Japanese memory chip giant Kioxia's disappointing earnings report sparked a chain reaction in the U.S. storage sector. On Thursday, Kioxia Holdings announced a staggering year-over-year decline of over 60% in its adjusted net profit for the second fiscal quarter, dragging down shares of American peers Western Digital, Seagate Technology, and Micron Technology. This cast a shadow over what had been the best-performing tech sector this year.
Kioxia's quarterly net profit plummeted to just ¥41.7 billion (approximately $284 million), facing dual pressures of declining revenue and rising costs. The weak performance raised concerns about the overall health of the memory storage industry.
During Tokyo trading hours on Thursday, Kioxia shares fell 1.62%, subsequently impacting its overseas counterparts. Seagate dropped 7.31%, Western Digital declined 5.29%, and Micron Technology slid 3.25%. These companies had all delivered triple-digit percentage gains year-to-date, with Western Digital leading the S&P 500's annual gainers at 269% as of Wednesday's close, followed by Seagate and Micron in third and fourth places respectively.
Market analysts suggest Kioxia's underperformance may stem from its fixed-price agreement to supply mobile NAND chips to Apple. While spot prices have surged significantly, this pricing mechanism prevented Kioxia from benefiting from favorable market conditions, making it an outlier in the industry.
Kioxia's earnings shock has raised concerns about the sustainability of the AI-driven storage market boom. The data and memory hardware sector experienced strong growth in 2025, fueled by unexpected demand surges from AI and cloud computing investments. Western Digital, Seagate, and Micron had all posted triple-digit percentage gains this year, ranking among the top performers in the U.S. stock market.
Compared to these stocks' massive year-to-date rallies, Thursday's pullback appears relatively modest, suggesting Wall Street hasn't yet developed serious concerns about the sector's outlook. Investors now face the question of whether Kioxia's results represent an isolated case or signal broader industry challenges.
Apple supply agreement emerges as key drag Market observers point to Kioxia's supply contract with Apple as a likely contributor to its weak performance. The company has been providing mobile NAND chips to Apple at predetermined prices while market spot prices have risen substantially, preventing Kioxia from capitalizing on the industry upswing.
Both Western Digital and Seagate recently reported earnings that exceeded market expectations. Micron is scheduled to release its November quarter results next month, which will provide further insight into overall industry demand conditions.