Samsung Electronics is anticipated to announce a substantial operating profit of approximately 86 trillion won ($56.35 billion) for the second quarter, representing an increase of 18 times compared to the same period last year. This projected figure positions Samsung to achieve its third consecutive quarter of record-high operating profit.
The forecast relies on a compilation from 30 analysts conducted by LSEG SmartEstimate, which also predicts revenue will soar by 127% to a historic total of 169 trillion won.
Market Drivers and Profit Outlook
The surge in profitability is largely attributed to the rising demand for memory chips used in artificial intelligence (AI) infrastructure. According to data from Citi Research and HSBC, average selling prices of DRAM and NAND increased dramatically in the second quarter, with DRAM prices rising approximately 44% quarter-on-quarter and NAND prices climbing around 53%.
This trend is indicative of a broader demand for both high-bandwidth and conventional memory solutions, as agentic AI systems necessitate enhanced memory and storage capabilities.
Employee Bonuses and Potential Impact
However, there is a significant caveat. In May, Samsung reached an agreement with its workforce that allocates 10.5% of the operating profit from its semiconductor division to special bonuses. Some analysts estimate that the total bonuses may exceed 40 trillion won. The treatment of these provisions in Samsung's accounting for the second quarter may affect the headline profit figures.
While a robust profit trajectory is expected, the actual earnings report could fall short of market consensus due to the timing of bonus accounting recognition.
Stock Performance and Analyst Sentiment
Samsung's stock has experienced notable volatility; it has risen over 155% this year but saw a decline of nearly 9% last week, marking its worst performance since late March, influenced by global chip market fluctuations and concerns regarding AI capital expenditure sustainability.
The present valuation of Samsung remains relatively low, trading at a multiple of 5.7 times its 12-month forward earnings, compared to 7 times for Micron and approximately 24 times for the Philadelphia Semiconductor Index.
Analysts have expressed optimism regarding Samsung's shares. On July 2, Citigroup elevated its price target for Samsung from 460,000 won to 530,000 won, indicating a potential increase of 71% relative to the stock's closing price on the prior Friday. This is based on the belief that fundamental trends in the memory market remain supportive.
The average price target set by analysts monitored by Bloomberg suggests an additional upside of 52% for Samsung shares over the coming year.
