Samsung Earnings: Profit Expected to Surge 18-Fold, Risk of Demand Backlash Already Approaching

Samsung Electronics will release its preliminary second-quarter earnings report on Tuesday, July 7. Market consensus expects its Q2 operating profit to surge by about 18 times year-on-year, reaching a new all-time high. At the same time, SK Hynix will list ADRs on the Nasdaq on Friday, July 10. With these two major events hitting in quick succession, South Korea’s semiconductor sector is at a critical turning point for its near-term fate.

According to 30 analysts’ forecasts compiled by the London Stock Exchange Group (LSEG), Samsung’s Q2 operating profit is expected to be around 86 trillion Korean won (about $56.3 billion), with some brokerages forecasting as high as 90 trillion won. By comparison, last year’s figure for the same period was only 4.7 trillion won—meaning a year-on-year increase of about 17 to 18 times.

The significance of this earnings report goes beyond Samsung alone—it will be the latest signal flare for global memory-sector conditions, directly influencing the direction of memory stocks such as Samsung, SK Hynix, and Micron.

Price surges are the core engine

The increase in memory prices is the most direct support for this earnings report.

Citi Research disclosed last week that average Q2 selling prices for DRAM and NAND rose 44% and 53%, respectively, quarter-on-quarter. Kim Dong-won, head of research at KB Securities, offered a higher estimate: “DRAM and NAND price increases may reach 60% quarter-on-quarter. In June, the customer memory demand fulfillment rate was only around 50%, and the supply shortage is worsening.”

He expects Samsung’s Q2 operating profit to reach 90 trillion Korean won, with an operating margin as high as 51%.

Structural changes on the demand side are equally critical. According to Reuters, analysts point out that, unlike early AI applications that mainly focused on large-model training, Agentic AI systems carry out more complex multi-step tasks. This requires server processors to be equipped with more memory, and it also requires larger storage capacity to retain and retrieve data during inference. This means that each AI inference request consumes far more memory than the market previously expected.

This memory shortage has also directly pushed up the share prices of the three main memory manufacturers. Since the start of this year, the share prices of Samsung Electronics, SK Hynix, and Micron Technology have surged 158%, 273%, and 242%, respectively, and the market values of all three companies have already exceeded $1 trillion.

Bonus provisions: a hidden variable suppressing earnings

However, this earnings report is not without risks.

In late May, Samsung reached an agreement with the labor union to avoid a large-scale strike. The agreement stipulates that 10.5% of the operating profit of the semiconductor (DS) division will be used to pay special bonuses to employees in the chip division. According to Reuters, some analysts estimate that Samsung’s cumulative bonus provisions could exceed 40 trillion Korean won.

The accounting recognition timing of this expense will directly affect the Q2 earnings numbers.

In other words: if Samsung chooses to recognize this provision in Q2, the operating profit actually reported may be lower than market consensus. Conversely, if this one-time expense is not included, Samsung’s operating profit could have surpassed 100 trillion Korean won for the first time.

Apple’s price hikes: a warning sign for demand elasticity

The other side of rising memory prices is that cost pressure from downstream customers is starting to show—this is precisely the starting point for the market questioning whether the memory industry’s continued upswing can last.

On June 25, Apple announced that it would raise prices across its entire line of Mac and iPad products, citing rising memory costs as the reason. After the news broke, chip stocks—including SK Hynix and Samsung—fell sharply.

The market’s logic is: if memory prices rise to the point where even Apple has to pass costs on to consumers, then the ceiling of demand elasticity is within reach. Once end consumers develop resistance to the price increases, tech companies’ willingness to purchase memory may shrink accordingly.

According to reports, Apple CEO Tim Cook even personally lobbied the Trump administration, hoping to allow Apple to purchase memory from Chinese memory maker CXMT (CXMT/ChangXin Memory Technologies). In response, the Semiconductor Industry Association (SEMI) of the United States— including Samsung, SK Hynix, and Micron—sent a joint letter opposing government intervention and warned that: “If the government tries to address the memory shortage by influencing prices or capacity, the supply pressure stemming from the AI boom will only intensify further.”

This contest over memory pricing power has spread from the market level into political tug-of-war in Washington.

Can the upswing be sustained? Nomura gives a positive outlook

Despite the above concerns, analytical institutions’ assessment of the memory industry’s short-term conditions still leans optimistic.

In a recent report, Nomura Securities predicted that, supported by increased demand for consumer storage products and rising demand for chips in traditional and AI data centers, bulk DRAM prices in Q3 (July–September) will rise 24% quarter-on-quarter, and NAND prices will rise 25%.

But JPMorgan Chase is more cautious. According to Reuters, JPMorgan noted in a recent report that although investors generally believe memory supply-and-demand fundamentals remain tight, many question the share of AI memory in cloud service providers’ capital expenditures—estimated at 52% this year and expected to exceed 70% next year— and whether this rapidly rising trend is sustainable.

JPMorgan said, “Investors are seeking clearer evidence that breakthroughs in AI services will translate into faster growth in cloud computing and related AI revenue, thereby helping to justify that the share of memory in AI infrastructure spending continues to expand.”

$2 trillion capacity expansion: a high-stakes bet at the spotlight moment

Just ahead of the earnings release, Samsung and SK Hynix jointly announced a massive capacity expansion plan.

According to Reuters, the two companies pledged last week to invest 3,200 trillion Korean won (about $2.07 trillion) to expand chip production capacity in South Korea. Samsung plans to complete the investment between 2026 and 2040, while SK Hynix did not provide a specific timeline.

The logic behind it is to lock in supply dominance in the AI era. Samsung announced in April that it had signed multi-year binding contracts with customers that want to secure supply, but it did not disclose the customer identities or contract terms.

However, according to the U.S. investment channel Barchart, “In the memory industry, which is highly sensitive to the economic cycle, large-scale financing-led capacity expansion at a potential cycle peak is a typical precursor to a downturn.”

Once AI spending slows, this $2 trillion bet will face direct pressure.

Anthropic collaboration and SK Hynix ADR: two cards driven by sentiment

Beyond fundamentals, two events are providing emotional support to the chip sector.

First, on July 2, foreign media disclosed that Anthropic—the developer of the AI model “Claude”—is in talks with Samsung Electronics’ chip foundry outsourcing division to cooperate in producing its self-developed AI chips. The next day, Samsung Electronics’ stock price jumped 8.22%, and SK Hynix rose 10.88%. The significance of this collaboration is that if Samsung can expand its customer base from the “Magnificent Seven” (M7) to emerging AI companies such as Anthropic, the sources of memory demand will become more diversified, reducing the risk of over-reliance on a single major customer.

Second, SK Hynix will list ADRs on the Nasdaq under the code “SKHY” on July 10. According to Reuters, the fundraising target for this listing is about $29.4 billion, with each ADS expected to correspond to one-tenth of the price of the domestic common stock, or about $166. Underwriters include Bank of America, Citigroup, Goldman Sachs, and JPMorgan Chase, with Citibank serving as the depositary bank.

According to Bloomberg, the underwriters are considering an approximately 0.5% commission rate, which is lower than SpaceX’s previously reported IPO commission rate of 0.67% and also lower than typical Wall Street practice.

Market views are split. Optimists believe that the ADR listing will make SK Hynix directly comparable to Micron in the same market, potentially driving a valuation re-rating. Currently, SK Hynix’s 12-month forward price-to-earnings ratio is about 7 times, lower than Micron’s 8–10 times. Pessimists cite the historical pattern of “financing-led capacity expansion at cycle peaks,” arguing that the timing itself is a risk signal.