Samsung Electronics Co Ltd Earnings - Q2 2026 Analysis & Highlights
Samsung Electronics delivered record-breaking financial results in Q2 2026 driven by exceptional demand for AI-related semiconductor products, with management emphasizing sustained technology leadership, multiyear customer supply agreements, and strategic investments in advanced manufacturing capacity to capitalize on the agentic AI market expansion.
Key Financial Results
Total revenue reached KRW 171.5 trillion, up 28% quarter-on-quarter, with operating profit increasing 56% to KRW 89.5 trillion.
Operating margin improved to 52%, up from 43% in the previous quarter.
Net profit increased 52% quarter-on-quarter to KRW 71.6 trillion, with earnings per share for both common and preferred shares increasing 52% to KRW 10,849.
R&D expenses reached a new quarterly high of KRW 16 trillion, up from KRW 11 trillion in the previous quarter.
Currency effects provided a positive quarter-on-quarter impact of around KRW 3.1 trillion on operating profit, mainly in component businesses from a stronger US dollar against the Korean Won.
Business Segment Results
Memory Division
DRAM bit shipment increased by low teens percentage compared to the previous quarter, exceeding guidance, while NAND bit shipments increased by low-single-digit percentage in line with guidance.
ASP in the second quarter rose by mid 40% for DRAM and high 60% for NAND compared to the previous quarter.
Record high bit shipment for both DRAM and NAND achieved, with bit share portion of server application reaching an all-time high.
HBM4 supply expanded with differentiated performance, and industry-first HBM4E samples shipped to major customers.
Server SSD expected to exceed 60% of NAND sales mix this year, an increase of more than 20 percentage points year-over-year.
System LSI Division
Overall demand softened due to flagship smartphone seasonality and weakness in the Chinese mobile market, but quarterly revenue was sustained by driving sales of SoC and imaging sensors in the high volume mobile segment.
Record high first-half revenue achieved, with next-generation flagship SoC secured and new awards from major customers across multiple categories.
Foundry Division
Revenue increased driven by growing demand for memory HBM-based die products and product demand centered on customers in the US.
Earnings showed significant improvement before incentive-related charges, with continued extension of order pipeline centered on major HPC customers for 2nm process.
Advanced nodes 8nm and below have reached full utilization levels as the company maximizes sales of high growth products.
Samsung Display Division
Mobile display business performance improved quarter-on-quarter thanks to solid demand for high-end mobile products.
Large display business saw both sales volume and revenue increase quarter-on-quarter driven by growth of gaming monitor market.
Mobile Experience (MX) Division
Q2 revenue reached KRW 32.3 trillion with combined operating profits across MX and network businesses turning to a loss of KRW 0.7 trillion.
Smartphone sales volume increased quarter-on-quarter with revenue growing year-on-year, but profit declined due to industry-wide factors including rising compliance costs.
Visual Display Division
Overall TV demand demonstrated modest growth versus last year driven by a major global sporting event, but declined versus previous quarter.
Sales and profitability increased compared to last year, mainly by preemptively capturing demand for the major sporting event and successfully launching new product categories.
Capital Allocation
CapEx for the second quarter was KRW 16.8 trillion, representing a sequential increase of KRW 5.5 trillion.
Of quarterly CapEx total, KRW 15.4 trillion was allocated to the DS Division while KRW 0.7 trillion was invested in the display business.
Memory CapEx increased quarter-on-quarter as the company expanded investments in the new fab in Pyeongtaek and other infrastructure projects on expectations of continued strength in AI demand.
Foundry CapEx increased quarter-on-quarter as investments were expanded to support the Taylor Fab ramp up in the United States, which remains on track.
Display business capital expenditure increased sequentially due to ongoing supplementary investments in the Gen 8.6 line.
Second-quarter dividend of KRW 374 for both common and preferred shares approved under the 3-year shareholder return policy for 2024 to 2026, with commitment to annual regular dividend of KRW 9.8 trillion distributed through quarterly payment of KRW 2.45 trillion.
Second quarter dividend scheduled to be paid in August.
Industry Trends and Dynamics
Demand was clearly strong in the memory market primarily driven by AI applications, with spread of agentic AI driving additional supply requests based on AI-driven demand mainly from major hyperscaler customers.
