Star Metro - Samsung logs record quarterly profits despite investor AI jitters

Samsung is the world's largest maker of memory chips -- components in short supply as advanced types are snapped up for use in data centres powering artificial intelligence.

The company posted July-September operating profit at 107.4 trillion won ($80.5 billion) -- up more than 780 percent on-year.

It marked the first time any technology company had reported quarterly operating profit over 100 trillion won, Samsung said.

Net profit jumped more than 510 percent from last year to 75.1 trillion won, while sales reached 195.3 trillion won.

The global race to build data centres to train and run chatbots, image generators and other AI tools has turbocharged the fortunes of Samsung and other chipmakers, despite concerns that the sector may be overvalued.

Samsung shares fell more than five percent on Thursday morning.

Investors were disappointed by a miss of market expectations for operating profit by the semiconductor division, according to Bloomberg News.

The company's memory business achieved "another record-breaking quarter by managing its product mix, with a focus on AI products, amid capacity constraints," Samsung said in a statement.

"Strong demand momentum for servers led to higher market prices across all applications."

- 'Unprecedented growth' -

Demand-driven shortages of advanced memory chips known as HBM, used in AI systems alongside other data-crunching semiconductors, has caused their price to spike.

Dilin Wu, research strategist at Pepperstone, said strong earnings from Samsung and South Korean industry rival SK hynix were "a reminder that the AI memory boom is still very real, despite all the concerns we've seen around the broader AI trade".

"Chipmakers are benefiting directly from the AI investment boom, while the companies buying their chips are still trying to prove they can earn a decent return on all that spending," she told AFP earlier this week.

With sky-high expectations for stellar results, record profits may not be enough to reassure market players.

"Ultimately, investors want to know whether there's still another leg to this memory upcycle, or whether we're getting close to peak earnings," Wu said.

Samsung predicted Thursday that it would continue to feel the benefits of the AI boom.

Chief financial officer Park Soon-cheol told an earnings call the company expects "unprecedented growth in memory demand in 2027, driven by accelerating competition to build AI infrastructure and the expansion of personal AI agents".

"On the supply side, however, we expect difficulties in expanding... output in a short period of time through new capacity additions," he said.

Chip companies focusing their efforts on profitable HBM has also fuelled shortages of the less glamorous computer memory components used in everyday consumer electronics -- driving up the price of smartphones and laptops.

- Shareholder returns -

Samsung on Thursday detailed plans to return up to 110 trillion won to shareholders this year, including 30 trillion won in cash dividends, following an August announcement.

Record profits driven by booming demand for AI memory chips have fuelled calls for greater shareholder returns, particularly after shares in tech giants such as Samsung tumbled from their June record highs amid concerns over US tech firms' AI spending.

The announcement comes a day after SK hynix also announced plans to return 60 trillion won to shareholders, following the completion of a 40 trillion-won shareholder return programme.

Such shareholder returns "would allow the benefits of earnings growth to translate into greater shareholder returns," said Kim Dong-won, head of KB Securities' research center.

"With record profits and undervaluation coexisting, the largest-ever expansion of shareholder returns would be a decisive opportunity to address the company's undervaluation and serve as a key driver of a reassessment of its market value," said Kim.

F.Davis--SMC