By Jules Rimmer

Samsung earnings beat expectations but the stock fell 10% as investors 'sell on the news'

Samsung reported a surge in earnings.

Samsung Electronics shareholders proved a difficult audience to please.

Despite announcing preliminary operating profits for the second quarter nineteen times higher than the corresponding period of 2025, Samsung (KR:005930) shares fell as much as 10% before recovering slightly to close down 7% in Seoul.

It was a case of "travel and arrive'" for the stock whereby investors expected strong results beforehand and were positioned for it, triggering profit-taking. Given Samsung has returned 50% in the last three months and almost 150% so far in 2026, the temptation to book some profits is understandable, especially in a market where retail participation is so intense and where both leverage and volatility is so pronounced.

Operating profit for the three months to June was 89.4 trillion won (around $58.5 billion), slightly ahead of the consensus according to FactSet of 87 trillion won. Samsung earned just 4.68 trillion won in the year-earlier period.

Revenue of 171 trillion won met expectations, vs. the 74.6 trillion won in the year-earlier quarter.

Full second-quarter results will be released at the end of July but it's clear that Samsung made more in the first half of 2026 than it made in the whole of 2025.

Analysts covering Samsung were more measured in their assessment of the release with both JPMorgan's team, led by Jay Kwon, and Citi's Peter Lee noting the record-breaking results, the earnings beats, the projected increases in average selling prices of its high-bandwidth DRAM and Nand memory chips. JPMorgan's earnings note published Wednesday reiterated "our bullish longer for higher up-cycle" and recommended that investors accumulate the stock.

Kwon writes, "As memory sufficiency remains extremely low (only 50-60% of procurement is met via supply) the pricing environment is likely to remain favorable in 2H26." Their rating is overweight and their target price is 480,000 won, more than a third higher than the closing price of 296,000 won.

Citi is even more bullish. Lee's target price is530,000 won with a buy rating and he also is minded to disregard the negative reaction to the numbers as "Samsung is uniquely positioned as an end-to-end AI turnkey provider with sustained structural growth ahead."

The mean target price of the three dozen or so analysts contributing estimates to FactSet is 487,000 won and the recommendations are. with one exception, bullish.

The 12-month earnings estimates are still not expensive.

On Kwon's estimates Samsung Electronics trades at a price-to-earnings multiple of just over five times ("the cheapest memory stock globally") with analyst upgrades probably incoming.

Looking forward he anticipates the chip shortage broadening out to foundry - the actual manufacturing of chips. Given the tightness of supply at Taiwan Semiconductor Manufacturing Company's (TSM) fab, Samsung Foundry is now winning new contracts from the likes of Google (GOOG), Meta (META), Anthropic, AMD (AMD) and BYD (CN:002594) who all have new chip projects.

The negative reaction to Samsung's results may concern SK Hynix (KR:000660) shareholders too. Its stock also plummeted 6%, just three days before $29 billion of its new depositary receipts are listed on Nasdaq. The nervousness surrounding the chip makers reflects a broader concern about the sustainability of the AI investment boom and the possibility of flagging demand, although at this stage, there is no evidence of that happening.

In London trading Tuesday morning Samsung's global depositary receipts (UK:SMSN) were down 5%, the equivalent of around 294,000 won.

The Roundhill Memory ETF DRAM, whose top holdings are SK Hynix and Samsung, tumbled 6% in premarket trade, after gaining 7% on Monday.

-Jules Rimmer

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