What They Actually Said
Samsung just made about nineteen times as much operating profit as it did a year ago — and its phone division lost money for the first time since at least 2011, squeezed by the exact same boom.
That's the whole story of the AI era in one company. Samsung's memory chips, the ones that feed AI data centres, are so in demand it can't make them fast enough, sending profit to a record. But the resulting surge in chip prices is now hurting Samsung's own smartphone business, which has to buy those pricier components. One company, containing both sides of the AI trade at once.
Here's what happened.
The Numbers: A Record That's Hard to Believe
- Revenue: ₩171.5 trillion (about $119 billion), up 130% year-over-year and 28% from the prior quarter — an all-time record
- Operating profit: ₩89.5 trillion, up 1,814% year-over-year (about nineteenfold) and 56% quarter-over-quarter — a record
- EPS: ₩10,849, up 52% quarter-over-quarter
- Chip division (Device Solutions): record operating profit of ₩89.2 trillion, up 357% year-over-year — the engine of the entire result
- Mobile division (MX & Networks): ₩33.2 trillion revenue, but an operating loss of ₩0.7 trillion
- Beat expectations: operating profit ₩89.5tn vs ~₩88.1tn expected; revenue just below the ~₩172.7tn expected
An 1,814% jump in profit sounds impossible, and it partly reflects how depressed last year's number was — memory chips were in a slump then, so the comparison is against a low base (operating profit was ₩4.7 trillion a year ago, versus ₩89.5 trillion now — roughly nineteen times higher). But that doesn't diminish what's happening now: this is a genuine record, driven by a specific, ferocious demand for one product. The number to focus on isn't the eye-watering percentage; it's what is driving it, because that tells you whether it lasts.
The Engine: AI Memory Nobody Can Make Fast Enough
The semiconductor division dominated the result, and the driver was one product: high-bandwidth memory, or HBM — specialised chips that sit next to AI processors and feed them data. Every AI data centre being built needs enormous quantities, and demand has outstripped what Samsung (and its rivals) can produce. DRAM and NAND shipments both hit record highs, and prices rose sharply.
Samsung is expanding HBM4 supply and has begun shipping HBM4E samples to major customers. Crucially, Samsung expects the memory market to remain undersupplied and supply constraints to continue despite efforts to expand production.
This is why the market cares as much about Samsung's outlook as its record profit: a great quarter tells you about the past, while guidance about continued undersupply tells you whether the profits have staying power. HBM is the picks-and-shovels business of the AI gold rush — Samsung doesn't need to win the AI race, it just needs everyone to keep buying the memory that powers it. That's a more durable position than betting on any single AI product.
Reading finance anywhere else? The free extension explains any term you highlight.
The Twist: The Boom Is Eating the Phone Business
Here's the fascinating contradiction. The same chip shortage minting money for Samsung's memory division is hurting its smartphone division. The mobile business posted an operating loss — its first quarterly deficit since the segment began separate tracking in 2011 — even though Galaxy S26 and Galaxy A sales grew, because surging component costs (the very memory prices Samsung's chip arm is raising) wiped out the profit on phones. Samsung's own explanation cites "elevated component cost pressures across the industry," and its outlook notes softening consumer demand as a separate pressure.
Samsung is, in effect, being pulled in two directions at once. Its semiconductor division benefits from tight memory supply and higher prices, while its device businesses are exposed to the resulting component-cost pressure. For most phone makers this is simply bad news — and note the read-across for anyone buying a laptop or phone: memory prices are rising for everyone, so devices get pricier. Samsung at least captures the chip profit to offset its phone pain. A pure phone maker has no such cushion.
The Bottom Line for Investors
Samsung posted the biggest quarter in its history on the back of AI memory demand it can't fully satisfy, with a supply shortage its own management expects to run for years — while the same boom pushed its smartphone division into a loss. The chip story is extraordinary and, by Samsung's own guidance, durable; the question is how much of the company's fortunes now ride entirely on memory.
↑ The Bull Case
Samsung sits at the centre of the AI hardware supply chain with a product the whole industry is desperate for and can't get enough of, a shortage management expects to last until 2028, and multi-year contracts locking in demand. HBM4 is ramping, the newest HBM4E is already sampling to big customers, and pricing power is immense. As long as AI infrastructure spending continues, the memory business is a toll booth on the whole boom.
↓ The Bear Case
Memory is famously cyclical — today's shortage becomes tomorrow's glut when everyone expands capacity at once, and the 1,814% jump partly flatters against a weak base. Samsung is now dangerously dependent on one product line: the phone division is losing money, consumer electronics is soft, and if HBM demand cools or rivals catch up on the newest chips, the earnings could reverse as fast as they rose. Records set at the top of a cycle are the ones to scrutinise hardest.
Ask yourself: when one division's record profit comes from the very thing pushing another division into a loss, are you looking at a company that's diversified — or one that's made a single, enormous bet on AI memory?
Follow Samsung
Samsung reports again in October. Get the plain-English breakdown the evening it drops.
Or get the weekly version: Ask AYO Weekly. One email, Sunday evenings. Sign up here. Unsubscribe anytime.
More breakdowns
References
- Samsung Electronics — Q2 2026 Earnings Release (July 30, 2026)
- Samsung Electronics — Q2 2026 Earnings Call (July 30, 2026)
- Samsung Q2 2026 results, corroborated via CNBC (LSEG estimates)
Ticker: 005930 (KRX) / SSNLF · Reported: July 30, 2026 · Figures in Korean won (₩); USD conversions approximate.