Samsung profit misses estimates, falls sharply from previous quarter as costs rise

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Samsung Electronics on Friday reported that its operating profit dropped sharply from the previous three months as it ramps up R&D spending, while flagging a slowdown in its chips business.

The South Korean company posted better-than-expected fourth-quarter revenue, though its operating profit missed expectations.

Here are Samsung’s fourth-quarter results compared with LSEG SmartEstimate, which is weighted toward forecasts from analysts who are more consistently accurate:

• Revenue: 75.8 trillion Korean won ($52.2 billion) vs. KRW 75.4 trillion
• Operating profit: KRW 6.5 trillion vs. KRW 6.8 trillion

Revenue rose about 12% from last year, while operating profit grew about 130%, year on year. However, operating profit fell nearly 30%, and revenue slipped by over 4%, quarter on quarter, amid soft market conditions and an increase in company expenditures.

Fourth-quarter revenue beat Samsung’s own guidance of KRW 75 trillion, while operating profit came in line with the company’s forecast.

Samsung is a leading manufacturer of memory chips, which are utilized in devices such as laptops and servers, and is also the world’s second-largest player in the smartphone market.

“Although fourth quarter revenue and operating profit decreased on a quarter-on-quarter (QoQ) basis, annual revenue reached the second-highest on record, surpassed only in 2022,” Samsung said in its statement.

For the full year, Samsung reported KRW 300.9 trillion in revenue and KRW 32.7 trillion in operating profit. In 2023, the company posted an annual revenue of KRW 258.94 trillion and an operating profit of KRW 6.57 trillion.

For the current quarter, Samsung said that earnings might be limited due to weakness in its semiconductor business but that it would pursue growth through AI smartphones and other premium devices. 

“For 2025 as a whole, the Company plans to enhance technological and product advantages in AI, continue to meet future demand for high-value-added products and drive sales growth in premium segments,” it added.

Samsung shares fell 2.2% in South Korea on Friday morning, while SK Hynix stock fell over 11% as South Korean markets resumed trading after a four-day break. Asian tech majors have faced pressure from the latest artificial intelligence model from China’s DeepSeek that threatens to upend the U.S.-led AI ecosystem.

Samsung Electronics’ chip business posted an operating profit of KRW 2.9 trillion in the fourth quarter, down over 25% from the three months ending in October, while its annual numbers came in below that of SK Hynix.

This was despite Samsung’s memory business achieving a record-high fourth-quarter revenue of 30.1 trillion helped by demand for its advanced memory products used for AI applications. 

“[O]perating profit decreased slightly compared to the previous quarter as a result of increased R&D expenses to secure future technology leadership, as well as the initial ramp-up costs to secure production capacity for cutting-edge nodes,” Samsung said. 

Samsung and SK Hynix both provide DRAM, or dynamic random access memory, products — a type of semiconductor memory needed for data processing. 

However, SK Hynix has left Samsung behind in HBM, or high bandwidth memory, a type of DRAM, in which chips are vertically stacked to save space and reduce power consumption. HBM products have seen booming demand due to there use in high-performance computing applications such as AI.

“They’ve lost share in the high bandwidth DRAM business… that’s where SK Hynix has really leapfrogged ahead of Samsung,” Eric Ross, analyst at Cascend Securities, told CNBC’s “Squawk Box Asia,” on Friday.

He noted that U.S. DRAM maker Micron has also gained ground on the company.

“Samsung is kind of in the wrong pieces of the DRAM market right now because they missed the high bandwidth piece, and they really need to catch up on that,” he said, adding that the PC and smartphone DRAM markets are under price pressure.

According to Samsung, its memory business is cutting down legacy products to better align with market demand and increasing its proportion of high value-added products, such as HBM. 

“In 2025, overall memory market demand is expected to recover from the second quarter,” Samsung said, warning that its earnings are expected to remain weak in the current quarter.  

Samsung’s mobile experience and networks businesses, tasked with developing and selling smartphones, tablets, wearables and other devices, reported a quarter-over-quarter decrease in sales and profit.

Samsung said the performance was in part due to the fading effects of new flagship smartphone model launches.

The segment saw a consolidated revenue of KRW 25.8 trillion and an operating profit of KRW 2.1 trillion in the fourth quarter.

“However, on a full-year basis, flagship sales saw robust growth on the back of double-digit growth of the Galaxy S24 series featuring Galaxy AI, with tablets and wearables also increasing in both value and shipments,” Samsung said. 

In the current quarter, Samsung plans to drive sales growth with new flagship models, particularly its newly launched Galaxy S25 series and will continue to push into the AI smartphone market.

“What Samsung is doing, and has done really well in the last few years, is it’s really focused more on value and its flagship devices,” Nabila Popal, senior director with IDC’s Data & Analytics team, told CNBC’s “Squawk Box Asia” on Friday.

Given that focus, Samsung’s share of the premium market has inched closer to Apple’s, the leader in the premium smartphone segment, she added.