Samsung earnings call

By Markos

For me, the Samsung call was the most important of the two Korean memory calls this week and it was on the top of my earnings season notes. Hyperscaler numbers and Capex raise I had no doubt on.

So on the numbers real quick. Revenue of 171.5 trillion won, operating profit of 89.5 trillion won, a 52 percent operating margin, and almost all of it from the chip division. The phones and the TVs actually lost money this quarter, partly because they have to buy memory at the same prices as everyone else. Samsung is squeezing its own consumer business with its own chip prices. But that is simple dynamics in a scarcity market and following margins.

Following the Q&A, when the head of memory said Samsung plans to supply 60 to 70 percent of its total DRAM and NAND capacity through long-term agreements. Five-year contracts, renegotiated annually on a rolling basis. The top five global data center customers have already signed, and that is an important detail of course, because these are the buyers with the deepest pockets and the longest planning horizons. Five more customers from the AI side are in final negotiations. Customers pay substantial money up front, and about a quarter of those advance payments has already been received. Also as expected minimum price floors on mainstream products. Not only the high-end AI memory. The ordinary memory now has contractual floors under it for these customers.

This is something we have been writing about the whole year. The market refuses to give memory companies a normal multiple because it assumes the next crash is always coming. Our thesis has been that the contract structure is removing the crash, and the missing piece was always the coverage, because nobody would say how much of the business actually sits under contract. SK Hynix confirmed the architecture two days earlier, around ten customers, five-year terms, deposits, but would not give the share. Happy to see that Samsung gave the share. That is again a confirmation of the framework we track.

It is a “plan” tho not a fully completed fact yet. Part of those contracts still has to be signed. And the level of the price floors was not disclosed, so a floor can exist and still sit low. Personally i expect a good baseline as you could hear between the lines in the call.

next to that, management said the supply shortage in 2027 will be more severe than in 2026, and continues into 2028, because a new fab takes more than three years to build. Those who follow the HBM research longer know we have been positioned on 2027 as the heavily scarce year for a long time , while most of the street had 2026 as the top. the biggest memory producer in the world puts that year on the record, that open question is closed for me. Focus on 2028-2030 now even more.

And then over to pricing, because the two calls together confirmed something what led to a initial sell-off after SK hynix earnings because the street misunderstood this before earnings. Most memory reprices every quarter right now. HBM sits on yearly contracts, so its price lags for the moment. the company with the more ordinary mix should print the faster price growth this quarter. Samsung printed DRAM prices up around mid-40 percent. SK Hynix printed around 30. Logically because SK has a higher product mix of HBM. They will benefit when the repricing occurs. Two companies, same quarter, exactly the pattern. Samsung said its 2027 supply agreements are already signed, so we will see those prices come through.

On the strategy part because we focus a lot on strategy in the research.

The first point is how Samsung allocates the shortage. Management said it pretty open: the customers who commit demand and accept mutually binding conditions get the capacity, and the rest wait. And on the supply side they build the cleanrooms first and install the equipment flexibly behind actual signed demand. So the shells stand ready, but the tools only follow contracts. With this the supplier using scarcity as a selection tool, and imo it is exactly the behavior you want to see if you believe the capacity discipline holds through this cycle.

The second point is a new class of customer showing up more. Management said the frontier AI model developers, the labs themselves, are now approaching Samsung directly for multi-year supply, because they cannot secure enough capacity through the clouds anymore. Think about what that means for a second. The demand line is not only the hyperscalers now, the layer above them has started bidding too. I view that as pricing power arriving from a direction most models do not even include yet.

And the third point matters most for my own Samsung thesis, which those who follow me longer know runs through the foundry. The foundry ran at full utilization on all advanced nodes this quarter, earnings improved significantly, management expects the 2nm project wins to more than double this year, and they said on the call they are in talks with Broadcom and others. And here is the detail I like most: the base dies for Samsung's own HBM come out of Samsung's own foundry. Design, memory, foundry and packaging under one roof, sold as one package. No other supplier can offer that combination. Management called a turnaround possible in the near term, and they were honest that timing is hard to predict with custom orders. The signal I want next is the first clean profitable quarter there, because that is where the biggest part of my Samsung upside sits.

What I follow from here. First, whether the 60 to 70 percent converts from plan to signed, contract by contract. Second, any leak on 2027 contract pricing in the second half, because that is where the premium comes back or does not. Third, the HBM4 ramp. Samsung guided those sales up more than three times next quarter, and I want to see that delivered, not guided. And fourth, the thing neither company would give: how fast real wafer capacity grows. So we have to monitor that.

Good call im happy about it.