Robust demand observed not only for AI servers but also for general computing servers, with this trend expected to accelerate further.
Gap between supply and demand in the following year expected to become much wider, with customers' demand outgrowing supply despite efforts to increase production.
Amid accelerated adoption of agentic AI, amount of tokens being consumed has grown exponentially, driving unprecedented rise in demand for AI servers and broader computing servers.
Memory supply constraints limit expansion of AI infrastructure capacity at hyperscalers and new cloud providers, with AI frontier model developers increasingly approaching Samsung directly to secure memory supply.
Smartphone market volume declined year-on-year primarily in price-sensitive mass segment while value increased driven by higher ASP and expanded share of premium products.
Competitive Landscape
Memory business achieved record high bit shipment for both DRAM and NAND, with bit share portion of server application reaching an all-time high, demonstrating product competitiveness.
HBM4E samples shipped to major customers as industry first, strengthening technology competitiveness.
System LSI secured next-generation flagship SoC and continued building momentum with new awards from major customers across multiple categories.
Foundry continued to extend order pipeline centered on major HPC customers including cloud service providers for 2nm process.
Samsung Display aims to maintain profitability through high value-added products and operational efficiency supported by major customers with new product launches in smartphone market.
Macroeconomic Environment
Company achieved results despite ongoing macro and geopolitical uncertainty, demonstrating differentiated technology built across core businesses.
Market uncertainty expected to continue in the second half due to tight memory supply and demand conditions.
Persistent cost pressures stemming from rising component prices expected in the second half, with overall consumer market demand expecting to soften.
Rising component and material cost pressures likely to continue for DX Division, with division remaining focused on defending profitability.
Annual smartphone shipments expected to decline as demand softens amid macroeconomic uncertainty and rising memory prices.
TV market demand expected to slow down following end of sporting event with macroeconomic and geopolitical uncertainties likely to persist.
Growth Opportunities and Strategies
Memory Business
Company plans to preemptively optimize product mix for both DRAM and NAND, considering changes in demand by applications and voice of customers.
Multiyear supply agreements being pursued with major customers to establish more stable and predictable business structure, with top five global data center customers already finalized and five additional major accounts in final stages of talks.
Multiyear supply agreements based on 5-year term with annual negotiations where parties can agree to add additional year, operating on rolling basis.
Substantial advance payments included as contractual requirement in multiyear supply agreements to announce binding nature of commitments, with significant portion already received.
Pricing structures for multiyear agreements designed to provide sufficient compensation for certain level of future investment risk, with differentiated pricing models depending on customer segment and product categories.
Expected to transition business structure from one previously overexposed to supply/demand cycles to more stable and predictable model through multiyear arrangements.
Foundry Business
Mass production of new mobile-oriented products based on second generation 2nm process to commence in second half, while ramping up volume production of LPU products for major 4nm customers.
Revenue contribution from advanced nodes projected to exceed 50%, with share of AI HPC applications anticipated to expand significantly from high teens percentage in 2025 to over 30% in 2026.
Taylor Fab 1 preparing to commence operations by 2026 as planned, with plans to gradually ramp up 2nm capacity to ensure timely capacity readiness in line with growing customer demand.
Taylor Fab 2 will begin construction by end of this year, targeting mass production by 2030.
Company reviewing options to potentially secure additional fab capacity, with detailed plans to be developed in phases based on customer engagements and order development.
Display Business
Gen 8.6 IT OLED line ramp up planned to expand OLED adoption in IT market and drive revenue growth.
Technology innovation including full oxide and maximizing production efficiency based on large substrate 8.6 gen process to boost cost competitiveness.
Expansion of revenue through ramp up of new 8.6 generation IT OLED line, ensuring timely panel supply.
Mobile Experience Division
Flagship first-expansion strategy to drive overall market share growth, with increasing sales mix of high value-added products including top tier Ultra model and newly launched foldable Z8 series.
S26 momentum to be maintained through sustained marketing and launch of new S26 FE while expanding upselling in mid-to-high end segments.
Core AI experiences to be brought to A Series to capture market opportunities resulting from component supply shortages and drive volume market share growth.
Launch of intelligent eyewear later this year to bring new form factor experience for AI era across broader Galaxy ecosystem.
