Samsung Electronics 2Q26: Memory is paving Samsung's new growth path

• Memory has become Samsung's primary growth engine, driving record semiconductor earnings and fundamentally reshaping the company's revenue mix.

• Semiconductor revenue surged 357% year-on-year as record DRAM and NAND shipments combined with sharply higher memory prices lifted profitability.

• Long-term supply agreements, advance customer payments and minimum pricing improve earnings visibility while reducing investment risk across the memory business.

• Foundry momentum is strengthening as improving 2nm yields and new AI-related customer orders position Samsung for a second semiconductor growth engine.

• Despite short-term share price weakness, AI infrastructure demand, a higher-value product mix and expanding memory capacity continue to support Samsung's long-term earnings outlook.

As a leading memory company, Samsung delivered another strong set of results, with both segment-level and overall performance suggesting that memory may have already put Samsung on a new growth path.

Samsung Electronics Overall Earnings Up 129.9% increase YoY on Semiconductor

Samsung recorded revenue of KRW 171.5 trillion in 2Q26, beating market expectations and marking a 129.9% y-o-y increase. As in the prior quarter, this strong growth was mainly attributable to surging downstream demand for memory. At the same time, Samsung's revenue structure has also shifted.

Figure 1: Samsung Segment Revenue and Operating Margin

The semiconductor segment accounted for 74.3% of 2Q26 revenue, up 36.9 percentage points y-o-y, while the share of consumer electronics fell sharply from 58.4% a year earlier to 28%. This reflects a major shift in the revenue structure of Samsung, which had long relied on consumer electronics as its main business.

Driven by AI model iteration and AI-related capital spending by hyperscale cloud service providers, Samsung's DRAM and NAND shipments both hit record highs and exceeded management's expectations. At the same time, memory prices remained elevated, with average selling prices (ASPs) for DRAM and NAND rising around 40% and 60% q-o-q, respectively. With both price and volume rising, the semiconductor segment's 2Q26 revenue reached KRW 127.5 trillion, up 357% y-o-y, of which memory sales accounted for about 95%. The foundry business, which makes up a smaller share of semiconductor segment revenue, was relatively flat, with revenue broadly unchanged from a year earlier.

As Samsung has focused on high-value-added products such as HBM, DDR5, and SOCAMM2, rapid expansion in the memory business together with operating leverage drove Samsung's overall operating profit up 1,814% y-o-y to KRW 89.5 trillion, while the operating margin improved from 42.8% in the prior quarter to 52.2%.

On the other hand, the consumer electronics segment, whose share of revenue has declined, performed relatively weakly. Although the segment's revenue rose 10% y-o-y, operating profit fell 4.1% y-o-y and turned into a loss, due to higher memory prices and rising delivery costs.

According to Counterpoint, global smartphone shipments fell 11% y-o-y in 2Q26 due to higher memory prices and shipping costs. This shows that the decline in smartphone sales volume is a global phenomenon, with many manufacturers facing the same cost pressures, adding to the pressure on revenue growth and margins in Samsung's consumer electronics segment. In addition, Samsung's smartphone shipments accounted for a 24% global market share in 2Q26, up 4 percentage points y-o-y, indicating that the company's smartphone products remain reasonably competitive.

 A Rising Foundry Business

Although the semiconductor segment is still dominated by memory, Samsung's foundry business is beginning to rise against the backdrop of accelerating global AI adoption.

Figure 2: Global Foundry Market Share (1Q26)

As of the prior quarter, TSMC held a 74% share of the global foundry market, with Samsung ranking second. However, as global chip demand is also rising rapidly, TSMC may not be able to absorb all of it. In addition, yields on Samsung's 2nm chips have gradually improved to close to 60%, bringing the process closer to the mass-production threshold. Driven by both overflow capacity and technology improvement, Samsung has therefore begun receiving more orders. According to company management, utilization of Samsung's advanced nodes below 8nm has now risen to 100%, indicating that the expansion of its foundry business is on solid footing.

Samsung has already secured orders from major cloud service providers and high-performance computing customers, with design work already underway. In July, Broadcom signed a memorandum with Samsung worth over $200 billion, under which Samsung's advanced 2nm process will support the development of Broadcom's next-generation networking chips; Meta has also reportedly selected Samsung to manufacture its third-generation MTIA (Meta Training and Inference Accelerator) chips to support the training of its AI models. Discussions on multiple such partnerships also show that other major technology companies are increasingly favouring Samsung's foundry technology. Although foundry revenue growth was flat in 2Q26, the company expects revenue from 2nm chip development projects to double this year, and expects the resulting gain in market share to open up a second growth engine for the semiconductor segment.

Is Rising Memory Cost a Double-Edged Sword?

