Five Key Issues for Samsung Ahead of Q3 Earnings

Samsung Electronics is set to release its preliminary third-quarter earnings guidance on Thursday. Analysts anticipate an operating profit of 106.1 trillion won ($79.1 billion), representing a fourth consecutive record quarter.

AI infrastructure demand continues to outpace memory supply. However, the pace of memory price increases moderated in the third quarter, prompting investors to wonder if chip margins have peaked.

Key Areas to Focus On When Samsung’s Preliminary Q3 Results Arrive

Samsung’s guidance filings provide only consolidated revenue and operating profit. A more comprehensive report will come in late October.

Thursday’s announcement will address the profit question initially. The remaining four points depend on analyst projections, industry data, and market response.

1. A Record Profit Underpinned by Lowered Expectations

The headline figure is profit, forecast to be almost nine times the 12.17 trillion won Samsung earned a year ago.

That would surpass the second-quarter record operating profit of 89.5 trillion won ($62 billion) Samsung reported in July.

However, this figure incorporates a downward revision. The LSEG SmartEstimate, compiled from 21 analysts, has fallen 7.7% since the end of August.

Two reasons underlie this reduction.

• Slower memory price gains. Memory chip prices continued to rise in the third quarter, but at a slower rate.
• A stronger won: The won appreciated 14.3% against the dollar in Q3, its largest quarterly increase since early 1998. This reduces the value of Samsung’s overseas earnings when repatriated.

2. Memory Margins Steady at 76%

SK Securities analyst Han Dong-hee estimates Samsung’s third-quarter memory operating margin at 76%. That would be unchanged from the April-to-June period.

Meanwhile, US rival Micron anticipates its gross margin will edge down to 86.3% from 87% this quarter, attributing part of the decline to employee compensation expenses.

3. Outlook for DRAM Prices in the Fourth Quarter

TrendForce predicts the moderation in memory price increases will persist into the fourth quarter. It forecasts conventional DRAM contract prices will climb 10% to 15% from the third quarter, following a roughly 60% surge in the second quarter.

Avril Wu, senior vice president for research at TrendForce, attributed part of the slowdown to long-term supply agreements.

“With ceiling-price mechanisms built in, the rate of price increases has slowed down…long-term agreements represent an increasingly higher proportion of suppliers’ total ‌output. With ⁠ceiling-price mechanisms built in, the rate of price increases has slowed down,” Wu