Visual Display Division
Expansion of sales of new categories by leveraging product competitiveness and highlighting differentiated experience.
Pioneering AI TV market by delivering differentiated viewing experience powered by Vision AI and continuing to advance AI features to reinforce sales leadership.
Securing future growth engine and elevating profitability by expanding advertising service business while strengthening OS competitiveness to further broaden licensing business.
Robotics Business
Establishment of RX Business Office reporting directly to CEO to bring together companywide robotics capabilities and integrate strategy, establishment, hardware, AI and software development and product planning under single organization.
Building robotics pilot production line and data factory in Gumi to build foundation for robot manufacturing and field deployment.
Leveraging global R&D hubs in US, China and Japan to expand robotics ecosystem.
Centering on B2B applications in manufacturing logistics to secure core technologies and data and develop highly intelligent multipurpose humanoid robots, gradually expanding into B2C market.
Exploring collaborations with promising global startups along with potential investments and M&As to accelerate robotics strategy.
Financial Guidance and Outlook
Overall Outlook
Growth momentum expected to continue building in second half, supported by sustained strength in semiconductor demand.
Targeting leadership in agentic AI market by delivering hyper-personalized AI experiences with open platform and sales expansion of premium products across businesses.
Memory Division Outlook
Q3 bit-growth outlook: mid-single digit for DRAM and high single digit for NAND, as inventory levels for both DRAM and NAND are significantly low.
Supply shortage expected to persist through 2028, with supply constraints expected to become even more severe in 2027 than 2026.
Unlikely to see any significant increase in incremental supply through 2028, considering lead time from new fab construction to actual wafer production exceeds 3 years.
Unmet demand from this year likely to carry over into following year, contributing to tighter supply conditions going forward.
HBM4 sales expected to increase by more than three full Q-o-Q in third quarter.
HBM4 expected to account for well over 60% of total HBM revenue mix in second half.
System LSI Division Outlook
Overall consumer market demand expecting to soften in second half amid persistent cost pressures stemming from rising component prices.
Strengthening competitiveness of core business and further expanding into high-value segments despite adverse market conditions.
Foundry Division Outlook
Double-digit or higher year-on-year revenue growth expected in second half, combined with revenue growth across key customers in both US and China at all nodes.
Profitability improvement expected to gain full momentum through strategic shift of business towards high growth segments.
Significant profitability improvements expected year-on-year supported by higher utilization, improved yields and effect of pricing adjustments.
Turnaround to profit believed possible in near term, though difficult to predict exactly when due to nature of foundry business driven by customer orders.
Display Division Outlook
Sales volume may decline due to higher stack prices arising from memory supply constraint, yet aiming to grow revenue through expanded sales of premium product and full-scale mass production at Gen 8.6 line.
Profitability expected to be maintained through high value-added products and operational efficiency supported by major customers with new product launches in smartphone market.
Mobile Experience Division Outlook
Annual smartphone shipments expected to decline as demand softens amid macroeconomic uncertainty and rising memory prices.
Demand in premium segment projected to remain resilient supported by expansion of AI-enabled features and innovation in form factors.
Both full-year sales volume and ASP expected to increase.
Visual Display Division Outlook
TV market demand expected to slow down following end of sporting event with macroeconomic and geopolitical uncertainties likely to persist.
Shareholder Returns and Capital Management
Board and management actively discussing specific implementation plan for current shareholder return policy, including this year's special dividend.
In-depth discussions engaged on next shareholder return policy, working to drive shareholder value while maintaining optimal equilibrium between reinvesting for future growth and delivering long-term value to shareholders.
Current policy of returning 50% of free cash flow noted, with customer prepayments under LTAs for memory business and share repurchases for employee compensation potentially affecting FCF.
Share buyback timing to be determined through optimal method after considering both shareholder value and effectiveness of employee compensation, rather than one large-scale execution.
Sustainability Initiatives
Renewable energy transition rate reached 32.5% in 2025, an increase of 1.1 percentage points from previous year.
Proportion of recycled plastics in products increased to 33.7%, representing 2.7 percentage point increase year-on-year.
Achieved four consecutive years without any serious workplace accidents, reflecting steadfast commitment to workplace safety.
