Samsung Electronics Co Ltd Earnings - Q1 2026 Analysis & Highlights
Samsung Electronics delivered record-breaking Q1 2026 financial results driven by robust AI infrastructure demand and strong memory product performance, with management emphasizing continued technology leadership, strategic capacity investments, and shareholder returns amid geopolitical headwinds and labor negotiations.
Key Financial Results
Total revenue reached an all-time high of KRW 134 trillion, up 43% quarter-over-quarter from the previous record set one quarter prior.
Operating profit reached a new all-time high of KRW 57 trillion, up 185% quarter-over-quarter, with operating margin expanding from 21% in the previous quarter to 43%.
Net profit recorded KRW 47 trillion, representing 2.4 times the previous quarter's performance.
Earnings per share came in at KRW 7,123 for common shares and KRW 7,124 for preferred shares.
Currency appreciation, particularly of the US dollar, provided a positive impact of approximately KRW 1.8 trillion on operating profit quarter-over-quarter, mainly benefiting component businesses.
Business Segment Results
Memory Business
Memory Business posted its second straight quarterly earnings record, with revenue increasing from the previous quarter driven by stronger sales of high value-added AI products and higher average selling prices (ASPs).
Server bit shipment growth reached low-teens percentage quarter-over-quarter for DRAM and low-20% quarter-over-quarter for NAND, resulting in record-high quarterly sales in the server segment.
Blended ASP rose by low-90% range quarter-over-quarter for DRAM and high-80% quarter-over-quarter for NAND following a sharp rise in market pricing and improved product portfolio from expanded server application sales.
Samsung became the first in the industry to commence mass production and shipment of HBM4 in the first quarter, with production-ready capacity fully booked and sold out.
HBM sales are expected to increase substantially by more than threefold year-over-year in 2026, with HBM4 sales expected to exceed 50% of total HBM sales from the third quarter onward and account for roughly half on a full year basis.
System LSI Business
Overall earnings improved quarter-over-quarter despite weak demand in the smartphone market, driven by SoC sales on the back of flagship product launches from major customers and favorable seasonality.
System semiconductor delivered improved results thanks to expanded sales of flagship SoC.
Foundry Business
Earnings declined quarter-on-quarter due to seasonally weak customer demand, aligning with the industry pattern of first half low, second half high, though the business achieved double-digit year-on-year revenue growth.
Foundry continued to expand customer base and deepen engagements across high-performance computing applications, sustaining solid order momentum throughout the quarter.
A strategic project was secured from a leading optical communication module player, marking a significant milestone in establishing the foundation of the silicon photonics business.
Display Business
Mobile display business performance declined quarter-on-quarter due to seasonality and memory price pressure.
Large display business maintained stable sales thanks to strong demand in gaming monitors.
Mobile Experience (MX) Division
Q1 revenue reached KRW 37.5 trillion, with a combined operating profit of KRW 2.8 trillion across the MX and Network businesses.
Despite new model launch schedule adjustment and geopolitical uncertainties, the division delivered quarter-over-quarter growth in both revenue and operating profit.
Year-on-year solid ASP and revenue growth was achieved, driven by higher contribution from Ultra models.
Visual Display (VD) Business
Overall TV demand declined after year-end peak season, but demand for QLED, OLED, and 75-inch overall remained solid.
Profit declined year-on-year due to stagnant demand and rising raw material cost, despite showing improvement versus the previous quarter.
Capital Allocation
Capital Expenditures
CapEx in the first quarter totaled KRW 11.2 trillion, down KRW 9.2 trillion quarter-over-quarter, of which KRW 10.2 trillion was allocated to DS Division and KRW 0.6 trillion was allocated to Display Business.
Memory Business CapEx declined quarter-over-quarter, reflecting the front-loaded nature of certain investments made last year, including the addition of new cleanroom space at the Pyeongtaek site.
Foundry CapEx declined from the previous quarter due to the base effect set by major infrastructure investments at the Taylor fab in the fourth quarter of 2025, though investments to support the ramp-up of the Taylor fab are expected to increase steadily throughout the year starting in the second quarter.
Display Business CapEx remained roughly flat sequentially, with investments focused on enhancing existing lines after completion of the Gen 8.6 line last year.
