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Quick Take
  • Samsung Electronics will publish preliminary Q3 earnings guidance on Thursday.
  • Analysts expect operating profit of 106.1 trillion won ($79.1 billion), which would mark a fourth straight record quarter.
  • Demand for artificial intelligence (AI) infrastructure is still outrunning memory supply.
  • However, memory price gains slowed during the quarter, leaving investors questioning whether chip margins have topped out.

What Happened

Demand for artificial intelligence (AI) infrastructure is still outrunning memory supply. However, memory price gains slowed during the quarter, leaving investors questioning whether chip margins have topped out.

Market Context

Thursday’s release will therefore answer the profit question first. The other four points rest on analyst estimates, industry data and the market’s reaction.

Slower memory price gains. Memory chip prices kept climbing in Q3, though the pace eased.

3. Where DRAM Prices Head in Q4

TrendForce expects the slowdown in memory price gains to continue into Q4. It projects conventional DRAM contract prices will rise 10% to 15% over Q3, after a roughly 60% jump in the second quarter.

“With ceiling-price mechanisms built in, the rate of price increases has slowed down…long-term agreements represent an increasingly higher proportion of suppliers’ total ‌output. With ⁠ceiling-price mechanisms built in, the rate of price increases has slowed down,” Wu said.

Why It Matters

Samsung Electronics will publish preliminary Q3 earnings guidance on Thursday. Analysts expect operating profit of 106.1 trillion won ($79.1 billion), which would mark a fourth straight record quarter.

1. A Record Profit Built on Trimmed Forecasts

Profit is the key headline number, and it is expected to reach nearly nine times the 12.17 trillion won Samsung earned a year earlier.

US rival Micron, meanwhile, expects its gross margin to ease to 86.3% from 87% this quarter. The company partly blamed employee compensation costs.

Details

What to Watch as Samsung’s Preliminary Q3 Numbers Land

Samsung’s guidance filings list only consolidated sales and operating profit. A detailed report follows in late October.

That would top the record second-quarter operating profit of 89.5 trillion won ($62 billion) Samsung posted in July.

However, that figure reflects a downward revision. The LSEG SmartEstimate, based on 21 analysts, has dropped 7.7% since the end of August.

Two factors sit behind the cut.

A stronger won: The currency rallied 14.3% against the dollar in Q3, its biggest quarterly gain since early 1998. That lowers the value of Samsung’s overseas earnings when they are brought home.

2. Memory Margins Stuck at 76%

SK Securities analyst Han Dong-hee puts Samsung’s Q3 memory operating margin at 76%. That would leave it unchanged from the April to June period.

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Avril Wu, TrendForce’s senior vice president for research, linked part of the slowdown to long-term supply deals.

Samsung said in July it aims to secure long-term contracts covering about two-thirds of its memory output.

4. Samsung Chips Away at SK Hynix in HBM

SK Hynix remains the largest supplier of high-bandwidth memory (HBM), which AI data centers depend on. Samsung has been gaining on its rival this year.

Samsung had fallen behind after delays in qualifying its products for Nvidia. This year, larger shipments of its latest HBM4 chips have helped it recover ground.