Samsung Profits Surge 160% Driven by Chip Recovery

Samsung Electronics (005930.KS) has announced a significant rebound in its earnings for the third quarter, driven by robust demand for memory chips powering the burgeoning artificial intelligence (AI) sector. The South Korean tech titan’s performance underscores the critical role of memory solutions in the AI infrastructure build-out, positioning Samsung to capitalize on this accelerating trend.

The company’s Q3 results surpassed analyst expectations, indicating a strong recovery in its core business segments. Here’s a breakdown of Samsung’s key financial metrics compared to LSEG SmartEstimate forecasts:

• Revenue: 86.1 trillion Korean won ($60.5 billion) vs. 85.93 trillion won
• Operating profit: 12.2 trillion won vs. 11.25 trillion won

Year-over-year, Samsung’s quarterly revenue witnessed an 8.85% increase, while operating profit saw a substantial climb of 32.9%. The positive earnings report triggered a surge in Samsung shares, rising nearly 4% in early Asian trading.

This strong performance marks a significant turnaround from the previous quarter, which was hampered by a downturn in the chip market. Q3 operating profit increased by a notable 160% compared to Q2, while revenue grew by 15.5% during the same period.

As South Korea’s largest company by market capitalization, Samsung’s diverse portfolio spans memory chips, semiconductor foundry services, and smartphones. The company’s resurgence is particularly noteworthy given the current macroeconomic climate and intensifying competition within the global tech landscape. The AI-driven demand for memory is proving to be a significant tailwind for Samsung, offsetting some of the challenges in other areas.

The surge in earnings was primarily fueled by the company’s chip business, which experienced a tenfold increase in operating profit compared to the prior quarter, driven by the increased demand for AI server components. This reflects the overall surge in data center investment aimed at supporting AI applications, a trend expected to continue well into the future.

Mirroring the optimistic outlook of its rival SK Hynix, Samsung anticipates sustained growth in AI chip demand. “We expect data center companies to continuously expand their hardware investment because of the ongoing competition to secure AI infrastructure,” a Samsung executive stated during the earnings call. “Therefore, our AI-related server demand keeps growing, and this demand significantly exceeds industry supply,” the executive added, indicating a potential supply-demand imbalance in the near term that could further benefit memory manufacturers.

Samsung’s chip business reported a 19% increase in sales compared to the June quarter, with the memory division achieving record quarterly sales driven by the surging demand for AI-focused solutions.

Specifically, chip revenue reached 33.1 trillion Korean won, representing a 13% increase from the previous year, while operating profit surged 81% to 7.0 trillion Korean won over the same period. This highlights the high profitability associated with AI-related memory components.

The Device Solutions division, encompassing memory chips, semiconductor design, and foundry units, forms the cornerstone of Samsung’s chip business. The division benefited from a favorable pricing environment and record revenues due to increased sales of High-Bandwidth Memory (HBM) chips crucial for AI computing.

While Samsung has been working to close the gap with SK Hynix in the HBM market, progress appears to be substantial as reports indicate that the company recently passed Nvidia’s qualification tests for an advanced HBM chip. This successful qualification is a crucial step towards securing significant orders from the leading AI chip designer, a move that could significantly impact Samsung’s future market share.

Recent data from Counterpoint Research indicates that Samsung has regained its position as the leading memory market player, surpassing SK Hynix in Q3. This resurgence highlights Samsung’s ability to capitalize on the booming memory market. MS Hwang, research director at Counterpoint Research, explained that Samsung’s Q3 success was driven by a “memory market boom” and the rising prices of general-purpose memory, suggesting that both AI-specific and broader memory demand are contributing to the company’s positive performance.

Looking ahead to 2026, Samsung’s focus will be on mass production of its next-generation HBM technology, HBM4. This proactive investment in advanced memory technologies positions the company to retain its competitive edge and continue benefiting from the secular growth trends in AI and high-performance computing.

Samsung’s Mobile eXperience (MX) and network businesses, encompassing the development and sale of smartphones, tablets, wearables, and other devices, also demonstrated positive growth in both sales and profitability. This indicates a healthy ecosystem surrounding Samsung’s core smartphone business, even amid changing consumer spending patterns.

The MX division reported an operating profit of 3.6 trillion won in Q3, approximately 28% higher compared to the same period last year. This increase suggests a successful product strategy and execution, despite the increasingly competitive landscape of the smartphone market.

The company attributed revenue gains to strong sales of its flagship smartphones, including the newly launched Galaxy Z Fold7 device. The continued success of Samsung’s foldable devices demonstrates the company’s innovation and its ability to capture consumer demand for premium mobile experiences.

Samsung believes the rapid growth of the AI industry presents new market opportunities for its devices and chip businesses in the upcoming quarter. With the integration of AI capabilities into smartphones and other devices, the interplay between software and hardware is becoming increasingly critical, positioning Samsung to leverage its expertise in both areas to develop differentiated and competitive products.