In 2026, Samsung anticipates a substantial year-on-year increase in CapEx, driven by sustained demand related to AI, with further expansion of preemptive R&D investments in next-generation processors and core technologies.
The company plans to invest over KRW 110 trillion in facilities and R&D to strengthen strategic production bases including the Pyeongtaek site, the US Taylor fab, and the Yongin semiconductor cluster, as well as to advance R&D in next-generation technologies.
Shareholder Returns
The Board of Directors approved a quarterly dividend of KRW 372 trillion per share for both common and preferred shares.
Under the three-year shareholder return policy for 2024 to 2026, the company is committed to ensuring an annual minimum payout of regular dividends totaling KRW 9.8 trillion through quarterly dividends of KRW 2.5 trillion.
The distribution for the first quarter is scheduled for payment in May.
A KRW 10 trillion share repurchase program announced in November 2024 was completed by September 2025, with the first tranche worth KRW 3 trillion canceled in February 2025.
During the first quarter of 2026, the board resolved to proceed with full cancellation of the remaining shares, with the cancellation of the remaining shares completed earlier in the month.
The board decided to retain only KRW 1.6 trillion worth of shares specifically allocated for employee compensation.
The cancellations in this round totaled 73.4 million common shares and 13.6 million preferred shares, representing 1.2% and 1.7% of total shares outstanding in each respective class.
Based on the closing price on the date of the board resolution, the valuation of the canceled shares amounts to approximately KRW 14.6 trillion.
Industry Trends and Dynamics
AI Infrastructure Demand
Robust demand focused on server application became increasingly visible in the first quarter, with hyperscalers' CapEx expansion to secure AI infrastructure and initial demand for agentic AI.
The adoption of agentic AI drove further growth in relevant demand, mostly for HBM, server DRAM, and server SSD.
Despite rising demand, industry-wide constraints in expanding capacity have made supply shortage more intense relative to robust demand.
With the spread of agentic AI, token processing is increasing in volume and technologies improving the efficiency of data processing are being introduced, with the AI ecosystem growing faster than ever.
Hyperscalers are expanding their AI services and major LLM providers are speeding up introduction of B2B services, with the spread of agentic AI likely to accelerate at a much faster pace than initially expected.
Memory Market Dynamics
The company has very tight inventory, and available supply is far short of customer demand, with demand fulfillment rate now at a record low.
Customers concerned about supply shortages are bringing forward their demand for 2027 already, with the supply/demand gap looking to widen further in 2027 versus 2026 based on pre-booked demand alone.
Supply shortage situation is expected to continue due to server-oriented product mix execution in the industry.
NAND Storage for AI
NAND has been gaining attention as AI infrastructure expands, with NVIDIA proposing architectures such as CMX that extend AI inference data storage beyond HBM to NAND-based storage.
High-performance storage such as TLC-based PCIe Gen6 SSD is expected to see rising demand as storage use cases increase in AI systems.
Smartphone Market
The smartphone market declined quarter-on-quarter due to seasonality, with volume and revenue decreasing across premium and mass segments.
Overall smartphone demand is expected to decrease quarter-over-quarter in Q2 due to seasonality.
The smartphone market is expected to decline in shipments due to rising costs, while revenue is projected to grow driven by expansion of super premium products.
TV Market
TV demand is forecast to grow year-over-year in the second quarter driven by a major international sporting event.
Following the sporting event, the market may see a downward trend compounded by macroeconomic and geopolitical risks in the second half of 2026.
Competitive Landscape
Memory Competition
Samsung's differentiated performance of HBM4 has led to concentration of demand, with the company's production-ready capacity fully booked and sold out.
Samsung has secured industry-leading product competitiveness leveraging cutting-edge 1C nano processes for HBM.
Foundry Competition
Samsung is actively engaging with major customers for the 2-nano processor and expects to secure more visible results in the near future for certain accounts.
Samsung is in discussions with many automotive or robotics customers in the US and wider China on adoption of 2- or 4-nano processes.
Display Competition
TCL and Sony recently established a joint venture, combining their manufacturing capabilities and brands, representing a shift in the competitive landscape.
Samsung aims to strengthen its competitiveness across all segments, from premium to entry level, to proactively reshape the competitive landscape and lead the market.
