Samsung Electronics’ operating profit jumps 932.8% in first quarter, beats expectations

Samsung Electronics on Tuesday explained running financial gain for the initial quarter jumped 932.8% as memory chip charges rebounded on the back again of AI optimism.

Below are Samsung’s to start with-quarter benefits vs . LSEG estimates:

• Revenue: 71.92 trillion Korean received (about $52.3 billion), vs. 71.04 trillion Korean received
• Operating income: 6.61 trillion Korean won, vs. 5.94 trillion Korean gained

Samsung’s income for the quarter ending March jumped 12.81% from a calendar year back, whilst operating gain soared 932.8% in the exact time period.

The figures were being in line with the firm’s steerage earlier this thirty day period, in which Samsung mentioned working profit in the January-March quarter likely rose to 6.6 trillion Korean gained, up 931% from a year in the past. The agency expected first quarter revenue at 71 trillion won.

The South Korean electronics big saw document losses in 2023 as the industry reeled from a post-Covid slump in demand.

“The firm posted KRW 71.92 trillion in consolidated revenue on the again of solid product sales of flagship Galaxy S24 smartphones and bigger selling prices for memory semiconductors. Functioning financial gain amplified to KRW 6.61 trillion as the Memory Business returned to revenue by addressing demand from customers for significant value-extra items,” Samsung Electronics stated in a assertion on Tuesday.

Samsung is the world’s premier manufacturer of dynamic random-obtain memory chips (DRAM), which are generally located in a extensive selection of customer devices such as smartphones and computer systems.

“We think the earnings shock was pushed by better memory rate hike on AI-driven sturdy upturn cycle. We foresee the company will guidebook for optimistic memory sector outlook and emphasize its readiness in AI period like HBM (12H HBM3E, HBM4) and foundry/packaging option,” mentioned SK Kim of Daiwa Money Marketplaces in emailed responses to CNBC on Monday, ahead of the earnings launch.

As AI types turn into additional sophisticated and datasets become much larger, these versions need to have memory chips with larger capacities and more rapidly speeds to cater to these workloads.

Kim mentioned in an April 5 report he expects one more price hike on memory chips to travel Samsung’s 2nd-quarter earnings on the again of an AI growth and the earthquake in Taiwan.

“Specially, we expect much more upside in costs resulting from the earthquake in Taiwan,” mentioned Kim, adding that the earthquake in early April temporarily impacted TSMC‘s and Micron‘s creation.

Citi analysts reported they see upside for Samsung’s NAND flash memory small business as a final result of AI computing demand. In a take note on April 5, they reiterated their “acquire” ranking on the business with a target cost of 120,000 received — a 56% upside from the closing value of 76,700 gained on Monday.

NAND is a further staple memory chip together with DRAM.

“We hope storage (HDD) to be the upcoming bottleneck in AI computing, particularly in AI schooling, and foresee Samsung Electronics to be one of the essential beneficiaries of SSD desire momentum for AI coaching,” said the Citi analysts.

Earlier this month, the Biden administration agreed to grant Samsung up to $6.4 billion of funding to produce new manufacturing ability to deliver chips in Texas. Micron and TSMC are also poised to receive grants to strengthen chipmaking in the U.S. soon after decades of chip output moving to Asia.

Samsung and TSMC are set to face competitiveness from Japan’s Rapidus Corporation, which was lately granted $3.89 billion in supplemental subsidies from the Japanese governing administration to mass generate 2-nanometer chips from 2027.

There are rising problems that Samsung Electronics pitfalls shedding its major situation to rivals like SK Hynix, the world’s no. 2 memory chip maker.

SK Hynix on March 19 claimed it turned the first in the industry to mass produce HBM3E, the following-generation of higher bandwidth memory chips utilized in AI chipsets. SK Hynix is the primary provider of HBM3 chips to Nvidia’s AI chipsets.

Mehdi Hosseini, senior tech hardware analyst of Susquehanna Intercontinental Team, pointed out in early April that Samsung employed to be the current market leader in memory, smartphones and show improvements.

Now, Samsung is only “benefiting from the cycle restoration,” he extra.

In the initially quarter, Samsung managed to get back the best spot in smartphone shipments soon after getting rid of the crown to Apple in 2023, according to International Facts Corp.