Goldman Sachs reiterates Buy on Kioxia Holdings, highlighting earnings resilience amid tight NAND supply and demand

Overview

Based on an investor conference call with Kioxia Holdings' IR team on the morning of June 23, Goldman Sachs summarized the company's views on long-term agreements, XL-Flash R&D progress, future profitability, and financial strategy. The report's core view is that, although the NAND industry remains cyclical, Kioxia's profit level can remain higher than in past cycles thanks to sustained supply-demand tightness and AI-driven demand.

Core views

First, Kioxia remains flexible on LTAs but puts profitability first, and about 50% coverage over the next two years helps stabilize the price floor. Second, XL-Flash is aimed at scenarios where inferencing GPU servers need expanded memory capacity; if product performance and premium pricing materialize, it could strengthen the company's differentiation in high-performance SSDs. Third, the company believes NAND supply-demand tightness will last at least through CY27 and possibly through CY28, supporting the view that earnings over the next 2-3 years may exceed market expectations. Fourth, Chinese NAND makers' capacity expansion and market-share gains warrant attention, but management believes the performance gap remains and customers prefer a dual-supplier strategy.

Analysis framework

The report mainly synthesizes the conference call notes and company IR remarks, and combines Goldman Sachs' earnings forecasts, valuation framework, target-price history, and supply-demand views to assess Kioxia's earnings sustainability, product differentiation, and risk factors.

Methodology notes

• Valuation methodsP/B and ROE correlation valuation

  12-month target price

  Goldman Sachs's ¥93,000 12-month target price is based on the correlation between P/B and the average ROE for FY3/27E-FY3/28E, implying FY3/27E P/E of 9.5x and P/B of 8.0x.

• Factor analysisGS Factor Profile

  Growth, financial returns, valuation multiples, and composite percentile

  Goldman Sachs Factor Profile compares the stock with covered stocks and industry peers using growth, financial returns, valuation multiples, and composite metrics.

• M&A probabilityM&A Rank

  M&A Rank 3

  The report discloses Kioxia's M&A Rank as 3, indicating a low probability of being acquired and typically excluded from the target price.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Kioxia Holdings (285A.T)

  The report's subject company; covered by Goldman Sachs with Buy reiterated.

  Strengths

  Tight NAND supply and demand, higher LTA coverage, XL-Flash progress, and earnings over the next 2-3 years may exceed market expectations.

  Weaknesses

  Still a cyclical NAND industry, with earnings heavily affected by prices, costs, utilization, and exchange rates.

  Comparison

  Compared with the HB Flash jointly developed by SanDisk and SK Hynix, management believes Kioxia's SSD-based solution does not require additional manufacturing processes such as TSV and has differentiation.

  Risks

  AI investment slowdown, expansion and market-share gains by Chinese NAND makers, higher costs, utilization volatility, sharp appreciation of the yen against the U.S. dollar, and a slowdown in non-AI NAND demand.

• SANDISK CORP (SNDK.US)

  Mentioned as a competitive reference related to HB Flash.

  Strengths

  Co-develops HB Flash with SK Hynix and participates in high-performance storage competition.

  Weaknesses

  The report does not independently assess SanDisk's fundamentals.

  Comparison

  Kioxia emphasizes that its SSD solution does not require additional manufacturing steps such as TSV compared with HB Flash.

  Risks

  The report does not provide an independent risk assessment for SanDisk.

• NAND industry

  The core industry backdrop for Kioxia's earnings and valuation.

  Strengths

  Supply-demand tightness is expected to last at least through CY27, with AI-related demand and high-performance SSD applications providing incremental room.

  Weaknesses

  The industry is highly cyclical, and price and inventory swings affect earnings sustainability.

  Comparison

  Chinese manufacturers' capacity expansion may alter the competitive landscape, but management believes a performance gap remains and customers prefer a dual-supplier model.

  Risks

  New supply, demand slowdown, rising costs, and weakness in non-AI applications.

Key data

• RatingBuyGoldman Sachs reiterates its Buy rating.
• Target price¥93,00012-month target price based on P/B and ROE correlation valuation.
• Reference close¥65,85031-May-26 closing price in the target-price history table.
• Implied upsideapproximately 41.2%Estimated from the ¥93,000 target price and the ¥65,850 closing price.
• LTA coverageabout 50%Long-term agreement coverage for the next two years starting from CY27.
• NAND market growthCY25-CY28 CAGR 22%Calculated on a capacity-bit basis; the company expects its own bit shipments to broadly track market growth.
• XL-Flash sample planMore than 10 million IOPS by end-CY26; 100 million IOPS second generation in CY27High-performance SSD for inferencing GPU servers, aimed at expanding memory capacity.
• R&D spending planAverage ¥230bn per year for FY3/27-FY3/29FY3/27 is expected to be between the actual FY3/26 ¥141.1bn and ¥230bn, with further increases starting in FY3/28.
• FY3/27E revenue¥9,733.4bnGoldman Sachs forecast.
• FY3/27E operating profit¥7,677.3bnGoldman Sachs forecast.
• FY3/27E EPS¥9,799.0Goldman Sachs forecast.
• FY3/27E P/E9.4xDisclosed in the financial forecast table.

Impact & implications

If NAND supply-demand tightness continues, the LTA pricing mechanism effectively protects profitability, and XL-Flash gains recognition from demand tied to high-end AI servers, Kioxia's earnings midpoint may be higher than in prior cycles and than market expectations, supporting Goldman Sachs's positive view. Conversely, a slowdown in AI capital spending, weak non-AI demand, yen appreciation, or intensifying competition from Chinese NAND makers would weaken this investment thesis.

Risks

• A slowdown in AI investment centered on hyperscalers.
• Expansion by Chinese NAND makers and rising market share.
• Margin pressure from rising costs or utilization volatility.
• Sharp appreciation of the yen against the U.S. dollar.
• A slowdown in NAND demand for non-AI applications.
• The cyclical nature of the NAND industry may still weigh on earnings sustainability.

What to watch

• Execution of contracts, pricing flexibility, and earnings protection from roughly 50% LTA coverage starting in CY27.
• Progress on XL-Flash sample deliveries at end-CY26 and in CY27, performance realization, and per-GB premium pricing.
• Whether NAND supply-demand tightness extends through CY27 or CY28.
• Chinese NAND makers' capacity expansion, market share, and speed of performance catch-up.
• Whether Kioxia's bit shipment growth tracks the expected 22% CAGR for the CY25-CY28 industry.
• The pace of R&D spending from FY3/27 to FY3/29 and its impact on cash flow and competitiveness.