Samsung Electronics' 2Q26 results strongly beat expectations, with the Memory business driving the earnings surprise

Overview

This report is Nomura's quick review of Samsung Electronics' preliminary 2Q26 results. Its core conclusion is that the company's 2Q26 results significantly exceeded expectations, driven primarily by strong performance in the Memory business; although Foundry/LSI and MX remain under earnings pressure, rising Memory prices, prolonged long-term supply tightness, and improving HBM profitability support a positive investment view.

Core views

Nomura believes Samsung Electronics' 2Q26 revenue of KRW 171tn and operating profit of KRW 89tn constituted an earnings surprise, significantly above its KRW 76tn operating profit forecast. As approximately KRW 20tn in bonus provisions were concentrated in 2Q, pre-bonus operating profit could reach approximately KRW 110tn. The report maintains its Buy rating and KRW 670,000 target price, citing the company's high profit scale among global technology companies and an unfair discount relative to competitors with similar market capitalizations.

Analysis framework

The report combines segment earnings decomposition, Memory price-cycle analysis, peer valuation comparison, and a target P/B valuation framework: it first assesses the difference between preliminary 2Q26 results and forecasts, then analyzes the contributions and drags from Memory, Foundry/LSI, Display, and MX, and finally evaluates valuation attractiveness using a 12-month target price framework.

Methodology notes

• Valuation methodsP/B multiple valuation

  12-month target price

  Nomura's 12-month target price of KRW 670,000 is based on applying a 5.0x target P/B to 12MF BVPS of KRW 133,139; the target multiple reflects improved business stability and visibility under long-term Memory contracts.

• Industry Cycle AnalysisSupply, demand, and price cycle

  Memory price increases and supply shortage

  The report assesses the sustainability of Memory business profitability by evaluating commodity DRAM/NAND prices, HBM prices, and the pace of long-term supply expansion; Nomura expects the material impact of supply expansion may not emerge until after 2029F.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Samsung Electronics (005930.KS)

  Core covered company

  Strengths

  2Q26 results significantly exceeded expectations, the Memory business performed strongly, profit scale was outstanding relative to peers, and valuation was considered excessively discounted.

  Weaknesses

  Foundry/LSI remains under loss pressure, the MX business is affected by rising Memory costs, and Display profitability is pressured by declining prices.

  Comparison

  The report believes the company's operating profit is close to 1.5-2 times that of competitors with similar market capitalizations and is at a relatively high quarterly profit level among global technology companies.

  Risks

  US semiconductor tariffs, delays to data-center construction due to power shortages, and a slowdown in AI capital expenditure in a high-interest-rate environment.

• Apple (AAPL US)

  Comparable company related to smartphone and Display demand

  Strengths

  The report notes that higher market shares at leading companies such as Samsung and Apple drove better-than-expected Display shipment volumes.

  Weaknesses

  Apple may raise product prices by 15-25%, reflecting rising end-market cost pressures.

  Comparison

  Samsung's MX business may follow Apple in raising smartphone prices further, but profit improvement remains constrained by rising Memory prices.

  Risks

  Higher end-product prices may affect demand elasticity.

Key data

• Preliminary 2Q26 revenueKRW 171tnSamsung Electronics' announced preliminary 2Q26 results.
• Preliminary 2Q26 operating profitKRW 89tnAbove Nomura's previous forecast of KRW 76tn.
• Estimated pre-bonus 2Q26 operating profitApproximately KRW 110tnNomura estimates that approximately KRW 20tn in 1Q and 2Q bonus provisions were both reflected in the 2Q financial statements.
• 3Q26F commodity DRAM/NAND price expectationUp 15-20% quarter on quarterThe report believes the pace of Memory price increases will gradually stabilize thereafter.
• Target priceKRW 670,000Maintained unchanged, based on a 5.0x target P/B and 12MF BVPS of KRW 133,139.
• Current priceKRW 318,000Closing price on 2026-07-06.
• RatingBuyMaintained unchanged, with expected outperformance versus the benchmark over a 12-month horizon.

Impact & implications

The report's investment implications for Samsung Electronics are positive: an earnings beat and price increases in the Memory business strengthen earnings leverage, improving HBM profitability provides additional support, and continued long-term supply shortages enhance profit visibility. However, Foundry/LSI losses, MX cost pressure, and macroeconomic and industry capital expenditure risks still require ongoing monitoring.

Risks

• Potential risk of the United States imposing tariffs on semiconductor products.
• Data-center construction delays caused by power supply shortages.
• A slowdown in AI capital expenditure in a high-interest-rate environment.
• Further increases in Memory prices may constrain profit improvement in the MX business.
• Foundry/LSI losses may widen after bonus provisions are recognized.
• Although Display shipments were better than expected, pricing pressure may weigh on profitability.

What to watch

• Whether actual 3Q26 commodity DRAM/NAND price increases reach 15-20%.
• Whether HBM prices and profitability continue to converge toward commodity DRAM.
• Progress in expanding long-term Memory contracts and its impact on price stability.
• The pace of improvement in Foundry/LSI losses.
• Whether the MX business can offset rising Memory costs through smartphone price increases.
• Whether the Memory supply expansion plan changes the assessment of tight supply and demand before 2029F.