss on these items in Q3.
- Profit before taxProfit before income tax expense. In this simplified presentation, it equals operating profit plus net non-operating gains or losses. · Operating profit plus net non-operating gains or losses: about KRW 50.7tn.
- Net income · The final figure after subtracting income tax expenseThe income tax cost recognized in the income statement for the period. It can differ from cash taxes actually paid during the quarter. from profit before tax: KRW 39.7756tn.
Operating profit rose in every quarter.
It was non-operating income that swung.
In Q3, that same line swung to a KRW 32.6tn loss.
Two sources of non-operating losses
Most of the roughly KRW 32.6tn Q3 non-operating loss came from currencies and changes in the value of investment assetsEquity stakes in other companies or financial instruments held for investment rather than for use in core operations. . Let's illustrate the mechanics with hypothetical numbers first.
Here are SK hynix's actual Q3 figures.
- At quarter-end, dollar-denominated cash, receivables and payables are remeasured in Korean won using the closing exchange rate.
- In Q3, a a stronger wonAn appreciation of the Korean won. When the KRW/USD exchange rate falls, each U.S. dollar converts into fewer won. contributed to an FX loss. In Q2, the company instead recorded a gain of about KRW 1.1tn.
- When the value of an equity stake or financial instrument falls, the company may recognize a valuation lossA loss recorded when an investment falls in value while still held. This does not itself mean cash was paid out. A rise in value may produce a valuation gain. The accounting treatment depends on the asset's classification.; an increase may produce a valuation gain.
- The company did not identify which assets drove the loss. In Q2, gains related to Kioxia—from a stake sale and rising valuations—totaled about KRW 63tn.
- A valuation loss is a decline in an asset's carrying value. It does not mean cash has left the company's bank account.
- At the end of Q3, SK hynix's cash and liquid financial assetsCash, cash equivalents and assets readily convertible into cash. Company earnings releases may also include short-term financial products in a broader cash-assets figure. totaled KRW 114.5tn, up KRW 26.5tn in three months
- . Nor is a valuation gain the same as cash received. It differs from a gain on disposalA gain realized when an asset is sold for more than its carrying amount. from actually selling an asset.
Changes in cash reflect operating cash generation as well as uses such as dividends and share buybacks. A valuation loss does not, by itself, explain why cash rose or fell.
Net income halved—yet a special dividend?
On the earnings date, SK hynix declared a dividend of KRW 20,000 per share. Half of it—KRW 10,000 per share—was a special dividendA one-off dividend paid in addition to the regular dividend, often following an exceptional gain or event. funded by gains from the sale of a Kioxia stake.
Net income measures profit recorded for the current quarter. Dividends are paid from available cash, supported by accumulated profits and distributable reserves. A decline in one quarter's net income does not mean an equivalent amount of cash has vanished.
Company A earned KRW 100bn in operating profit this quarter. It holds USD 100m in dollar deposits (at an opening exchange rate of KRW 1,400 per dollar) and KRW 100bn of shares in another company. Choose the quarter-end exchange rate and the value of those shares. For simplicity, assume income tax expense is 22% of pre-tax profit.
Exchange rate at quarter-end
Value of shares held
Choose an exchange rate and a share value to begin.
This is a simplified illustration. Actual income tax expense does not necessarily equal a fixed percentage of pre-tax accounting profit because tax rules differ from accounting rules. Also, depending on the investment and its accounting classification, valuation changes do not always flow through net income. This example assumes they do.
Operating profit stays at KRW 100bn whatever you choose. Even with zero non-operating gains or losses, net income would be KRW 78bn after assumed income tax expense.
P/E ratios also depend on net income
Divide earnings attributable to shareholders by the relevant share count to get EPSEarnings per share. Broadly, profit attributable to ordinary shareholders divided by the weighted-average number of ordinary shares. Trailing P/E commonly uses earnings from the last four quarters., or earnings per share. Divide the share price by EPS to get the P/E ratioPrice-to-earnings ratio: share price divided by earnings per share. It shows how much investors pay for each unit of annual earnings per share. (seePart 4). The earnings figure in a trailing P/E generally comes from the latest four quarters combined. Large non-operating gains or losses can therefore move the ratio substantially.
Assumes identical core operating earnings in all three cases; only non-operating results differ.
The underlying business has not changed, yet the P/E moves from 5× to 20×. When non-operating items are unusually large, a P/E ratio alone may say little about whether a stock is cheap or expensive.
