On robust demand for new smartphone models and memory chips used in servers, Samsung Electronics Co announced preliminary earnings for the first quarter that surpassed analysts’ estimates.
South Korea’s largest company reported a 50% increase in operating profit for the three months ended March. An average analyst estimate is 13.4 trillion won. Sales increased 18% to 77 trillion won, also higher than expected. Samsung will announce its full earnings on Apr. 28. It will include its net income and divisional performance.
In a period disrupted by the war in Ukraine, sanctions on Russia, and the Covid-19 resurgence in China, Samsung is the first major tech company to report first-quarter results. The worldwide move to 5G communications and the expansion of data centers continue to boost demand for semiconductors, which are the source of most of the conglomerate’s profits.
Analyst Peter Lee at Citigroup said in a note ahead of the results that earnings will rebound in semiconductors and displays in 2H 2022. In particular, Samsung’s memory business will benefit from the strong memory pricing throughout 2H 2022.
Samsung expects to sell over one million units of its Galaxy S22 series this week in South Korea, another pillar of its growth strategy.
According to the Suwon-based company, the new flagship lineup, which launched in February, has sold 20% faster than the previous S21 lineup. According to research firm Counterpoint, the S22 sold 60% more than the S21 during its first three weeks on the market.
Samsung shares have lost about 12.5% this year through Wednesday, while the broader chip sector has underperformed amid rising economic risks. In the wake of Russia’s invasion of Ukraine, rising oil prices as well as inflation and interest rate hikes have been raising concerns about declining disposable income and discretionary spending.
Since Samsung produces more than a third of the world’s DRAM and NAND memory chips, it is affected not only by the cycles of the semiconductor industry, but also by consumer demand since it makes gadgets as well as the chips that go into them.