Samsung flags $95.7 billion profit on AI boom, highest quarterly for any tech company

On October 8, Samsung Electronics announced that its quarterly profit would surpass 100 trillion won (S$95.7 billion), marking a world-first for a technology company and nearly a ninefold increase from third-quarter earnings. The South Korean firm, the world's largest memory chipmaker, projected an operating profit of 107.4 trillion won for the July-September period, slightly beating a LSEG SmartEstimate of 106.1 trillion won.

Analysts attribute Samsung's impressive forecast to the booming demand for AI chips, which has driven strong memory sales.

The surge in memory chip prices, coupled with a growing AI infrastructure investment, has caused a significant shortage in the global chip supply, with prices soaring. Samsung and Micron have warned that the imbalance between supply and demand is expected to persist until 2028. However, the company is cautious of risks like rising costs, Chinese competition, and potential US semiconductor tariffs.

Analysts predict that third-quarter revenue will likely grow by 127% to 195 trillion won from 2025. Samsung will disclose detailed results, including earnings broken down by business division, on October 29. Shares in Samsung rose by 0.3% during early trade, outperforming the 0.1% decline in the benchmark KOSPI.

Supply constraints are expected to continue affecting the memory chip industry, with the imbalance potentially widening in 2027 as AI-related demand absorbs an increasing share of global memory capacity. Conventional DRAM bit shipments are projected to remain flat due to limited inventories, while HBM shipments could rise sharply from the previous quarter, driven by strong demand for HBM4.

The surge in memory chip prices, while benefiting Samsung's semiconductor arm, is increasing costs for Samsung's own smartphones and consumer electronics divisions, squeezing margins in those businesses. Samsung's contract chipmaking, or foundry, business is currently loss-making due to the burden of fixed costs and low utilization rates, according to analysts. However, analysts anticipate that utilization will improve over the next several quarters, as demand for advanced manufacturing processes grows.

Despite favorable supply conditions for Samsung and other memory makers, the expansion of Chinese memory-chip makers remains a potential challenge. Chinese memory makers are expected to remain more dependent on domestic customers, including Chinese AI-chip developers and PC and smartphone manufacturers. However, US restrictions on China's access to advanced chipmaking equipment may limit how quickly Chinese producers can expand.

Another uncertainty in the market is the prospect of US semiconductor tariffs. While analysts acknowledge that it may take several years for new US chip manufacturing capacity to significantly boost global memory supply, such tariffs could still impact the industry.