Samsung Electronics expects third-quarter operating profit to hit 107.4 trillion won (approximately $80 billion) for the period ending September. This fourth consecutive quarter of record earnings is driven by massive demand for AI-related memory chips, though losses persist in the company’s mobile and foundry divisions.
Samsung projects a nearly nine-fold jump in quarterly profits compared to the same period last year. This estimate of 107.4 trillion won ($80.17 billion) slightly exceeds the 106.1 trillion won LSEG SmartEstimate.
According to the BBC, growth is fueled by the escalating need for memory chips used in artificial intelligence data centers. These forecasts rely on internal company data, a common practice among major South Korean firms to advise investors before detailed reports are issued, making them more credible than external analyst estimates.
AI Demand Drives Memory Chip Prices
Samsung, Micron in the US, and SK Hynix in South Korea are the world’s primary memory chip producers, providing critical components for AI leaders like Nvidia. A global semiconductor shortage has emerged because AI infrastructure investment is outstripping supply growth, allowing manufacturers to raise prices for computers and smartphones.
Samsung’s stock market valuation surpassed $1 trillion (£757bn) earlier this year, the BBC reports.
High-bandwidth memory (HBM) is essential for processing the vast data loads required by AI applications and is the primary driver of this profit surge. Douglas Kim of Douglas Research Advisory estimated that Samsung’s HBM bit shipments grew by nearly 50 percent quarter-over-quarter in the third quarter as the company attempts to close the market gap with SK Hynix. Tight supplies of conventional NAND and DRAM chips have also pushed margins to record highs.
US tech giants Meta, Amazon, and Google have pledged over $650 billion toward AI projects this year. South Korea announced plans in June for at least $880 billion in projects led by SK Hynix and Samsung to expand domestic manufacturing capabilities. Rival firms across Taiwan, China, and Japan are also investing heavily in chip plants as AI demand soars, according to the BBC.
Mobile and Foundry Divisions Post Losses
Samsung’s mobile business posted a loss of more than $1 billion in the third quarter, a figure that exceeded expectations. The same chip shortage driving memory profits is increasing component costs for these other divisions. However, the BBC notes that Samsung is expected to receive a boost from its latest folding devices, including the Galaxy Fold, which were released in August.
The company’s contract chipmaking, or foundry, business also continues to operate at a loss due to low utilization rates and heavy fixed costs. Analysts expect utilization to improve over several quarters because of stronger demand for advanced processes, as Samsung works to narrow the gap with industry leader TSMC.
Stock Prices Drop Despite Record Gains
Samsung’s shares slipped 0.2 percent in early trade and moved sideways following the forecast. The stock price has fallen more than 25 percent from its June record high, reflecting investor anxiety over whether the AI boom is durable.
The sharp appreciation of the South Korean currency lowers the value of dollar-denominated overseas sales. While Samsung and Micron expect the chip imbalance to last into 2028, risks include potential slowdowns in AI spending and competition from China.
Revenue Growth Slows Heading Into Year End
Samsung expects third-quarter revenue to hit 195 trillion won, a 127 percent increase from the previous year. Analysts anticipate fourth-quarter profit growth of 8.2 percent, a decrease from the 20 percent sequential growth seen in the third quarter.
TrendForce expects conventional DRAM contract prices to rise between 10 percent and 15 percent in the fourth quarter, a drop from the 60 percent surge seen in the second quarter.