Samsung’s stock rises on explosive operating profit growth

Samsung Electronics Co. Ltd. today confirmed its earlier expectation that runaway memory chip prices will drive a massive 19-fold jump in operating profit, as robust artificial intelligence demand continues to accelerate momentum in its semiconductor business.

The company just announced its full first-quarter results, saying it delivered total revenue of 171.5 trillion won (around $118.56 billion), up 130% but trailing the analyst consensus estimate of 172.65 trillion. However, the slight shortfall in sales was made up for by Samsung’s profitability, which exceeded expectations. The company reported an operating profit of 89.5 trillion won during the quarter, up a staggering 1,814% from the same period one year earlier and ahead of the 88.13 trillion won forecast.

Samsung’s stock was up more than 5% during the early trading session in South Korea Thursday morning.

Samsung said its chipmaking business was the key growth driver during the quarter, recording a record operating profit of 89.2 trillion won, meaning it accounted for virtually all of its profit. Runaway AI server demand was the main reason for those record-breaking numbers, helping Samsung to register all-time high sales of both dynamic random-access memory and NAND flash chips, which are both key components in those products.

Samsung said it’s also making progress in terms of its new high-bandwidth memory products, with sales of its HBM4 chips scaling up during the quarter. It also shipped the first samples of its upcoming HBM4E products to major customers. HBM4 is the company’s sixth-generation high-bandwidth memory chip, and has been specifically designed to work with high-powered AI processors such as Nvidia Corp.’s graphics processing units. HBM4E is an enhanced, faster and more energy-efficient version of the HBM4, which offers around 20% greater throughput and can be installed in denser configurations to support much larger clusters of AI chips.

For the second half of the year, Samsung believes that demand for its HBM chips from AI server makers is going to increase, due to broader enterprise adoption of “agentic” AI workloads and continuing capital expenditure increases from the world’s biggest cloud infrastructure firms. The company also sees demand escalating for its server DRAM and solid-state storage devices this year, due to the growing needs of the AI industry.

Samsung’s DRAM chips are used not only in AI servers, but also devices such as smartphones and personal computers, while SSDs are high-performance storage devices designed to transfer data rapidly. They have become critical to AI infrastructure.

While Samsung is undoubtedly benefiting from the insane growth of its chipmaking business, it is coming at the expense of profitability in its other key business segments. Its smartphone and home appliance businesses both recorded modest operating losses during the second quarter, as they’re being forced to bear the burden of those higher chip prices.

Last week, Samsung unveiled a slate of new devices that it hopes will be able to turn things around in the smartphone division, including new foldable smartphones. It also announced an expanded strategic collaboration with another chipmaker, Broadcom Inc., which spans memory and foundry technologies.

Samsung’s chief rivals right now include SK hynix Inc., another South Korean memory chipmaker that recently debuted on the U.S. stock markets, and Micron Technology Inc. SK hynix also reported record-breaking profits this week while just missing analyst’s estimates.

Photo: Samsung