Samsung Q1 Profit Surges 756%: Chip Profit Soars 48-Fold, Mobile Business Slumps Significantly

[Samsung Q1 Earnings Data, Source: Samsung Official Website]

For the quarter ended March 31, Samsung reported consolidated revenue of 133.87 trillion won, a 69% year-on-year increase and a record quarterly high. Operating profit surged 756% to 57.23 trillion won, while net profit rose 487% to 47.10 trillion won, exceeding market estimates of 38.29 trillion won.

The DS (Device Solutions) semiconductor division recorded revenue of 81.7 trillion won, up 225% year-on-year, with operating profit increasing approximately 48-fold to 53.7 trillion won. This division contributed 94% of the company's total operating profit, while all other business segments combined accounted for only 6%.

This represents the most lopsided profit structure in Samsung's history. A decade ago, the profit contributions from the chip and mobile phone segments were essentially equal, but the current memory chip supercycle has now completely marginalized other divisions.

The surge in chip profits was primarily driven by skyrocketing prices for memory products and an explosion in demand for HBM, server DRAM, and enterprise SSDs. According to TrendForce data, DRAM contract prices rose 90%-95% quarter-over-quarter in the first quarter, while NAND flash rose 55%-60%. Samsung benefited from both price hikes and shipment growth.

Samsung's HBM revenue more than tripled year-over-year. The company has supplied NVIDIA ( NVDA) with HBM4 modules for its Vera Rubin platform, with unit pricing between $500 and $560 and gross margins exceeding 80%. Samsung will begin producing its first HBM4E samples in May for NVIDIA’s evaluation, paving the way for large-scale supply in 2027-2028.

Notably, competitor SK Hynix also saw an explosive surge in performance. SK Hynix's revenue for the period topped 50 trillion won for the first time, with operating profit at 37.6 trillion won and an operating margin of 72%. In contrast, the operating margin for Samsung’s memory business was approximately 65.7%.

The margin gap between the two stems mainly from product mix: HBM accounts for over 50% of SK Hynix's total memory revenue, whereas Samsung remains dependent on conventional DRAM; according to estimates from Daishin Securities, Samsung's HBM revenue share is around 30%. The industry is experiencing its strongest memory price-hike cycle in a decade; notably, customer prepayments and long-term contracts are replacing the traditional spot pricing model, which should help mitigate future volatility.

While profits surged, Samsung is also paying a high price for future capacity expansion. Full-year capital expenditure has been revised upward to approximately 110 trillion won, a record high, with funds primarily allocated to memory capacity expansion at the P4 plant in Pyeongtaek, South Korea, and the construction of foundry lines at the Taylor wafer fab in the United States. Equipment investment will officially commence in the second quarter.

SK Hynix also plans to significantly increase its full-year capital expenditure, judging that HBM demand will far exceed its own supply capacity over the next three years. The two South Korean memory giants are simultaneously ramping up capacity, betting on at least three years of rapid growth in AI memory.

However, large-scale equipment investment will bring depreciation pressure. Based on an estimated capital expenditure of 110 trillion won, new depreciation is projected to average approximately 2-3 trillion won per quarter over the next four quarters, potentially dragging down gross margins by 1-2 percentage points. Samsung management has not yet provided specific guidance, but investors should be wary of a marginal decline in profit margins after the second quarter.

Profit growth in the chip division has translated into cost pressure for the mobile division.

The DX Division (comprising mobile and home appliances) reported first-quarter revenue of 52.7 trillion won and an operating profit of approximately 3 trillion won, a 38% year-on-year decline. The Memory division nearly doubled mobile DRAM prices from early 2025 levels to roughly $70/12GB, opting exclusively for short-term quarterly contracts and rejecting long-term pricing agreements.

While Galaxy S26 series pre-sales are strong, core component costs now account for over 40% of the total, and price hikes have been unable to offset the rising costs. Samsung's mobile division has issued an internal warning that 2026 could see the division's first annual loss since its inception. The impact of rising component prices will be fully reflected in financial reports following the second quarter.

Samsung's primary dilemma is that it is simultaneously the main beneficiary of upstream price hikes and the biggest victim of downstream cost increases. The same cost-increase equation is recorded as profit in the chip division's ledgers and as a loss in the mobile division's.

[Source: MarketScreener]

According to MarketScreener data, as of April 29, 2026, the average price target from 37 analysts covering Samsung Electronics is 274,603.22 KRW.

Goldman Sachs ( GS) raised its price target from 205,000 KRW to 260,000 KRW in March and reiterated a "Buy" rating, citing solid fundamentals in the memory business and AI-related exposure that will support its long-term leadership.

Samsung's first-quarter earnings report showcased a super-cycle in the AI memory industry, but also exposed the company's vulnerability due to its over-reliance on a single business segment.

Investors should monitor two key signals over the next two quarters: first, the pace of memory price increases—if DRAM growth falls below 20% and HBM growth stays under 30%, the profit peak may be approaching; second, if mobile losses can be contained within 1 trillion KRW while chip profits remain above 50 trillion KRW, the current forward P/E of approximately 4.9x remains attractive. As the only company spanning both chips and end-user devices, the inflection point of the memory cycle and the bottoming of mobile profits will be the core variables for valuation.

This content was translated using AI and reviewed for clarity. It is for informational purposes only.