Samsung Electronics' quarterly operating profit topped 100 trillion won, setting a new milestone for South Korean companies. Analysts say AI investment has shifted memory demand toward hyperscalers and handed pricing power to suppliers, creating a structure different from past booms.

Samsung Electronics said on Wednesday its third-quarter consolidated operating profit came to 107.4 trillion won. It was the first time quarterly operating profit exceeded 100 trillion won. That was up 20.01 percent from 89.49 trillion won in the previous quarter and 8.8 times 12.17 trillion won in the third quarter a year earlier. Revenue rose to 195 trillion won, up 126.59 percent from a year earlier. Cumulative revenue for the first three quarters of this year reached 500.37 trillion won, exceeding last year's full-year revenue of 333.6 trillion won.

Operating profit in the third quarter of 2018, when the 2017-2018 memory supercycle peaked, was 17.57 trillion won. The Device Solutions (DS) division in charge of semiconductors earned 14.56 trillion won at the time, accounting for 83 percent of companywide profit. The boom faded within a year, and operating profit in the first quarter of 2023 sank to 640 billion won. Full-year operating profit last year also remained at 43.6 trillion won. The DS division posted an operating loss of 4.58 trillion won in the first quarter of 2023.

QUARTERLY OPERATING PROFIT OF 107 TRILLION WON, MORE THAN ANY SINGLE YEAR ON RECORD

It later regained momentum as memory became an essential product with the rise of the AI industry. It climbed by a step each quarter, starting from 12.17 trillion won in the third quarter of 2025, then 20.1 trillion won in the fourth quarter, 57.2 trillion won in the first quarter of 2026 and 89.49 trillion won in the second quarter.

This third-quarter operating profit was 6.1 times that of the third quarter of 2018 and 1.8 times the full-year operating profit of 58.89 trillion won in 2018. It was also close to the combined operating profit of 112.54 trillion won in 2017 and 2018. Cumulative operating profit for the first three quarters of this year was 254.13 trillion won, equivalent to 48 percent of the 534.28 trillion won accumulated over 16 years from 2010 to 2025. The operating margin also rose to 55.1 percent in the third quarter from 26.8 percent in the third quarter of 2018.

MORE THAN HALF OF REVENUE LEFT AS OPERATING PROFIT

A shift in memory demand is behind the change. Past booms were driven by PC and smartphone demand, and oversupply ultimately followed a 2 to 3-year cycle. At the peak in 2017-2018, the DS division's operating margin was 42 percent. Now, demand comes from hyperscalers investing in AI infrastructure and AI chipmakers, and high-bandwidth memory (HBM) is seen as being locked in by customer-specific certification and advance contracts.

Because customers are companies that increase volumes based on investment plans, the business is seen as less affected by swings in consumer sentiment. Since customers pre-commit volumes with suppliers that have completed certification, suppliers are seen as having a stronger position in price negotiations than in the past. Analysts say a supplier-led phase, in which suppliers set prices, could continue while demand is tied to the AI investment cycle.

That demand was reflected first in the DS division's performance. DS revenue rose fivefold in five quarters, to 127.5 trillion won in the second quarter of 2026 from 25.1 trillion won in the first quarter of 2025, and the operating margin climbed to 70 percent from 4 percent. Since production capacity is unlikely to increase fivefold over the same period, most of the gain is seen as coming from selling prices and product mix.

At the peak of the boom in the third quarter of 2018, quarterly memory revenue was 21 trillion won, but it was already 1.8 times higher at 37.1 trillion won in the fourth quarter of 2025. As HBM4 output increased, commodity DRAM became scarcer and third-quarter prices rose by double digits.

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The price rise flowed almost directly into profit. Comparing the second quarter of 2025 and the second quarter of 2026, companywide revenue rose by about 97 trillion won and operating profit increased by about 85 trillion won, leaving about 87.5 percent of additional revenue as operating profit. Memory, which has a high proportion of factories and equipment, has a fixed-cost structure, so costs did not rise in line even as prices increased. Over the same period, the Device Experience (DX) division's revenue rose to 48 trillion won from 43.6 trillion won, but operating profit fell to 800 billion won from 3.3 trillion won.

Amid the concentration, Samsung Electronics' profit became focused on a single semiconductor division. DS' share of companywide operating profit rose to 82 percent in the fourth quarter from 57 percent in the third quarter of 2025, then to 94 percent in the first quarter of 2026 and 99.7 percent in the second quarter. Of companywide operating profit of 89.49 trillion won in the second quarter, DS accounted for 89.2 trillion won. Third-quarter divisional results are set to be released in confirmed earnings at the end of this month.