Samsung Electronics Targets Record Q1 Profit as Memory Chip Supercycle Hits Full Stride

TLDR

• Samsung Electronics is expected to report a six-fold jump in operating profit for Q1 2025, potentially hitting 40.5 trillion won ($26.9 billion).
• The expected result is being driven by surging memory chip prices fuelled by AI demand.
• Samsung’s stock has dropped 14% since a Middle East conflict began on February 28 but remains up 50% year-to-date.
• Analysts at Simply Wall St estimate the stock is undervalued by around 14%, with a DCF fair value of roughly ₩207,643 per share versus the recent price of ₩178,400.
• Risks include easing DRAM spot prices, Google’s memory-saving TurboQuant technology, rising energy costs, and potential labour strikes in South Korea.

The stock last closed at ₩178,400, with a one-year return of 215.2% and a year-to-date gain of 38.8%.

Samsung Electronics Co., Ltd., SMSD.L

Samsung Electronics is gearing up to post what could be one of the most eye-catching earnings results in its history. The world’s largest memory chip maker is forecast to report Q1 operating profit of around 40.5 trillion won ($26.9 billion), according to an LSEG SmartEstimate based on 29 analysts. That would be a roughly six-fold increase from the same period last year.

For context, Samsung’s total operating income for the whole of 2024 was 43.6 trillion won. The company could nearly match that in a single quarter.

Citi is even more bullish, forecasting 51 trillion won. Revenue is expected to climb around 50% for the period.

The engine behind the numbers is memory chips. AI data centre buildouts have created what Samsung itself calls an “unprecedented supercycle.” Demand for high-bandwidth memory and DRAM has outpaced supply, pushing prices sharply higher. Contract DRAM prices reportedly doubled in Q1 compared to the previous quarter and are forecast to rise a further 58-63% in Q2.

Samsung co-CEO Jun Young-hyun told shareholders last month the company is moving key customers onto three-to-five year contracts to reduce exposure to demand swings. That’s a strategic shift that signals confidence in long-term demand.

Headwinds Starting to Show

Despite the bullish headline numbers, the stock has not been immune to pressure. Since a Middle East conflict began on February 28, Samsung has shed around 14% of its value.

The war has raised energy costs and threatened supply chains for key production inputs. Some analysts worry Big Tech firms could trim AI data centre spending if input costs rise sharply enough.

There are also early signals that DRAM spot prices have cooled over the past three to four weeks. Google’s recent unveiling of TurboQuant, a memory-saving technology, has added to concerns about long-term chip demand.

Samsung’s non-memory businesses face their own problems. The contract chip manufacturing unit, which competes with TSMC, is expected to stay unprofitable. The smartphone and flat-screen TV divisions could see profits fall by around half in Q1, hurt by higher memory input costs and competition. Labour unions in South Korea are also pushing for a new bonus structure and have threatened a strike in May.

Valuation Picture

At ₩178,400 per share, Samsung trades at a P/E of 26.61x, slightly above the broader tech industry average of 22.03x but roughly in line with peers.

Simply Wall St’s DCF model puts the intrinsic value at approximately ₩207,643 per share, implying the stock trades at a 14.1% discount on that measure. The firm’s own “Fair Ratio” for the P/E stands at 52.70x, well above the current multiple of 26.61x.

Bull case estimates put fair value around ₩209,080 per share, assuming 12% revenue growth and continued AI memory demand. The bear case, which factors in geopolitical risk and margin pressure, lands at ₩125,890 per share.

Samsung is due to release its preliminary Q1 earnings on Tuesday. A more detailed breakdown, including forward guidance, is expected later in the month.

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