Mobile Competition
Samsung will leverage its full price tier portfolio to outperform the market in both value and volume despite a contracting market.
Macroeconomic Environment
Geopolitical Risks
In the second quarter, despite geopolitical headwinds such as Middle East tensions and rising oil prices, semiconductor demand is expected to remain strong.
The labor union announced a general strike from May 21 to June 7, with the company planning to respond through dedicated teams and response system within the legal framework to minimize potential production disruptions.
2026 will be a challenging year with ongoing geopolitical uncertainties impacting profitability across the industry.
Supply Chain and Logistics
Samsung's semiconductor production lines are operating normally, and there have been no supply chain issues to-date, though the company sources some processed gases from Israel and the Middle East.
Samsung has secured sufficient safety stock and alternative logistic routes, with diversified suppliers including the US and Japan.
Oil price increases driven by the war are impacting global ocean and air freight costs, expanding the risk of higher shipping rates.
Samsung is closely monitoring global inventory levels while optimizing supply chain operations to minimize cost burden from international transportation.
Cost Pressures
Memory costs increased in the MX Division, though the company secured single-digit profitability through proactive resource efficiency improvements.
Cost pressure on key components in Q2 are expected to intensify, with a decline in profitability appearing inevitable.
Rising component costs are raising concerns over market contraction in the smartphone market.
Rising raw material costs are impacting the TV business, with the company facing challenges in securing both revenue and profitability.
Growth Opportunities and Strategies
AI and Advanced Semiconductors
Samsung will continue to increase sales of HBM4, high-density DDR5, and eSSD to expand profitability in the Memory Business.
Samsung is accelerating development of next-generation HBM4E products with pin speed of 16 gigabps and bandwidth of 4.0 terabytes per second, with samples set to start shipping within the second quarter.
Foundry will drive earnings improvements through increased sales in advanced processes, while continuing to secure orders for leading-edge modules based on 2-nanometer technology.
The development of the 1.40-nanometer processor is progressing as planned, ensuring readiness for future technology.
In the second half, Samsung will start mass production of the second-generation 2-nanometer processor and expand the application of the 4-nanometer processor for memory products and LPU products for AI applications.
Silicon Photonics
Samsung is developing silicon photonics components and technology for the CPO or co-packaged optics business based on advanced processes and 3D packaging.
Samsung will be starting mass production for a major optical communications module player starting in the second half.
Robotics and Physical AI
Over the past year, under the leadership of Jun-Ho Oh, a leading robotics expert in Korea, Samsung has made meaningful technological progress and established a foundation to catch-up with global leaders.
Samsung is internalizing key robotics components and building capabilities to develop customized parts optimized for its own robots.
Through the development of humanoid robots, the culmination of advanced robotics technologies, Samsung aims to innovate manufacturing productivity and daily experiences.
Samsung will focus on securing its own technological capabilities while cooperating with competitive global partners as part of a two-track strategy, and where appropriate, will consider strategic investments or acquisitions.
Mobile and Consumer Products
Samsung will enhance the product mix with sales expansion of the S26 series and launch of premium lineups, including Micro RGB TVs and AI Combo.
Samsung will expand sales of S26 and new A series to leverage stable supply and expand sales across all segments.
For foldable devices, Samsung plans to strengthen product development to stay ahead of evolving customer needs.
Samsung will deliver immersive multimodal AI experiences through diverse form factors, such as AI glasses.
Display Technology
Samsung will focus on high-end products where demand is expected to be relatively stable in the second quarter.
For IT products, Samsung will increase revenue through the ramp-up of brand new 8.6 generation IT OLED line.
For QD-OLED, Samsung will continue to strengthen its positioning in the premium segment, while expanding its monitor business into the consumer and enterprise market.
Data Center Cooling
Samsung successfully acquired FläktGroup, a Germany HVAC specialist last year, thereby establishing a strategic foothold for entering the data center cooling market.
The company is operating the business centered on FläktGroup in Europe and plans to expand into the largest global data center market, North America.
Samsung plans to establish a Korean subsidiary and factory of FläktGroup to enter the Korean market.
The data center cooling market is projected to grow from $4.7 billion in 2024 to $16.6 billion by 2030, growing at an average annual rate of around 24%.
