Samsung Electronics has projected its quarterly profit to top 100 trillion won, a world first for a technology company, with an estimated operating profit of 107.4 trillion won ($80.17 billion) for the July-September period. This represents a nearly nine-fold jump in third-quarter earnings, driven by strong memory sales due to booming demand for AI chips. The forecast marks Samsung's fourth straight quarter of record operating profit.
The world's largest memory chipmaker's shares moved sideways despite flagging another record profit, slipping 0.2% in early trade versus a 0.5% fall in the benchmark KOSPI. Samsung's share price has slumped more than 25% from a record high in June amid concerns about the durability of the AI boom. Analysts have recently trimmed their forecasts due to the sharp appreciation of the South Korean currency, which reduces the value of dollar-denominated overseas sales when converted into local currency.
The AI boom presents a challenge for Samsung's other businesses, particularly its smartphone and consumer electronics divisions, which face mounting pressure from higher component costs. Samsung's mobile business posted a larger-than-expected loss of more than $1 billion in the third quarter, analysts said. Meanwhile, Samsung's contract chipmaking, or foundry, business is expected to remain loss-making due to the burden of fixed costs and still-low utilisation rates.
Memory chips are expected to account for the bulk of the earnings improvement, with prices soaring due to the tight supply of conventional DRAM and NAND chips, as well as growing demand for high-bandwidth memory (HBM), essential for processing vast amounts of data for AI applications. Douglas Kim of Douglas Research Advisory estimated that Samsung's HBM bit shipments expanded by close to 50% quarter-over-quarter in the third quarter.
Analysts expect profit in the fourth quarter to grow 8.2% from the previous quarter, down from 20% sequential growth in the third quarter, as chip price growth abates. Market research firm TrendForce expects conventional DRAM contract prices to rise 10% to 15% in the fourth quarter from the preceding quarter, much slower than the roughly 60% surge in the second quarter.
Samsung's third-quarter revenue would likely rise 127% to 195 trillion won from the same period last year, the company said. The company will release detailed results, including a breakdown of earnings by business division, on October 29. Investors said they would also be closely watching for details of Samsung's shareholder return policy during its earnings call later this month.
The global memory chip shortage is expected to persist into 2028, although Chinese competition and a potential slowdown in AI spending pose risks to the longer-term earnings outlook. Samsung and Micron expect the imbalance to persist, driving chip prices up sharply. Analysts have shifted their focus to whether the sharp earnings growth that started a year ago would be sustainable.
Key points
- Samsung Electronics reports a record-breaking $80 billion profit driven by the AI boom.
- The company's operating profit is estimated to be 107.4 trillion won ($80.17 billion) for the July-September period.
- The global memory chip shortage is expected to persist into 2028.
