Samsung's blowout quarter fails to excite investors bracing for memory slowdown

Samsung Electronics reported an estimated operating profit of 89.4 trillion won ($58.6 billion) for the second quarter — a 19-fold year-over-year surge that beat market expectations — yet shares still tumbled Tuesday on fears that the memory upcycle has peaked.

The figure exceeded the 84.4 trillion won consensus compiled by FnGuide, but not by enough to shake bearish sentiment that has been building since Meta's April earnings call, when Big Tech signaled expanded AI investment while remaining vague about its returns. The gap between strong fundamentals and a cautious market mood has widened in recent weeks as investors grow increasingly sensitive to any sign that the AI-driven memory boom may be losing momentum.

The operating profit already comes with a significant cost: Samsung is now provisioning for bonus shares it must distribute to employees next year under a labor-management deal that allocates a 12 percent profit-sharing rate — a pact struck earlier this year to avert a strike at its chip plants. Total provisions across the first and second quarters are estimated at around 15 trillion won.

Revenue for the April-to-June quarter came in at 171 trillion won, up 129.3 percent from a year earlier but below analyst forecasts of 173.3 trillion won.

Despite posting a record quarterly profit, Samsung shares fell 6.92 percent to close at 296,000 won on Tuesday.

Wall Street added to the anxiety: Morgan Stanley warned in a research note the same day that the memory industry is approaching a "peak in its rate of change." The investment bank stressed that this does not signal a downturn, but that the pace of growth is gradually slowing.

Domestic analysts nevertheless maintained buy ratings, arguing that the chip cycle still has room to run and that the stock's decline also reflects the market's already-elevated expectations going into earnings.

"Despite strong earnings, concerns over slowing price growth appear to be weighing on the stock," said Kim Young-gun, analyst at Mirae Asset Securities. "In particular, sixth-generation high bandwidth memory [HBM] prices could rise two- to threefold on year, and the constrained supply capacity stemming from HBM expansion, along with the broader dynamic random-access memory price upcycle, is expected to persist."

Multiple analysts echoed similar views, saying Samsung's HBM revenue market share from supplying key customers such as Nvidia will grow significantly through the second half and into next year.

“The Korean memory industry continues to build out what is now a solid fundamental foundation, and the extreme volatility in its stocks without a clear cause looks like a buying opportunity,” said Park Jun-young, analyst at Hanwha Investment & Securities. “The end of the stock cycle has not arrived.”

Semiconductor analyst Chae Min-sook of Korea Investment & Securities noted that Samsung's valuation remains "extremely depressed" relative to an earnings growth cycle the firm expects to extend through 2028.

Not everyone was convinced, however. Some analysts had privately projected that the company's operating profit could reach 100 trillion won even after accounting for bonus costs — a bar the results fell short of.

Samsung did not provide a breakdown by business division, with a full earnings report set for release later this month.

BY LEE JAE-LIM [[email protected]]