Foundry Diversification
Samsung is diversifying its portfolio across more end markets, looking out to the mid to longer term.
Samsung is working to expand project awards across diverse application areas including AI, HPC, automotive, robotics, and aerospace.
Samsung is pursuing structural transformation by diversifying its application portfolio beyond mobile into AI/HPC, automotive, and aerospace sectors.
M&A and Strategic Investments
To drive continued future growth and enhance shareholder value, Samsung will continue to reassess its business portfolio.
Samsung will proactively pursue inorganic growth strategies to ensure mid- to long-term growth.
To identify new technologies and businesses and discover and collaborate with promising tech companies, Samsung is pursuing a wide range of investments, including venture and equity.
Financial Guidance and Outlook
Q2 2026 Outlook
In the second quarter, despite geopolitical headwinds such as Middle East tensions and rising oil prices, semiconductor demand is expected to remain strong, supporting continued improvement in overall earnings.
Memory price is expected to stay in the current upward trend, driven by ongoing expansion in AI infrastructure.
System LSI will look to offset earnings pressure through volume driven projects with key customers.
Foundry's advanced nodes are expected to reach full utilization rate, with sequential improvement in earnings supported by robust demand for leading-edge products, including HBM4-based die.
In display, amid demand uncertainties, Samsung targets performance improvement by ensuring stable supply to key customers with leading technology and mass production expertise.
In the DX Division, profit is expected to decline due to rising cost burdens.
For Memory, DRAM bit growth is expected to increase by single-digit percentage quarter-over-quarter, while for NAND, bit growth is expected to be constrained at a low single-digit level quarter-over-quarter.
For the MX Business, Q2 revenue is expected to decline quarter-over-quarter due to seasonality.
For the smartphone and IT market demand, it is likely to be weak mainly due to memory supply and price in the second quarter.
For the large display business, demand increase is anticipated supported by sports events and major customers' new product launches.
H2 2026 Outlook
In the second half of this year, a mixed business environment is expected with growth in semiconductor demand driven by AI expansion on one hand and rising cost for IT products on the other.
Against this backdrop, Samsung will remain agile in responding to market changes, while maintaining its profitability focused approach and expanding high value-added products.
As hyperscalers expand their AI services and major LLM providers speed up introduction of B2B services, the spread of agentic AI is likely to accelerate at a much faster pace than initially expected.
The demand for DRAM and SSD for conventional servers is expected to increase more sharply than previously anticipated due to the role of general servers tailored for various workloads becoming more important.
For mobile and PC, some impact on demand is expected due to price increases in end products and changes in memory contents per box.
Foundry expects to achieve double-digit revenue growth and earnings improvement in the second half.
In display, the market environment is expected to be uncertain and difficult to predict, though Samsung aims to maintain profitability by focusing on premium product strategy.
For smartphones, Samsung will secure stable demand of differentiated technologies such as low-power consumption and privacy solution, aligned with major customers' premium smartphones.
For tablets, decline in volume and value is expected due to cost pressures and reduced promotions.
The Note PC market is projected to see value growth driven by ASP increase, but shipments are expected to decline.
MX will maintain its strategy focused on expanding flagship sales through leadership in advancing AI capabilities and form factor innovations.
For eco products, Samsung will drive premium sales with even more advanced Galaxy AI capabilities and health features and expand its TWS lineup.
2026 will be a challenging year due to geopolitical risk, unpredictable market condition, and memory supply issues, though Samsung will strive to achieve revenue growth by strengthening its premium portfolio.
Samsung will focus on expanding high-value products and securing new growth drivers in System LSI.
For NAND, Samsung will focus on AI server and data center segments, locking in preemptive lead in the early Gen6 market in the second half of the year.
Samsung will work in close collaboration with major customers to proactively address and respond promptly to AI-driven NAND demand.
Full Year 2026 Outlook
Samsung will continue to strengthen its competitive edge through innovation and lead the global market.
The company will strengthen its core businesses, expanding market share and presence while enhancing mid-to-long-term competitive position.
At the same time, Samsung aims to secure future growth drivers, including through M&A.
Management and the board are currently gathering various views and engaging in deep discussions on the next shareholder return policy.
Centered on the board, Samsung will continue to carefully review and develop the optimal policy to enhance shareholder value.
