The Samsung logo is seen at its booth during the Mobile World Congress in Barcelona, Spain, on February 28, 2024. (Photo by Joan Cross/NurPhoto via Getty Images)
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Samsung Electronics Co. on Wednesday reported higher-than-expected revenue and operating profit in the second quarter, as demand remained strong for advanced memory chips that are essential for training artificial intelligence.
Here are Samsung's Q2 results versus analysts' average estimates according to LSEG.
Revenue: KRW 74.07 trillion (about $53.45 billion) vs. KRW 73.74 trillion Operating profit: KRW 10.44 trillion vs. KRW 9.53 trillion
Samsung's revenue in the quarter ended June rose 23.42% from a year earlier, while operating profit rose 1,458.2%.
The South Korean giant said strong demand for high-bandwidth as well as traditional memory, such as regular DRAM, from customers expanding their AI investments contributed to the strong performance.
For the second half, Samsung said it expects demand for server AI to remain strong across server products including HBM, server DRAM and SSD. SSD, or solid-state drive, refers to a semiconductor-based storage device.
The company added that expanding capacity to meet demand for HBM and DRAM for servers could further constrain supplies of traditional memory chips.
During the earnings call, the company said it plans to address AI demand by expanding sales of HBM3E — its 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 company also said it will pay 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 is approximately 2.45 trillion won, and will be paid out towards the end of August.”
Samsung shares rose 1.35% Wednesday morning.
Memory momentum
HBM memory chips are essential for AI chips — which have seen huge demand thanks to the AI boom. Companies like Samsung Electronics and SK Hynix, the world’s two largest memory chip makers, have benefited greatly from this demand.
“With memory average selling prices expected to continue their upward trend over the next several quarters, we forecast quarterly earnings growth for Samsung Electronics through 2025,” CLSA said in a report earlier this month following Samsung’s second-quarter outlook.
The world’s largest memory chip maker has been on a rebound as memory chip prices rebounded on optimism over artificial intelligence last year. The South Korean electronics giant posted a record loss in 2023 as the industry was hit by a post-Covid slump in demand for memory chips and electronics.
“After Nvidia and global chipmakers recently announced their semiconductor roadmap for AI, we expect memory prices to rise through the first half of 2025. We attribute this to greater concerns over memory supply amid strong demand for HBM and high-density SSDs for enterprises, which are using more chips, with longer lead times,” SK Kim of Daiwa Capital Markets said in a report last month.
Samsung has reportedly passed the necessary tests to use HBM3 memory chips in Nvidia processors destined 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 Inc. on Thursday posted its highest quarterly profit since the second quarter of 2018, recovering from a loss of 2.88 trillion won in the same period last year.
Declining demand for smartphones
Smartphone sales in the second quarter fell largely due to the “base impact of new model launches” in the first quarter. However, Samsung said the Galaxy S24 series continued to see strong demand.
“Smartphone demand declined sequentially in the seasonally weak quarter, especially in the premium segment,” the company said, adding that it expects the premium segment to grow in the second half although the full-featured segment is likely to slow.
Profitability in the smartphone segment also declined as prices of key components rose.
The company plans to continue promoting its premium Galaxy AI products. In its latest move, Samsung last week announced the global availability of its latest Galaxy devices including the Galaxy Z Fold6, Z Flip6, Watch Ultra, and Ring.
“Even in challenging circumstances, we will continue to invest in upgrading Galaxy AI functions to secure a sustainable long-term growth engine,” Samsung said on Wednesday.
Counterpoint Research said Samsung is expected to see a “further uptick in operating performance” in the second half of the year, mainly due to memory chips and a “surge” in smartphone prices.
“SK Hynix and Micron will continue to challenge Samsung in memory both in the AI segment with the growth of HBM and in the AI smartphone and PC market with close relationships and improvements with major computing players like Qualcomm, Intel and Nvidia,” Neil Shah, vice president of research at Counterpoint Research, said in emailed comments to CNBC.
