South Korea's stock market has settled above the 7,000 mark ahead of the third-quarter earnings season, yet expectations for corporate profits have edged lower. While earnings improvement hopes remain intact for chipmakers, results at non-semiconductor companies are expected to diverge as the won strengthens and profitability gaps widen across industries. Analysts say the key variable for share prices is not third-quarter results themselves but whether companies can sustain profit growth into next year.
According to financial data provider FnGuide on the 25th, the KOSPI returned 5.40% over the past week, but the consensus estimate for third-quarter operating profit was revised down 0.39% over the same period. Estimates for the electrical and electronics sector fell 0.45%, while those for construction rose 1.15%. Chemicals climbed 1.63% and securities dropped 3.06%, showing a clear divergence in earnings expectations by sector.
Semiconductors remain at the center of third-quarter earnings. Analysts expect rising memory prices and a growing share of high-value products to lift profitability at Samsung Electronics (005930.KS) and SK hynix (000660.KS). Shinhan Securities (008670.KS) estimated that third-quarter chip exports will rise 28.1% from the previous quarter and 21.6% in won terms. Even though the won-dollar exchange rate fell 5.0% from the previous quarter, the pace of export growth offsets the currency impact, according to the analysis. Combined operating profit at Samsung Electronics and SK hynix is also forecast to increase 26.3% from the previous quarter.
The question is less about how far third-quarter results can exceed already elevated market expectations than about whether profit growth can continue next year. Recent chip share prices are seen as reflecting concerns about memory price declines from expanded supply in 2027. As a result, this earnings season may hinge less on the size of operating profit than on what companies say about server DRAM prices, customer orders, high-bandwidth memory (HBM) contract terms and future supply schedules.
For non-semiconductor companies, currency pressure and firm-by-firm pricing power are expected to determine results. Excluding chips, third-quarter exports are estimated to rise 4.4% from the previous quarter in dollar terms but to fall 0.9% when converted into won. The won's strength offsets much of the export gain. Companies that import raw materials or pay costs in foreign currency can benefit from the stronger won, meaning profit trends may differ even among exporters.
Analysts say the points to watch also differ by sector. Third-quarter operating profit at shipbuilders and machinery makers is expected to fall 14.7% and 6.4% from the previous quarter, but profit estimates have risen 22.8% and 6.3% from early July. The key is how much profitability they retain as order backlogs convert into revenue. In cosmetics and bio-health, exports in July and August rose 44.3% and 26.2% from a year earlier, and the focus is whether that export growth translates into higher operating margins.
Sectors that have seen steep share price declines may be reassessed on the back of earnings announcements. For IT hardware, third-quarter operating profit estimates have risen 3.7% since early July while share prices have fallen 29.2%. Automakers saw their shares drop 21.3% over the same period, with profit estimates down 1.1%. For sectors where earnings estimates held up better than share prices, a rebound will likely depend on whether exchange rate and margin outlooks are bottoming out.
Market participants say the third-quarter earnings season will be less about the level of the numbers than about confirming the durability of profits. For chipmakers, prices, orders and supply plans are key; for the rest, the question is whether revenue growth feeds through to better profitability. "As high third-quarter results are confirmed, the market's attention is expected to shift to next quarter's revenue and margins and to the sustainability of profits in 2027," said Roh Dong-gil, an analyst at Shinhan Securities.