GO DEEPEROther terms you will see beside net income
Net income attributable to owners of the parent · The portion of consolidated net income attributable to parent-company shareholders. Where subsidiaries have outside investors, their share—called non-controlling interests (NCI)Ownership interests in a subsidiary held by investors other than its parent company.—is excluded. Korean filings call this “profit attributable to owners of the parent.” EPS generally uses earnings attributable to ordinary shareholders, rather than total consolidated net income. See Part 14 for the role of outside shareholders in a subsidiary.
Valuation gains/losses vs. disposal gains/losses · Valuation gains and losses arise when an asset's carrying or fair value changes while it is still held. Gains and losses on disposal arise when it is sold. SK hynix's Q2 results included both a one-off gain from selling a Kioxia-related stake and a valuation gain from a rise in the value of the remaining investment; the latter did not itself bring in cash.
FX translation vs. transaction gains/losses · Foreign-currency translation gains and losses arise when dollar-denominated assets or liabilities are remeasured at period-end exchange rates. FX transaction gains and losses arise when transactions are settled at different exchange rates, such as when dollar receivables are collected or converted into won.
Exchange rates also affect operating profit · Semiconductor sales invoiced in dollars must be reported in won. Samsung Electronics said a stronger won reduced its Q3 operating profit by about KRW 10tn quarter on quarter. That is different from non-operating FX gains or losses arising from remeasuring foreign-currency assets and liabilities or settling currency transactions.
How operating profit is defined · Under the financial reporting standards used by Korean listed companies (K-IFRSKorean International Financial Reporting Standards: the accounting framework followed by Korean listed companies.), operating profit has been defined as revenue less cost of sales and selling and administrative expenses. This provides a consistent subtotal for comparing companies.
Why the two losses exceed the total non-operating loss · SK hynix's Q3 FX-related loss (about KRW 11.6tn) and investment valuation loss (about KRW 22.9tn) add up to roughly KRW 34.5tn—more than its total net non-operating loss of about KRW 32.6tn. Other non-operating items therefore offset around KRW 1.9tn, but the company did not provide a detailed breakdown.
Preliminary earnings · Results released on earnings day are preliminary and have not yet undergone the external auditor's review. Figures can change when the quarterly report is filed.
Operating profit changes in 2027 · Under the new accounting standard, K-IFRS 1118, operating profit will become the residual category after items classified as investing, financing and other categories are excluded. The current operating-profit calculation will need to be disclosed separately in the notes. A company's reported operating-profit subtotal may therefore encompass different items under the new standard.
How to read
an earnings report
Now apply that income-statement staircase to SK hynix's Q3.
Three questions about SK hynix Q3
Operating profit rose 38% quarter on quarter to KRW 83.3338tn, a record for the sixth consecutive quarter.
Net non-operating results swung from a gain of more than KRW 62tn in Q2 to a loss of roughly KRW 32.6tn in Q3.
That depends on exchange rates and investment values. We also need the quarterly reportThe formal report filed by a company each quarter. The financial statement notes provide details about individual income and expense items. to know which assets were written down.
Use the same approach with other companies. Korean preliminary earnings announcementsPreliminary earnings are published ahead of the external auditor's review and may be revised later. typically provide five key figures.
Item ③ is the formal line for pre-tax profit from continuing operations; item ⑤ is the portion of net income belonging to the parent company's shareholders. The difference between item ② and item ③ reflects non-operating income and expenses.
Four checks for any earnings headline
01Which kind of profit?
02Operating vs. pre-tax profit
03Cash flow or change in value?
04Will it recur?
Operating profit measures the core business. Net income is the bottom line after non-operating results and income tax expense.
When net income is above or below operating profit, the question is not which figure is correct. Ask what was added or subtracted between the two, whether any cash actually moved, and whether the event is likely to recur.
Investors around the world follow MSCI indexes, which review their constituents in February, May, August and November. Korea's KOSPI 200 is rebalanced in June and December. Why can being added to or removed from an index move a share price? And how are indexes built in the first place?