Somewhat unusually, Samsung is in fact both a producer and a buyer of memory. For the semiconductor segment, rising memory demand and prices are the main drivers of revenue growth, but for the consumer electronics segment, they also raise the cost of producing electronic products. As a result, while producing high-end memory products can lift Samsung's overall margin, performance across segments may diverge.

Although smartphone sales revenue declined y-o-y, other consumer electronics products performed well. Boosted by sporting events and high-performance product innovation, both TV and home appliance revenue grew in 2Q26. Since Samsung's consumer electronics businesses generally face similar pressure from raw material and shipping costs, the strategy across its various segments is relatively consistent — mainly creating differentiation by integrating AI technology into end products, such as building a new "AI OS" architecture for the Galaxy smartphone lineup and introducing the Vision AI feature (a conversational AI platform for TVs) into the TV product line. At the same time, product planning is also focusing more on high-value product lines, while continuing to improve cost and manufacturing efficiency to enhance overall profitability.

In light of this, although rising memory costs are not entirely favourable for Samsung, given that this pressure is a global issue that is unlikely to ease in the near term, Samsung may need to find other ways to improve the performance of its consumer electronics segment — through its product mix, technology differentiation, and operating efficiency. In addition, since the profitability of the memory business is greater than the cost pressure faced by the consumer electronics segment, Samsung's overall financial performance should continue to benefit from the memory cycle.

Memory Is the New Growth Path

It is therefore hard to deny that, given the pressure on consumer electronics and the strong growth of the semiconductor segment, memory has become an important pillar for Samsung. For this reason, Samsung's capital expenditure rose to KRW 16.8 trillion in 2Q26, of which 91.7% was invested in memory and foundry capacity, while R&D spending rose 78% y-o-y, reflecting the company's continued confidence in AI development.

Driven by the memory cycle, the strong performance of memory sales revenue in the first half was not entirely surprising. This explosive revenue growth may lead some investors to start worrying about how long this expansion cycle can be sustained — should the memory cycle turn, Samsung, which is now heavily reliant on the memory business, could come under pressure.

In practice, however, allocating resources to the memory business represents Samsung's optimal deployment under the current AI investment boom. At the same time, Samsung has already signed long-term supply agreements (LTAs) with the world's top five data centre customers, locking in downstream demand from major clients. More importantly, these contracts are structured as five-year rolling agreements that can be renewed annually. Customers are also required to make advance payments under the contracts, ensuring capacity is fully utilized and reducing the risk that Samsung over-invests upfront only to face excess capacity later. In addition, the pricing mechanism of these contracts guarantees minimum prices for key memory products. As a result, signing long-term contracts not only supports the visibility of Samsung's revenue, but also shifts part of the risk from Samsung onto its customers.

Regarding the guidance on coming earnings, Samsung said it expects HBM4 sales to rise more than three-fold q-o-q in the next quarter at the earnings call, and it has already shipped HBM4E samples to major customers. Benefiting from the same wave of AI infrastructure buildout, enterprise SSDs (eSSD) are expected to account for more than 60% of Samsung's NAND sales mix this year, up more than 20 percentage points y-o-y.

Figure 3: Samsung Share Price Performance

The timing of the 2Q26 results release overlapped with a global sell-off in semiconductor stocks, so even though Samsung's results improved again, they failed to spark investor enthusiasm. This disconnect between fundamentals and share price may reflect that the market has already priced this in, along with concerns over excessive capital spending by technology companies. For now, however, record memory shipments, an increasingly higher-value product mix, an expanding foundry order book, and a memory business that is becoming more contracted and long-term in structure should continue to support Samsung as an AI hardware supplier that benefits from the ongoing wave of AI infrastructure investment.

In light of this, we believe Samsung's strong results will continue to support overall earnings for the South Korean stock market, and we also maintain our KOSPI earnings forecast set out in our South Korea 2H26 outlook; after a pullback, the KOSPI's upside had reached 74% as of 4 August 2026.

Figure 4: 12-Month Forward P/E of KOSPI

Table 1: Valuation and EPS forecast of KOSPI

	2025A	2026E	2027E	2028E
EPS (KRW)	248.9	627.6	787.2	842.9
EPS growth rate	19.4%	152.2%	25.4%	7.1%
P/E ratio	25.3	10.0	8.0	7.5
Dividend yield	1.1%	2.7%	3.4%	3.6%
Target Price at the end of 2028 (Based on 13x Forward P/E)				10,958
Potential upside				74%
Source: Bloomberg L.P., iFAST Compilations. Data as of 6 August 2026.

Figure 5: KOSPI EPS Forecast

Table 3: Related products

Market	Fund	ETF
South Korea	LionGlobal Korea USD	Franklin FTSE South Korea ETF (NYSE: FLKR) Global X Exchange Traded Funds Series OFC - Global X Asia Semiconductor ETF (HKEX:3119)

Declaration

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.

This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report, including all investment theses, ratings, price targets and conclusions, has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.