Kioxia orders surge 58% as storage super cycle accelerates

Apple's 58% surge in orders from Kioxia and a raw materials inventory buildup signal the storage industry's long-awaited super cycle is accelerating, Morgan Stanley said.

Apple Inc. contributed 476 billion yen ($3.1 billion) in revenue to Kioxia Holdings Corp. in the fiscal year ended March 2026, up 58% from a year earlier and far outpacing the NAND flash maker's overall revenue growth of 37%, according to Kioxia's annual report. The outsized jump suggests consumer electronics giant Apple is pulling forward component purchases to lock in pricing ahead of expected further increases, Morgan Stanley analysts led by Yuji Enami wrote in a June 25 note.

"The data supports two conclusions: storage price hikes have now reached consumer end-markets, and Apple is engaging in pull-in procurement to secure supply," Enami said. Apple's share of Kioxia's revenue rose to about 20% from roughly 18% a year earlier, with absolute spending climbing from about 301 billion yen.

Kioxia's raw materials inventory rose sharply even as finished goods and work-in-progress stayed flat, the report shows. Total inventory reached 412.6 billion yen, up from 352.9 billion yen a year earlier. Morgan Stanley attributed the buildup to pre-purchasing of DRAM — a key input for solid-state drives — as the entire supply chain positions for sustained price increases. The company's capital expenditure structure also shifted dramatically: spending on buildings and structures plunged to 62 billion yen from 1,099 billion yen, while machinery and equipment investment jumped to 2,598 billion yen from 1,927 billion yen, reflecting a pivot from factory construction to front-end BiCS-8 NAND production equipment.

Capex Pivot Signals Production Ramp

Kioxia plans 450 billion yen in capital spending for the fiscal year ending March 2027, up 166 billion yen from the current year. Morgan Stanley expects the bulk of that investment to go toward BiCS-8 and BiCS-10 front-end equipment at its Yokkaichi and Kitakami facilities, positioning the company for the next wave of NAND demand driven by AI data center storage requirements.

The shift from building factories to installing production tools marks a critical transition: Kioxia is moving from capacity planning to volume manufacturing of its next-generation 3D NAND technology. BiCS-8, which uses more than 300 layers of vertically stacked memory cells, competes directly with Samsung Electronics Co.'s V-NAND and SK Hynix Inc.'s 4D NAND in the race for higher density and lower cost per bit.

Investment Implications

Morgan Stanley maintained its overweight rating on Kioxia with a 110,000 yen price target, implying about 19% upside from the June 23 close of 92,290 yen. The bank cited an expected free cash flow yield of roughly 10% for the fiscal year ending March 2028 as the valuation anchor, with an implied price-to-earnings ratio of 11 times based on that year's earnings forecast.

The storage super cycle benefits the broader memory ecosystem. Samsung and SK Hynix, which together dominate the global NAND and DRAM markets alongside Kioxia, stand to gain from sustained pricing power. For Apple, the pre-buying strategy may provide near-term cost insulation, but component cost inflation will eventually pressure margins if prices continue rising through 2027. Micron Technology Inc., which reports quarterly results in July, could provide the next read on whether the cycle has further to run.

This article is for informational purposes only and does not constitute investment advice.