Samsung, SK hynix Q3 Earnings to Test Durability of Memory Supercycle

Samsung Electronics (005930.KS) and SK hynix (000660.KS) will report third-quarter earnings next month. With expanding artificial intelligence investment and a global memory shortage sustaining the semiconductor supercycle, investors are watching closely to see how long the memory makers can keep growing profits.

The results will serve less as another record-profit milestone than as a test of whether DRAM and NAND flash prices kept climbing, how long-term agreements (LTAs) affected profitability, and how much of the next-generation high-bandwidth memory, HBM4, translated into actual revenue and profit.

Samsung at 105.6 Trillion Won, SK hynix at 74.1 Trillion Won

Combined Operating Profit Approaches 180 Trillion Won

According to third-quarter consensus estimates compiled by financial data provider FnGuide on the 25th, Samsung Electronics is expected to post revenue of 199.1189 trillion won and operating profit of 105.6443 trillion won, based on forecasts issued over the past month. SK hynix is projected to report revenue of 94.1071 trillion won and operating profit of 74.1257 trillion won. Their combined operating profit alone reaches 189.87 trillion won.

Market expectations have come down recently. On a three-month basis, the consensus for Samsung Electronics was 204.5704 trillion won in revenue and 110.5736 trillion won in operating profit, while SK hynix stood at 99.3949 trillion won and 78.0802 trillion won. Samsung's revenue and operating profit estimates fell 2.6% and 4.4%, respectively. SK hynix saw declines of 5.3% and 5%. Analysts say this reflects a currency effect that reduced the won value of dollar-denominated sales, rather than a downturn in the memory market itself.

DRAM and NAND Price Gains Are the First Hurdle

Impact of Higher LTA Share to Show Up in the Numbers

The first item to check is memory prices and operating margins. Through the second quarter, the key driver lifting results at Samsung Electronics and SK hynix was the surge in average selling prices (ASPs) for DRAM and NAND.

Prices are expected to keep rising in the third quarter, but the rate of increase may slow from the previous quarter. Mirae Asset Securities estimated that Samsung's DRAM ASP would rise 16.5% quarter-on-quarter in the third quarter, but forecast a smaller 5.4% gain in the fourth quarter.

The expansion of LTAs has emerged as a new variable. Samsung Electronics is pursuing a strategy of locking in 60% to 70% of its memory production capacity through long-term contracts. SK hynix said at its second-quarter earnings announcement that it had completed LTA negotiations with about a dozen companies, including key customers.

LTAs secure sales volumes years in advance, reducing the earnings volatility that has long plagued the memory industry. On the other hand, when short-term memory prices spike, contract prices can limit how much ASPs rise.

For that reason, what matters in the third quarter is not only how much prices rose but whether high operating margins held up even as LTA volumes expanded. Even if the pace of price increases slows, high prices and sales volumes guaranteed over a long period would support the case that the supercycle is shifting from a short-term boom to a sustained one.

HBM4 Shipments to Nvidia Begin in Volume

SK hynix's Grip on HBM Leadership in Focus

The second key point is performance in sixth-generation high-bandwidth memory, or HBM4. Samsung Electronics began mass-production shipments of HBM4 in February, and SK hynix started volume supply in the second quarter. The third quarter is when shipments for Nvidia's next-generation AI platform, Vera Rubin, expand in earnest, meaningfully feeding related revenue into results.

Samsung Electronics in particular expects third-quarter HBM4 revenue to more than triple from the previous quarter, with HBM4 accounting for more than 60% of total HBM revenue in the second half. For SK hynix, the question is whether it can carry the leadership it holds in the fifth-generation HBM3E market into the next-generation product as it ramps up HBM4 output.

Third-quarter HBM4 results are likely to be a key leading indicator for both companies' HBM market share and profit estimates in 2027.

Samsung Foundry Could Turn a Profit for the First Time in Three Years

DX Division, Facing Losses, Tested by "Chipflation"

For Samsung Electronics, results at its non-memory business and at the Device eXperience (DX) division, which handles smartphones and televisions, carry considerable weight. KB Securities forecast a strong chance that the foundry business would swing to a profit from the third quarter, excluding incentive provisions, citing expanded mass production of 4-nanometer (a nanometer is one-billionth of a meter) language processing units (LPUs) and stabilizing production yields.

If the foundry unit, which has run losses since 2023, manages a quarterly profit, it could signal a recovery in the non-memory business that has long been cited as a discount factor in Samsung's corporate value. If that extends to expanded production of HBM4 base dies and improved yields on the 2-nanometer advanced process, a structure in which memory and foundry both generate profit becomes possible.

The DX division, by contrast, is facing headwinds from surging memory prices. Samsung's DX division posted an operating loss of 800 billion won in the second quarter. Internally, the company expects cost pressure to persist at the MX business, which oversees smartphones, for as long as memory prices keep climbing.

The question for the third quarter is therefore how much expanded sales of premium products such as Galaxy foldables absorbed the cost burden from rising component prices. If the DX division posts a loss, it would mean the continuation of what is called the "chipflation paradox," in which the DS division reaps enormous profits from higher chip prices while the DX division shoulders the cost burden.

Durability Matters More Than Record Results

A Profit Miss Could Reignite the "Peak" Debate

Ultimately, the crux of the third-quarter results is not the size of profits but their durability. Behind the relatively low valuations that Korean memory makers command in the stock market despite record profits lies investor wariness that earnings could plunge once the memory boom ends.

If the third-quarter results confirm long-term demand secured through LTAs, a larger profit contribution from HBM4 and a recovery at Samsung's foundry unit, that would add weight to the view that this supercycle could last longer than previous ones. Conversely, if DRAM and NAND ASP growth slows faster than expected and HBM4 profitability falls short, the "peak-out" debate could flare up again in the market.