Samsung Stock Gains After Posting Highest Quarterly Profit Since 2018

Shares of Samsung Electronics (OTC: SSNLF) are up more than 3% Thursday after the South Korean company reported preliminary Q2 earnings results.

Samsung delivered its best second-quarter profit report since 2018, driven by robust demand for its memory chips in the face of soaring inflation.

Shares of Samsung’s rival chipmakers SK Hynix and TSMC were also in the green as analysts estimated that the tight supply of some chips could compensate for the softening demand that is weighing on memory chip prices.

The electronics giant reported a Q2 operating profit of 14 trillion won ($10.7 billion, up 11% from the year-ago quarter and just below the 14.45 trillion won forecasted by Refinitiv’s SmartEstimate. Revenue came in at 77 trillion won, up 21% from the same period last year and in line with expectations.

Strong preliminary profit results come at an important moment for Samsung as rival chipmakers continue to warn about a chip oversupply as they stockpiled chips during the Covid-19 pandemic to tackle the booming demand.

Other major chipmakers, Advanced Micro Devices (AMD) and Micron, also voiced concerns over the weakening demand as 40-year-high inflation affects consumer spending.

"Memory chipmakers are expected to build inventory this year, keeping supply conservative, and hike shipments when prices rebound and demand recovers next year", said Cape Investment & Securities analyst Park Sung-soon.

The current macroeconomic conditions and market drawdown have also dented smartphone sales, making server customers the silver lining when it comes to chip demand.

Tech giants including Microsoft, Amazon, and Alphabet have played a key part in protecting Samsung’s profits as these companies continued to purchase chips to satisfy cloud demand.

By Senad Karaahmetovic

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