Samsung second-quarter operating profit soars 1,458% as AI demand remains strong; results top estimates

Samsung Electronics on Wednesday reported higher-than-expected second-quarter revenue and operating profit, as demand for its advanced memory chips that are crucial for artificial intelligence training remained strong.

Here are Samsung’s second-quarter results versus analysts’ average estimates according to LSEG.

• Revenue: 74.07 trillion Korean won (about $53.45 billion) vs. 73.74 trillion Korean won
• Operating profit: 10.44 trillion Korean won vs 9.53 trillion Korean won

Samsung’s revenue for the quarter ended June jumped 23.42% from a year earlier, while operating profit soared 1,458.2%.

The South Korean giant said robust demand for high-bandwidth as well as conventional memory, such as regular dynamic random access memory, from customers expanding AI investments contributed to the strong performance.

For the second half, Samsung said it expects the demand from server AI to stay strong across server products including HBM, server DRAM and SSD. SDD, or solid-state drive, refers to a semiconductor-based storage device.

The firm added that expanding capacity to meet demand for HBM and server DRAM could further constrain supply of conventional memory chips.

During its earnings call, the firm said it plans to address the AI demand by expanding sales of HBM3E —the latest AI memory product — through capacity expansion in the second half.

It will also expand sales of SSDs which are currently in high demand for AI servers as well.

The firm also said it would pay out a dividend of 361 won per common and preferred share for the second quarter.

“According to our current dividend policy, the total amount distributed per quarter amounts to approximately 2.45 trillion won, which will be paid near the end of August.”

Samsung shares rose as much as 1.35% Wednesday morning.

Business for the world’s largest memory chip maker rebounded as memory chip prices recovered on AI optimism last year. The South Korean electronics giant saw record losses in 2023 as the industry reeled from a post-Covid slump in demand for memory chips and electronics.

“After Nvidia and global chip makers announced an AI semiconductor roadmap recently, we foresee a memory price hike trend until 1H25. We attribute this to greater concerns about memory supply amid robust demand for HBM and high density enterprise SSD, which use more wafers, with increased production lead time,” SK Kim of Daiwa Capital Markets said in a report last month.

Samsung reportedly has cleared the tests for the use of its HBM3 chips in Nvidia processors for the Chinese market. SK Hynix has so far led the HBM memory chip market, having been the sole supplier of HBM3 chips to Nvidia.

SK Hynix on Thursday logged its highest quarterly profit since the second quarter of 2018, rebounding from a loss of 2.88 trillion won in the same period a year ago.

The firm plans to continue pushing its premium Galaxy AI products. In its latest move, Samsung announced last week global availability for its newest Galaxy devices including Galaxy Z Fold6, Z Flip6, Watch Ultra and Ring.

“Even in challenging circumstances, we will continue investing in upgrading Galaxy AI functionality in order to secure a long term sustainable growth engine,” Samsung said on Wednesday.

Counterpoint Research said Samsung should see “greater uptick to its operational performance” in the second half, mainly driven by memory chips and a “premiumisation” trend of smartphones.

“SK Hynix and Micron though will continue to challenge Samsung in memory both in the AI segment with HBM growth and in the AI smartphone and PC market as well with close tie-ups and optimizations with key compute players such as Qualcomm, Intel and Nvidia,” Neil Shah, research vice president at Counterpoint Research, said in emailed comments to CNBC.