Samsung says memory chip demand will drive 19-fold jump in operating profit

Record-breaking memory chip sales and prices are set to drive a 19-fold increase in Samsung Electronics Co. Ltd.’s second-quarter operating profit, according to a preliminary earnings report issued by the company today.

The strong forecast by Samsung, one of the world’s largest suppliers of memory chips, is likely to ease recent concerns raised by some analysts about the sustainability of artificial intelligence-linked spending. Samsung has been one of the biggest beneficiaries of this trend, and its stock doubled in value between April and June, only to lose momentum at the beginning of the month.

However, today’s report suggests Samsung is about to extend its run of record quarterly revenue and profit, which has continued since the final quarter of fiscal 2025. Analysts say its chipmaking business is expected to drive even stronger earnings growth throughout the remainder of the year, due to the ongoing demand for AI infrastructure.

Samsung said in its preliminary report that its operating profit is expected to hit an all-time high of 89.4 trillion won (around $58.47 billion) for the three-month period ending June 30. That’s up 56% from the previous quarter and above the analyst consensus forecast of 85.05 trillion won. In addition, Samsung said it expects its quarterly revenue to hit more than 171 trillion won, another record and more than double its sales from the same period one year earlier.

Samsung was able to exceed most analysts’ profit estimates even as it booked a provision for special bonuses that will be paid to employees in its chipmaking unit next year. In May, the company said it would allocate 10.5% of its semiconductor businesses’ annual operating profit toward “special bonuses,” although that is contingent on it achieving a number of profitability benchmarks.

The company’s recent share-price pullback may have been a simple technical correction, Citigroup analyst Peter Lee told the Wall Street Journal. The stock was up just over 2% in early trading in South Korea in the wake of the results. This year, Samsung’s shares have gained more than 150%, driven by record prices for the memory chips that are increasingly vital components of AI servers.

“We believe memory fundamentals are intact, and server DRAM pricing has been outperforming on strong CPU demand,” Lee said as he raised his full-year operating profit forecast from 334 trillion won to 401 trillion won.

Going forward, there are still some analysts and investors who are concerned that a slowdown in AI infrastructure spending could undermine the memory boom. In a note to clients last week, JPMorgan Chase said that while supply-demand fundamentals are still favorable, some investors are beginning to question whether  cloud infrastructure providers can continue to sustain their massive level of capital expenditures relating to AI.

Memory chips are believed to account for 52% of the big public cloud provider’s capex spending this year, and could reach 70% next year. That’s why some investors are growing wary, because any decline in AI spending could have a significant impact on Samsung’s revenue.

Nonetheless, Samsung itself is undeterred. Last month, the company committed to investing tens of trillions of won into building out its chip manufacturing capacity as part of a South Korean government initiative worth more than $580 billion. SK hynix Inc., a rival chipmaker that’s set to launch its initial public offering in the U.S. later this week, made a similar commitment.

Samsung is confident because earlier this year it was able to sign multiple multi-year deals with customers to lock in memory chip supplies, though it did not reveal the terms of those contracts or its customers names. Micron Technology Inc. has also revealed similar agreements with customers.

Nomura Holdings Inc. said in a recent report that it expects commodity dynamic random-access memory chip prices to increase 24% in the third quarter, while NAND prices are anticipated to rise 25% in the same period.

It’s not all rosy for Samsung, though. Its mobile business is coming under pressure as those higher memory prices continue to squeeze its profit margins. It has already increased the prices of many of its handsets, but higher component costs continue to offset that. Because of this, many analysts believe Samsung may need to raise the asking prices of its smartphones again this year. Its biggest rival, Apple Inc., recently announced higher prices for its Mac computers and iPad tablets.

Samsung is expected to announce its full quarterly results, including a breakdown by business segment, at the end of the month.

Photo: Samsung Electronics