Samsung Electronics just reported an incredible operating profit for the first quarter of fiscal 2026 that surged a much-stronger-than-expected 755% year-over-year. Even so, the company felt compelled to warn investors that the conflict in the Middle East is clouding the view of the future.
See more on Samsung’s spectacular Q1/2026 numbers…
A few weeks ago, Samsung put out a notice to investors that it was looking as though earnings to be reported for Q1 of 2026 were likely to be significantly ahead of previously announced expectations. It was a notice that attempted to be professional…and carefully worded with discretion. As you might suspect, investors took notice and got very excited.
However, the actual results that were announced this week in a report by the Nikkei were, to put it mildly, blockbuster. Like many companies, Samsung’s key financial milestone is operating profits (sometimes known as “profit from operations”). A short time after circulating its warning, Samsung reported the Q1 results…and jaws still dropped.
A Jaw-Dropping Performance
The report this week – a preliminary report, subject to some adjustment – revealed that the company booked an operating profit for the quarter of 57.2 trillion won (the equivalent of US$37.8 billion). Operating profits in Q1 of Fiscal 2025 were 6.7 trillion won…meaning that the result this year was a massive nearly+755% difference. Preliminary revenues were reported to be 133 trillion won, a 68% increase over the same quarter in Fiscal 2025.
Here’s the thing…Samsung has preliminarily booked a Q1/2026 operating profit that exceeds the entire annual operating profit of 43.6 trillion won in Fiscal 2025! These are huge numbers that exceeded the company’s previous forecast and the analyst consensus forecast, which were all adjusted after the company’s warning that things were going better than expected.
AI Chips – A Trend that Started in Q4 of 2025 and Just Kept Picking Up Speed
On a sequential quarter-over-quarter basis, Samsung booked an operating profit increase of 185% and a revenue increase of 41.7% over Q4 of 2025. This is important because the trend actually began in the previous quarter…and that ball kept rolling downhill, picking up speed.
Interestingly, the company did not provide a divisional breakout of results details, as is its normal practice. I’m not sure why it felt it needed a little subterfuge here, as it is well understood that the company’s memory chip division is the reason for the explosive growth.
The World’s Largest Memory Chip Manufacturer
Samsung is the world’s largest memory chip manufacturer, and as pretty much everyone knows, global demand has surged for memory chips as big tech rushes to build data centers to train their AI-based LLMs. With demand soaring, supply is getting crunched, which is dramatically driving up prices (and profits) for chip companies.
The intense competition between AI makers is driving them into a panic, desperate to lock up a supply of chips. Reports are that these customers are coming to the chip manufacturers like Samsung and offering huge premiums to lock up supply contracts. Samsung is said to be closing locked-up contracts that run anywhere from three to five years into the future. Before now, supply contracts were quarterly or, at most, one year.
Analyst: ‘Price Momentum to Persist for Quarters to Come’
Big tech AI makers need a very special high-bandwidth memory (HBM) chip, which is essential to help AI processors work in servers and other devices. Samsung is one of just a handful of companies in the world that manufacture HBM chips.
We expect positive memory price momentum to persist for quarters to come. More important is how LTAs (long-term agreements) will pan out and in what terms and conditions. Seismic change is looming in memory pricing and earnings visibility.
Daniel Kim, Senior Analyst at Macquarie to Nikkei Asia
One Very Large, Very Dark Cloud is Concealing the Future
However, there is one dark cloud darkening the skies above Samsung and South Korea. The company noted that the conflict in the Middle East, now paused for two weeks, is causing them great concern. This kind of massive geopolitical risk is pushing up oil prices, driving inflation higher, and could result in a drop in overall demand.
Not only that, but the steady supply of oil is threatened by Iran’s control of the Strait of Hormuz. It takes a lot of energy to keep chip factories like Samsung’s running. But even beyond Samsung, the entire country of South Korea is a major energy importer.
This added risk has kept Samsung’s shares quite volatile, despite its great fundamental business improvement. Investors are nervous…
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