Samsung Projects Record 80 Billion dollar Profit as AI Demand Drives Biggest-Ever Quarterly Earnings for a Tech Company

Samsung Electronics is forecasting a record quarterly operating profit of 107.4 trillion won ($80.17 billion) for the July-September period, marking what would be the first time a technology company has crossed the 100 trillion won profit threshold in a single quarter. The estimate represents an almost ninefold increase from the same period a year earlier and is slightly higher than the 106.1 trillion won expected by analysts surveyed by LSEG.

The remarkable jump in earnings is being driven primarily by the global boom in artificial intelligence, which has sharply increased demand for memory chips used in AI servers and data centres. As the world's largest memory-chip maker, Samsung has benefited from tight supplies of DRAM and NAND products as well as growing demand for high-bandwidth memory, or HBM, which is essential for processing the enormous volumes of data required by advanced AI systems.

The latest forecast would mark Samsung's fourth consecutive quarter of record operating profit and highlight the extent to which AI infrastructure investment has outpaced semiconductor supply. The resulting shortage has pushed memory prices significantly higher and strengthened the earnings of major chipmakers. Samsung and US-based Micron Technology expect the supply-demand imbalance in memory chips to continue potentially through 2028. However, increasing competition from Chinese manufacturers and concerns that AI-related investment could eventually slow remain significant risks to the industry's longer-term growth.

Despite the latest record profit projection, Samsung's shares showed limited movement in early trading, slipping around 0.2% compared with a 0.5% decline in South Korea's benchmark KOSPI index. The company's stock remains more than 25% below its record high reached in June, reflecting investor concerns about whether the extraordinary growth generated by the AI boom can be sustained.

Currency movements have added another challenge. The recent strengthening of the South Korean won has prompted some analysts to reduce their earnings forecasts because overseas sales denominated in US dollars translate into fewer won when converted into the company's home currency. At the same time, investors are becoming increasingly focused on whether Samsung can maintain the exceptionally rapid earnings growth seen over the past year.

Analysts expect Samsung's fourth-quarter profit to increase by about 8.2% from the previous quarter, considerably slower than the estimated 20% sequential growth during the third quarter. One reason is that the pace of memory-price increases is expected to moderate. Market research firm TrendForce forecasts that conventional DRAM contract prices could rise by around 10% to 15% in the fourth quarter, significantly below the roughly 60% jump recorded in the second quarter.

The direction of memory prices is being closely monitored because the more than year-long rally has helped Samsung, SK Hynix and Micron achieve exceptionally strong profit margins. A slowdown in price growth could therefore have a noticeable impact on the semiconductor industry's earnings momentum, even if demand for AI-related hardware remains strong.

Samsung expects its third-quarter revenue to reach approximately 195 trillion won, representing a substantial increase from the same period last year. The company is scheduled to publish its complete financial results, including detailed performance figures for its individual business divisions, on October 29. Memory chips are expected to account for most of the improvement in Samsung's overall earnings. Demand has strengthened not only for conventional DRAM and NAND chips but also for HBM, which has become a critical component in AI computing systems. Analyst Douglas Kim estimates that Samsung's HBM shipments increased by nearly 50% from the previous quarter as the company works to narrow its competitive gap with SK Hynix in the rapidly expanding market.

The semiconductor boom, however, is creating difficulties for some of Samsung's other operations. Its smartphone and consumer electronics businesses are facing higher component costs as memory prices rise, putting pressure on margins. Analysts estimate that Samsung's mobile division recorded a larger-than-expected loss of more than $1 billion during the third quarter.

Samsung's contract chipmaking business is also expected to remain loss-making, with high fixed costs and relatively low utilisation rates continuing to weigh on its performance. The company is nevertheless hoping that utilisation will improve over the next several quarters as demand for advanced semiconductor manufacturing increases.

Samsung is also continuing its efforts to close the technology gap with Taiwan Semiconductor Manufacturing Co. (TSMC), the world's leading contract chipmaker. If demand for advanced manufacturing processes continues to strengthen, higher factory utilisation could gradually improve Samsung's foundry business. The latest results underline how deeply the AI boom has reshaped the global semiconductor industry. While Samsung is benefiting enormously from surging demand for memory used in AI infrastructure, investors are now looking beyond record quarterly numbers and asking whether the extraordinary growth can continue as chip prices stabilise and competition intensifies.

Disclaimer: This image is taken from Reuters.