Quick glossary of related terms
- Income statement
- A statement showing a company's revenue, expenses and profit over a reporting period
- Core business
- The company's main commercial activity; for SK hynix, manufacturing and selling memory chips
- Revenue
- Income recognized from sales of goods or services; revenue may be recorded before cash is collected
- Cost of goods sold (COGS)
- The direct cost of producing the goods sold
- SG&A expenses
- Selling, general and administrative costs of marketing, selling and running the business
- Operating profit
- Revenue less COGS and SG&A expenses; profit from core operations under the current Korean presentation
- Operating margin
- Operating profit divided by revenue
- Non-operating gains/losses
- Gains and losses outside core operations, including FX, investments, financial instruments and interest
- FX gains/losses
- Gains or losses arising from exchange-rate changes, whether from remeasurement of currency positions or settlement
- Valuation gains/losses
- Changes recognized in the value of investments still held
- Disposal gains/losses
- Gains or losses realized on the sale of an asset
- Profit before tax
- Profit before recognizing income tax expense; here, operating profit plus net non-operating results
- Income tax expense
- Tax cost recognized in the income statement; not necessarily the amount of tax actually paid
- Net income
- The final profit figure after income tax expense
- Profit attributable to parent owners
- The parent shareholders' portion of consolidated net income
- EPS
- Earnings per share: earnings divided by the relevant share count; trailing EPS typically covers four quarters
- P/E ratio
- Price-to-earnings ratio: share price divided by EPS
- Special dividend
- An additional, usually one-off dividend beyond the regular payout
- Consolidated basis
- Financial figures combining a parent company with its subsidiaries
- Disclosure
- Information a company is required to publish for investors
- Cash and near-cash assets
- Cash, cash equivalents and other assets readily convertible into cash
- Preliminary earnings
- Results released before the external auditor's review
Real-world case studies
SK hynix reported Q1 operating profit of KRW 37.6103tn and net income of KRW 40.3459tn. Non-operating gains were about KRW 14tn, including roughly KRW 9.9tn in valuation gains on investments.
Net income of KRW 93.9226tn exceeded operating profit of KRW 60.5426tn by more than KRW 33tn. Non-operating results included gains from selling a Kioxia-related stake and increases in investment valuations. Reporting distinguished the one-off realized gain from the non-cash valuation gain.
FX-related losses of roughly KRW 11.6tn and investment valuation losses of about KRW 22.9tn contributed to a net non-operating loss of approximately KRW 32.6tn. Income tax expense was roughly KRW 10.9tn. That same day, SK hynix declared a quarterly dividend of KRW 20,000 per share, including a KRW 10,000 special dividend funded by gains on its Kioxia investment. Quarter-end net cashCash and near-cash assets minus borrowings. stood at KRW 98.7tn.
Samsung Electronics reported Q3 operating profit of KRW 107.4405tn. Consolidated net income was KRW 75.1361tn, of which KRW 75.2081tn was attributable to owners of the parent (fair-disclosure filing). The latter exceeded total consolidated net income because non-controlling interests in subsidiaries recorded a net loss (see Part 14). Quarter on quarter, operating profit rose 20.1%, while consolidated net income rose 4.9%. Samsung said a stronger won reduced operating profit by about KRW 10tn compared with Q2. The detailed bridge between operating profit and net income requires the quarterly report.
Important notes on the numbers
58% · The decline from KRW 93.9226tn in Q2 to KRW 39.7756tn in Q3 is roughly 57.7% (57.6% in some reports). Company materials and several news articles round it to 58%, which is the figure used here.
One decimal place in KRW tn · To make the waterfall and tables add up consistently, figures are rounded to one decimal place in KRW trillions. Calculations are based on company disclosures. Q3 profit before tax was KRW 50.7085tn. Q2 non-operating results—calculated as disclosed profit before tax less operating profit—were about KRW 62.1657tn. Some articles reported different values, such as KRW 50.7080tn and KRW 62.2166tn. Q1 non-operating results (about KRW 14tn) and income tax expense (about KRW 11.3tn) were calculated using reported pre-tax profit of KRW 51.61tn.
Investment valuation loss · The assets behind the KRW 22.92tn valuation loss were not identified. The fact that Q2 gains were Kioxia-related does not establish that the entire Q3 loss came from Kioxia.
Share price on earnings day · SK hynix closed at KRW 1,487,000 on October 28, up 10.89% from KRW 1,341,000 the previous day. One breaking report gave a different rise of 11.41%. Multiple market-moving developments occurred that day, so the share-price response cannot be isolated to any single earnings figure.
Income tax expense · This is an income-statement expense and may differ from taxes actually paid that quarter, including because of deferred tax. The simulator's 22% and the bakery's 20% are illustrative assumptions. SK hynix's Q3 income tax expense was about 21.6% of pre-tax profit (calculated for this article).
Cash and near-cash assets · SK hynix's reported KRW 114.5tn combines cash and cash equivalents with short-term financial products and certain other liquid assets.
We do not fill in figures that have not been verified.
