Samsung Electronics 2Q26 earnings beat, with the storage upcycle remaining the main growth theme

Overview

This is J.P. Morgan's 2Q26 earnings review for Samsung Electronics. The report notes that Samsung's preliminary 2Q26 performance exceeded the market expectation range, which had been recently revised lower, even though it included a labor cost provision of more than W15trn covering both Q1 and Q2 2026. The analyst maintains a constructive view on both the storage industry and Samsung Electronics, saying that tight memory supply-demand balance, strong server and enterprise SSD demand, NAND prices above expectations, and potential upside to EPS revisions will continue to support share performance.

Core views

The core view is that in 2H26 Samsung Electronics' earnings structure will remain led by memory, and momentum between storage and non-storage businesses will continue to diverge. Memory supply fulfillment remains extremely low, and the pricing environment is favorable to suppliers. NAND may continue to outperform expectations as hyperscale cloud providers in the U.S. buy eSSD for KV cache offloading. The report also says investors will pay greater attention to whether the profit cycle is sustainable, LTA coverage and pricing mechanics, AI infrastructure capex, and whether Samsung Foundry can improve utilization and achieve sustained turnaround through new AI chip customer orders.

Analysis framework

The report primarily uses a framework of earnings preview versus market expectation comparison, memory supply-demand and pricing trend assessment, business-line operating momentum decomposition, valuation multiple comparison, and key-catalyst tracking. Key analytic focuses include preliminary 2Q26 operating profit, DRAM and NAND ASP changes, memory customer procurement fulfillment, Foundry new orders, LTA negotiations, AI ecosystem financing and CSP capex, as well as 2024A-2026E and 2027-2029 shareholder return updates.

Methodology notes

• valuation frameworkmid-cycle P/E valuation

  The target price is based on 8x FY26E-27E P/E.

  The Dec-26 target price of W480,000 is based on a mid-cycle P/E framework, using 8x FY26E-27E P/E, and is compared with 6x down-cycle and 10x up-cycle valuation levels.

• industry supply-demand frameworkmemory S-D analysis

  Tighter supply and upward demand revisions are driving price increases.

  The report uses CPU competition for LPDDR supply, strong enterprise SSD orders, accelerating server demand, and memory procurement fulfillment of only about 50%-60% as key evidence for pricing being supplier-favorable.

• catalyst tracking framework2H26 key event monitoring

  AI capex, LTA, technology roadmap, and shareholder returns

  The report highlights monitoring CSP disclosures on AI service business models and hardware capex, AI ecosystem financing progress, storage LTA coverage and pricing terms, KV cache offloading-related storage tiering, and Samsung Electronics shareholder return updates.

Asset mapping & comparison

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

• Samsung Electronics (005930.KS)

  Core covered name

  Strengths

  Rising storage prices, NAND outperforming expectations, low valuation, strong AI server and enterprise SSD demand, and potential EPS upside revisions.

  Weaknesses

  Insufficient evidence of restored HBM moat, weaker non-storage momentum, MX margin pressure, and rising fixed-cost burden in Foundry/LSI.

  Comparison

  The report says the current roughly 5.2x FTM P/E is among the lower levels for global storage stocks, and that the market has not yet fully priced structural supply-demand changes.

  Risks

  A longer-than-expected storage price downturn, HBM demand weaker than expected, delayed qualification of the next HBM generation, and slower-than-expected growth in mobile device shipments.

• Memory business

  Main earnings driver

  Strengths

  Low supply fulfillment, favorable pricing environment, strong NAND and enterprise SSD demand, and accelerating storage consumption trend driven by servers.

  Weaknesses

  2H26 sequential price momentum could slow due to high base effects, and customers may show stronger pushback because of BOM cost pressure.

  Comparison

  NAND pricing is outperforming J.P. Morgan's prior expectation, while DRAM is below the high-50% sequential growth estimate due to mix effects.

  Risks

  Changes in customer procurement strategy, pricing negotiation pressure, and declining allocations to consumer electronics customers.

• Foundry/LSI business

  Potential recovery source, but needs order validation

  Strengths

  Potential AI chip customers include Google, Anthropic, Meta, AMD, and BYD, with additional order clues tied to Tesla AI5/AI6 and Apple CIS-related cooperation.

  Weaknesses

  The one-off labor cost provision may further widen losses, and fixed costs are under higher pressure than in the past.

  Comparison

  Given tight advanced-node and advanced packaging capacity at TSMC, Samsung Foundry could lift utilization if it secures new customers.

  Risks

  New orders may fail to materialize, Taylor fab expansion needs may create capex pressure, and a clear Foundry capex roadmap is lacking.

Key data

• Preliminary 2Q26 operating profitW89.4trnAbove the recently revised market expectation range of W75trn-W84trn.
• Labor cost provisionOver W15trnCovers both 1H26 quarters and is an important one-off factor in interpreting 2Q26 earnings.
• Current share priceW299,000Price date is 07Jul26.
• Target priceW480,000Dec-26 target price with Overweight rating.
• Implied upsideabout 60.5%Calculated from a W480,000 target and current W299,000 price.
• Current valuationabout 5.2x FTM P/EThe report describes it as one of the cheapest storage stocks globally.
• Consolidated NAND ASP trendSequential increase above 70%Higher than J.P. Morgan's previous +53% sequential expectation.
• DRAM ASP trendBelow the high-50% sequential growth expectationPrimarily affected by product mix.
• Historical target update17-May-26 target price W480,000The historical table shows J.P. Morgan maintaining an OW rating and raising its target price to W480,000.
• Potential shareholder return poolover W110trnJ.P. Morgan estimate of total 2026E shareholder returns.

Impact & implications

If the report's thesis proves right, Samsung Electronics' investment narrative would shift from a short-term earnings beat to the sustainability of the storage upcycle, structural supply-demand improvement, and mid-term valuation normalization. For the stock, continued storage price strength, LTA progress, AI server-related demand, and Foundry order execution could push EPS to further revisions and support valuation normalization. However, losses in non-storage businesses, insufficient evidence of restored HBM technology leadership, and customer pushback due to rising BOM costs could limit further valuation expansion.

Risks

• Storage price correction cycle extends for longer.
• HBM demand from ASIC customers in FY25-26E is weaker than expected.
• Delay in qualification of next-generation HBM products.
• Mobile device shipment growth is slower than expected.
• Customers show stronger pushback on storage price increases due to BOM cost pressure.
• Foundry/LSI fixed cost burden rises and new orders are insufficient, affecting sustainable turnaround.
• If evidence of restored technology leadership is absent, investor confidence in Samsung Electronics' long-term competitiveness may not fully recover.

What to watch

• Full earnings details disclosed by the company on the morning of July 30 (Asia).
• Storage price trend in 2H26, especially whether NAND and enterprise SSD prices continue to beat expectations.
• Updates from CSPs on AI service commercial model, hardware capex, and AI ecosystem financing.
• Progress on storage LTAs, including coverage, volumes, pricing protections, price floors and ceilings, and target margins.
• Impact of KV cache offloading, storage tiering, and software stack optimization on storage spend.
• Whether Samsung Foundry secures new AI chip customer orders, and whether Taylor fab requires additional capacity expansion.
• Updates to 2024A-2026E shareholder returns, and whether 2027-2029 shareholder return policy is more aggressive.