Samsung manages to beat on earnings despite 84% drop in Q2 net profit

Samsung Electronics

posted above-consensus quarterly earnings despite an 84% drop in net profit for the second quarter, as the South Korean tech giant sees the memory-chip industry passing through a trough.

The world’s largest manufacturer of memory chips, smartphones and televisions said Thursday that it expects global demand for technology products and semiconductors to gradually recover in the second half.

Net profit for the April-June quarter was 1.724 trillion Korean won ($1.35 billion), down sharply from net profit of KRW11.099 trillion in the same quarter a year earlier, the company said.

Its chip-making segment remained in the red for a second consecutive quarter, with operating loss reaching KRW4.360 trillion for the June quarter, it said.

The profit decline — though beating a FactSet-compiled consensus forecast for net profit of KRW889.45 billion — indicates still-weak consumer demand for technology products, which usually drive demand for memory chips, and a supply glut of semiconductors, whose prices are declining as a result.

Revenue fell 22% from a year earlier to KRW60.006 trillion, while operating profit dropped 95% to KRW668.50 billion–the weakest quarterly performance in more than 14 years. Both largely matched the company’s preliminary forecasts.

The delayed recovery in chip demand from smartphone manufacturers and clients’ inventory adjustments on weak global demand for IT products still weighed on results, despite stronger-than-expected demand for high-performance chips driven by the artificial-intelligence segment, Samsung said.

The company said its facility investment increased 18% from the previous quarter to KRW14.5 trillion in the second quarter, as it expects demand for IT products and memory chips to gradually recover.

Nomura analysts C.W. Chung and Eon Hwang said in a recent note that they believe Samsung’s profit is poised to improve from the third quarter, as the semiconductor cycle has likely bottomed out on industrywide production cuts and the booming AI segment that is currently driving demand for more advanced memory chips that Samsung makes.

The company’s resilient smartphone business, alongside an expected chip-industry recovery, could lead to better-than-expected earnings for the full year, Citigroup analyst Peter Lee said in a recent note.

Samsung on Wednesday unveiled its latest foldable smartphones, the large-screen Galaxy Z Fold 5 and the more compact Galaxy Z Flip 5. Samsung dominates the foldables category, accounting for more than 80% of the 14.2 million foldable smartphones shipped globally last year.

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