Samsung Electronics’ operating profit jumps 933% during its Q1 results beating expectations. Strong smartphone sales, higher prices for semiconductors plus a focus on high-value-added products including HBM (the high-bandwidth memory) used in AI hardware were key to the strong performance.
Samsung Electronics on Tuesday said operating profit for the Q1 jumped 932.8% as memory chip prices made a recovery on the back of AI optimism.
Samsung Q1 earning results
Q1 results of Samsung versus LSEG estimates:
Samsung’s revenue: 71.92 trillion Korean won (about $52.3 billion), vs. 71.04 trillion Korean won
Samsung’s operating profit: 6.61 trillion Korean won, vs. 5.94 trillion Korean won
The revenue of Samsung for the quarter ending March jumped 12.81% from a year ago, while operating profit soared 932.8% in the same period.
The figures were in line with the company’s guidance earlier this month, where Samsung said operating profit in the January-March quarter likely rose to 6.6 trillion Korean won, up 931% from a year ago. The firm expected first quarter revenue at 71 trillion won.
The South Korean electronics giant saw record losses in 2023 as the industry reeled from a post-Covid slump in demand.
Samsung’s NAND flash memory business
Citi analysts said they see upside for Samsung’s NAND flash memory business as a result of AI computing demand. In a note on April 5, they reiterated their “buy” rating on Samsung stock with a target price of 120,000 won, a 56% upside from the closing price of 76,700 won on Monday.
NAND is another staple memory chip alongside DRAM.
It is the world’s largest manufacturer of dynamic random-access memory chips (DRAM), which are commonly found in a wide range of consumer devices including smartphones and computers.
Samsung Q2 outlook
Samsung said it expects the second quarter to be driven mostly by demand for generative AI, while mobile demand remains stable. Meanwhile, it expects PC demand to be impacted by slow seasonality, which could lead to customers adjusting inventories before new product launches in the second half of 2024.
In a Tuesday earnings call, the firm warned of escalating geopolitical instability and continued cost hikes in major components, particularly memory.
“Profitability in Q2 is expected to be down slightly compared to Q1 and Q3, which is when we released new flagship products this year.
Samsung memory chip recovery
According to Samsung, its semiconductor business logged a 1.91 trillion Korean won in operating profit in the first quarter, as compared to a loss of 4.58 trillion won in the same period a year ago and a loss of 2.18 trillion Korean won in the fourth quarter.
As AI models become more complex and datasets become larger, these models need memory chips with higher capacities and faster speeds to cater to these workloads.
Kim said in an April 5 report he expects another price hike on memory chips to drive Samsung’s Q2 earnings on the back of an AI boom and the earthquake in Taiwan.
To meet AI demand, Samsung said it started mass producing HBM3E 8H and V9 NAND in April. It plans to mass produce HBM3E 12H products and a 128GB product based on 1b nanometer 32GB DDR5 within the second quarter.
Despite macroeconomic uncertainty and geopolitical tensions, the firm expects the operational environment to “remain positive with demand” – bolstered by generative AI in the second half of the year.
Samsung also said development of 3-nanometer and 2-nanometer processes is “progressing smoothly.” Samsung kicked off mass production of 3-nanometer chips in 2022 and plans to start mass producing 2-nanometer chips in 2025.
Galaxy S24 sales
Strong sales of Samsung’s latest smartphone series Galaxy S24 helped to lift revenue and operating profit of the mobile business, the firm said. AI features on the S24 such as Circle to Search, Photo Assist and Live Translate were popular among customers, Samsung said.
Samsung said it will continue to expand Galaxy AI to existing and new flagship products to drive further growth.
