Samsung Forecasts 23% Rise In Q2 Operating Profits

Strong demand for chips from data center customers amid pandemic is allowing Samsung Electronics Co Ltd SSNLF to beat analysts’ estimates and clock a likely operating profit of $6.8 billion for the second quarter of 2020 ended June 30.

What Happened

Samsung announced its Q2 2020 earnings guidance on Tuesday. The company’s operating profit was in excess of $5.3 billion projected by Refinitiv SmartEstimate, according to Reuters.

Operating profit rose 23% in Q2 2020 over the same period last year.

This is likely to be the highest quarterly profit for the world’s foremost chipmaker since Q4 2018. 

Samsung’s revenue is forecast to decline by 7% to $43.5 billion compared to the same period last year. 

Samsung was able to capitalize on strong demand for its chips as well as benefit from one-off gains from its display unit. 

Why It Matters

According to CW Chung, head of research in Korea at Nomura, the damage from the pandemic may be “less severe than the market had expected,” reported Reuters.

Cape Investment & Securities analyst Park Sung-soon ascribed the strong chip demand to COVID-19. 

Analysts warn that spike in memory chip prices may not continue into the second half of 2020 as datacenter customers may be reluctant to stockpile memory because of the pandemic’s resurgence in the United States and elsewhere.

According to analysts, Samsung’s handset and TV sales numbers may be better than expected as lockdowns are lifted and stores reopen. 

The South Korean conglomerate will release full earnings data later in July. 

Price Action 

On Tuesday, Samsung shares traded lower by 1.82% at $45.23 at press time in Seoul.

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