Sources and data methodology
- SK hynix · Q3 2026 official English earnings release · Official English source · Oct 28, 2026
- SK hynix · Q2 2026 official English earnings release · Official English source · Jul 29, 2026
- IFRS Foundation · IFRS 18 official standard overview · Official English source · Effective Jan 1, 2027
- SK hynix Q3 revenue, operating profit, net income, non-operating results (Q2 +KRW 62.166tn → Q3 −KRW 32.625tn), net FX results (+KRW 1.147tn → −KRW 11.633tn), pre-tax profit and 79.7% operating margin · Korea Financial News (Korean) Oct 28, 2026
- Income tax expense of KRW 10.933tn; why the investment valuation loss cannot be attributed exclusively to Kioxia; 58% fall in net income · Newsway (Korean) Oct 28, 2026
- Earnings call: adverse FX impact from a stronger won; KRW 11.6tn FX loss and KRW 22.9tn investment valuation loss; KRW 50.7tn pre-tax profit; 38% net margin; cash and near-cash assets of KRW 114.5tn (up KRW 26.5tn) · The Elec (Korean) Oct 28, 2026
- No detailed explanation of the gap between the two losses and total non-operating results; underlying investments not identified · StockHub earnings-call summary (Korean) Oct 28, 2026
- Record operating profit for six consecutive quarters; net cash of KRW 98.7tn; KRW 20,000-per-share dividend (including KRW 10,000 special dividend) · Yonhap News (Korean; reposted by Korean Center) Oct 28, 2026
- Coverage of operating profit rising 38% as net income fell 58%; 57.6% net-income decline; Kioxia-related Q2 gains · Yonhap Infomax (Korean; via KB Think) Oct 28, 2026
- Q2 revenue, operating profit and net income of KRW 93.9226tn (118% net margin) · Tax & Finance News (Korean) Jul 29, 2026
- Q2 non-operating results of KRW 62.17tn; pre-tax profit of KRW 122.708tn; income tax expense of KRW 28.786tn; one-off disposal gains, non-cash valuation gains and the Kioxia investment begun in 2018 · Yonhap Infomax (Korean; via Daum) Jul 29, 2026 · KRW 63.3tn in investment gains · The Korea Economic Daily (Korean) Jul 31, 2026 · Report giving Q2 non-operating results as KRW 62.2166tn · DealSite (Korean)
- Q1 revenue of KRW 52.5763tn, operating profit of KRW 37.6103tn and net income of KRW 40.3459tn · SK hynix Newsroom (official English release) Apr 23, 2026 · Approximately KRW 14tn of non-operating gains, including KRW 9.9tn of investment valuation gains; pre-tax profit of KRW 51.61tn · iNews24 (Korean) Apr 2026
- SK hynix closing price of KRW 1,487,000 (up 10.89%) and KOSPI close of 6,012.44 (up 6.63%) on October 28 · Blockmedia (Korean) Oct 28, 2026 · Breaking report citing an 11.41% rise · Newsis (Korean; reposted by StockHub)
- Samsung's consolidated net income of KRW 75.1361tn and profit attributable to parent owners of KRW 75.2081tn; respective QoQ growth of 4.9% and 5.53% · Samsung consolidated preliminary earnings fair-disclosure filing (DART, Korean) Oct 29, 2026
- Samsung Q3 revenue of KRW 195.3tn and operating profit of KRW 107.4tn; exchange-rate impact on operating profit of about KRW 10tn · Samsung Global Newsroom (official English release) Oct 29, 2026 · Operating profit of KRW 107.4405tn; consolidated net income of KRW 75.1361tn · Kyongbuk Daily (Korean) Oct 29, 2026 · Quarter-on-quarter gains of 20.06% in operating profit and 4.90% in net income · StockHub (Korean) Oct 29, 2026
- Current K-IFRS operating profit (revenue less cost of sales and SG&A); changes under K-IFRS 1118 and separate note disclosure of the existing measure · Crowe (Korean; summarizing FSS guidance of Apr 14, 2026) · 2012 introduction of the K-IFRS operating-profit measure · KPMG Korea commentary (Korean) Nov 28, 2024
- Five line items in Korean preliminary earnings disclosures: revenue, operating profit, pre-tax profit from continuing operations, net income and profit attributable to owners of the parent · Example fair-disclosure filing for consolidated preliminary earnings (KB Financial Group, Korean)
- Next installment · MSCI reviews in February, May, August and November · Asia Business Daily (Korean) Aug 13, 2026 · KOSPI 200 scheduled constituent changes in June and December · MoneyToday (Korean) May 22, 2026
- “Calculate Company A's net income,” the exchange-rate and investment illustrations, and the P/E examples use hypothetical numbers for teaching purposes.
- Handwritten typeface: Gaegu (The Gaegu Project Authors, SIL Open Font License 1.1), subset to only the glyphs used.