Samsung and SK Hynix Face 'Extremely High Expectations' as Q3 Earnings Approach

South Korea's two semiconductor titans, Samsung Electronics and SK Hynix, are at the center of a global semiconductor "super cycle," fueled by robust AI-driven demand and advances in next-generation memory technology. As both companies approach their third-quarter earnings reports, their performance will serve as a critical litmus test for the sustainability of the "AI trade" in global markets.

Market Expectations and Recent Adjustments

Market expectations for both giants are exceptionally high. According to Seoul Economic Daily citing FnGuide data:

• Samsung Electronics is projected to post 199.1 trillion KRW in revenue and 105.6 trillion KRW in operating profit for Q3.
• SK Hynix is expected to achieve 94.1 trillion KRW in revenue and 74.1 trillion KRW in operating profit.

The combined operating profit of the two companies is approaching a record 189.9 trillion KRW, a direct reflection of strong market momentum amid the current chip supply shortage.

However, beneath the headline figures, market consensus has seen subtle adjustments in recent months. Over the past three months, analysts have:

• Lowered Samsung Electronics' revenue and profit forecasts by 2.6% and 4.4%, respectively.
• Lowered SK Hynix's forecasts by 5.3% and 5%, respectively.

This shift is primarily attributed to the strengthening of the Korean won, which has reduced dollar-denominated sales figures, rather than a downturn in the memory market itself. Nevertheless, it has prompted the market to reassess the direct impact of currency fluctuations on the short-term performance of tech giants.

Deeper Signals from Q3 Earnings

Beyond the surface-level numbers, the upcoming Q3 reports will convey deeper signals to the market. Investors are closely monitoring:

• The sustainability of memory chip price increases.
• The profit-locking effect of long-term supply agreements (LTAs) .
• Whether next-generation high-bandwidth memory (HBM) can translate into tangible bottom-line profits.

These factors will help determine whether the current boom is a short-lived spike or a structurally resilient shift.

Slowing Price Growth and the Role of LTAs

The sharp rise in average selling prices (ASP) for DRAM and NAND flash in Q2 was the primary engine driving strong performance for both companies.

In Q3, prices are expected to continue rising, but at a slower pace. According to Mirae Asset Securities:

• Samsung Electronics' Q3 DRAM ASP is expected to climb 16.5% , but Q4 growth is forecast to narrow to 5.4%, indicating that the price rebound may be losing some momentum.

This moderation is partly due to the growing prevalence of long-term supply agreements (LTAs) .

• Samsung Electronics has locked in 60% to 70% of its memory capacity through LTAs.
• SK Hynix completed LTA negotiations with approximately ten core clients in Q2.

While LTAs provide stability and smooth out the historically volatile memory cycle, they also cap profit upside during rapid price increases, as contract prices often lag behind spot prices.

HBM4 Production Ramps Up, Shaping AI Infrastructure

The third quarter marks a turning point in the race for next-generation high-bandwidth memory (HBM4) , which is essential for advanced AI applications.

• Samsung Electronics expects its Q3 HBM4 sales to more than triple compared to Q2, driven by increased shipments to Nvidia's next-generation AI platform, Vera Rubin. HBM4 is projected to account for over 60% of Samsung's total HBM revenue in the second half of 2026.
• SK Hynix faces the challenge of expanding HBM4 production while maintaining its market leadership in HBM3E.

The Q3 earnings will provide early clues about the dynamics of this high-stakes competition.

The Broader Shift: Memory as the "Circulatory System" of AI

The hunger for high-bandwidth memory is reshaping the underlying logic of the entire tech industry. According to Global Economics citing KB Securities:

• Meta's launch of the AI agent-based application Muse signals a new era for AI services requiring continuous, sequential operations and higher memory bandwidth.
• Traditional generative AI processes about 100 tokens per second, while agent-based AI demands 1,000 tokens per second—a tenfold increase in data processing that is fundamentally altering data center architecture.

KB Securities analyst Kim noted: "In an AI data center, the GPU is the heart, the CPU is the brain, electricity is the oxygen, and memory is the circulatory system that supplies and cycles data. Ultimately, the key to AI data center performance and efficiency will shift to memory."

This trend is already visible across the industry. AMD recently joined the "trillion-dollar market cap club" alongside Nvidia, Broadcom, and Micron, and its Q2 data center revenue surged 107% year-over-year, indicating that the market now values CPU and memory on par with GPU.

In response, Samsung Electronics is already eyeing next-generation "zHBM" technology, which involves stacking memory directly on top of GPUs, with plans to deliver samples by the end of 2027.

Foundry Business Sees a Turnaround; "Chip Inflation" Tests End-User Segments

Beyond its core memory business, Samsung Electronics' non-memory divisions are also under the microscope.

• After consecutive losses since 2023, Samsung's foundry business is widely expected to return to profitability in Q3, driven by expanded 4nm language processing unit (LPU) capacity and improved yields. If achieved, this would significantly boost investor confidence and remove a long-standing drag on Samsung's overall valuation.

However, Samsung's Device Experience (DX) division, responsible for smartphones and TVs, is facing a "chip inflation paradox."

• In Q2, the DX division recorded an 80 billion KRW operating loss, as strong sales of high-end devices like the Galaxy Foldables failed to offset rising component costs.
• The same memory price surge that benefits the semiconductor business has become a heavy burden for the hardware division.

The key question for Q3 is whether high-end product sales can absorb these cost pressures, or whether the "profit on one side, loss on the other" dilemma will persist.

Navigating the "Peak" Debate and Reshaping Long-Term Valuation

As the Q3 earnings season approaches, the global semiconductor industry's focus is shifting from the absolute scale of profits to their sustainability.

• If Samsung Electronics and SK Hynix can demonstrate that LTAs have effectively locked in demand, that HBM4 is delivering strong margins, and that the foundry business is back on track, the current super cycle may prove more resilient than past cycles.
• Conversely, if DRAM and NAND price growth slows faster than expected, or if HBM4 profit contributions fall short, the debate over whether the semiconductor industry has already "peaked" will reignite.

In the coming weeks, these two earnings reports will not only determine the short-term market capitalization of both giants but also set the tone for global technology infrastructure investment in the years ahead.