After Micron posted results that beat market expectations by a wide margin for a second straight quarter, Samsung Electronics also delivered a surprise showing that, excluding the provision for performance bonuses, pushed quarterly operating profit above 100 trillion won, quelling talk of an "AI bubble." Analysts said previous forecasts by overseas investment banks and market research firms were essentially undervalued.
◇ If you strip out performance bonuses, 100 trillion won… standard DRAM and HBM4 pulling together
The provisional operating profit that Samsung Electronics released on Jul. 7 for the second quarter of this year is 89.4 trillion won. But this figure excludes the provision for performance bonuses in the semiconductor (DS) division, putting the actual operating profit above 106 trillion won. In wage talks in May, Samsung Electronics labor and management agreed to pay a special management performance bonus funded by 10.5% of the DS division's operating profit, and provisions of 6 trillion won in the first quarter and 11 trillion won in the second quarter were set aside, totaling 17 trillion won in the first half alone. Operating profit excluding provisions, at 106.5 trillion won, is larger than the combined operating profit that Samsung Electronics earned from 2023 to 2025 (82.9 trillion won). The DS division's operating margin is estimated to be around 80%.
Behind these results is a sharp price spike caused by a shortage in memory semiconductors. DRAM and NAND flash prices jumped 80% to 85% quarter over quarter in the first quarter and rose another 50% in the second quarter, extending a steep climb. Market research firm Counterpoint Research estimated the global memory market in the second quarter would reach about 350 trillion won, up more than 60% from the previous quarter. Samsung Electronics holds the largest production capacity among the three memory makers, which suggests it enjoyed the biggest windfall in this shortage phase.
A rebound in the high-bandwidth memory (HBM) business also supported the results. Samsung Electronics on Feb. 12 began mass production and shipments of HBM4, the world's first sixth-generation HBM, and in about four months, related sales surpassed $1 billion (about 1.54 trillion won) and have recently expanded to $1.2 billion (about 1.85 trillion won). For the next-generation product HBM4E, 12-stack samples were sent to major customers in late May, and Production yield in reliability testing has reportedly risen to above 70%. Considering that yields of 80% or higher are generally viewed as mass production stability, it is effectively in the final stage of development. HBM4 is slated to be installed in Nvidia's next-generation AI accelerator "Vera Rubin," to be released in the second half.
A securities industry official said, "The provision for performance bonuses is merely a recurring expense item each quarter and not a factor that damages profit strength itself, and if you strip out the provision, Samsung Electronics' pace of profit improvement does not lag Micron's."
◇ Overseas IBs also rush to raise second-half earnings… a reassessment instead of the 'bubble' argument
The view among overseas investment banks (IBs) is being reaffirmed by these results. Jefferies projected memory prices would rise an additional 40% to 50% in the third quarter from the second, and 30% to 40% in the fourth, noting that until 2027 Chinese memory makers are unlikely to resolve the supply crunch or push prices down.
Morgan Stanley, which had been negative on the memory cycle, last year forecast Samsung Electronics' 2026 operating profit at about 116 trillion won and 2027 at 135 trillion won, but recently raised them to about 245 trillion won for 2026 and 317 trillion won for 2027. By more than doubling its operating profit projections, it effectively acknowledged the past undervaluation. Its influence in the HBM market is also being reassessed. UBS, citing the acceleration of Samsung Electronics' capital expenditures (CAPEX), projected that by 2027 its HBM market share could reach parity with SK hynix.
Shin Seung-jin, a Samsung Securities analyst, said, "If the AI memory supercycle continues, a reassessment of Samsung Electronics' corporate value will gain traction. This quarter's operating profit, even accounting for differences in settlement of account timing, has risen to a level comparable to Nvidia's, and excluding the impact of provisions, it is among the world's highest on an operating profit basis," adding, "Its market capitalization still lags far behind Nvidia's, and some say its corporate value is not fully reflected relative to its results."