Samsung Electronics' third-quarter results significantly exceeded expectations, with a strong recovery in its memory chip business serving as the core driver, as Citigroup maintained its Buy rating and expressed optimism about the company's medium-to-long-term outlook.
Samsung Electronics announced preliminary operating profit of 107.4 trillion Korean won for the third quarter of 2026, representing a 20% increase quarter-on-quarter and a massive 782% surge year-on-year. According to Citigroup analysts Peter Lee and Jayden Oh in a research report, this performance surpassed market expectations, as robust memory chip earnings were sufficient to offset the negative impact of unfavorable currency factors and approximately 10 trillion won in additional bonus expenses during the quarter.
Citigroup maintained its Buy rating on Samsung Electronics Co., Ltd. with a 12-month target price of 430,000 Korean won, implying approximately 60% upside from the October 7 closing price of 268,500 Korean won. Combined with an expected dividend yield of 3.7%, the anticipated total return reaches 63.8%.
Semiconductor Business Carries the Load as Other Divisions Diverge
Citigroup expects Samsung Electronics Co., Ltd.'s third-quarter operating profit distribution across business divisions to be highly concentrated in the semiconductor segment. The semiconductor division's operating profit is projected to reach 107.0 trillion Korean won, a significant improvement from 89.2 trillion Korean won in the second quarter, making it the absolute pillar of overall performance.
Other divisions showed marked divergence. The display panel division is expected to record 1.1 trillion Korean won in operating profit, while the Harman division contributed approximately 0.5 trillion Korean won. Both the mobile business and consumer electronics divisions each recorded operating losses of approximately 0.6 trillion Korean won.
Notably, the mobile business loss narrowed slightly compared to the previous quarter, but third-quarter smartphone shipments declined 9% quarter-on-quarter to 58 million units, with weak sales of mid-to-low-end products partially offsetting improved sales of high-end products.
Three Key Focus Areas for the Q3 Earnings Call
Citigroup noted that Samsung Electronics Co., Ltd. will hold its third-quarter earnings briefing on October 29, at which the market will focus on three major topics.
The first is the latest assessment of global memory chip supply and demand prospects for 2027; the second is the progress of long-term supply agreements (LTAs) for memory chips; and the third is further details on the company's shareholder return policy. This information will have a direct impact on how the market evaluates Samsung Electronics Co., Ltd.'s future earnings trajectory and capital allocation direction.
HBM4 Ramp-Up Imminent, 2027 Earnings Elasticity in Sight
Looking ahead to 2027, Citigroup believes Samsung Electronics Co., Ltd. possesses significant structural advantages in the AI-driven wave of memory demand. With its leading capacity in DRAM and NAND, Samsung Electronics Co., Ltd. is expected to continue benefiting from growing demand for server DRAM and enterprise solid-state drives (eSSDs).
Regarding high-bandwidth memory (HBM) pricing, Citigroup expects the average price per GB for HBM4 12hi to climb substantially from approximately $2 in 2026 to the $4 to $5 range in 2027, representing a year-on-year increase of 100% to 150%; HBM4 8hi pricing is expected to command a 20% to 30% premium over 12hi. Citigroup believes this pricing trend will bring Samsung Electronics Co., Ltd. substantial average selling price (ASP) improvement and margin expansion potential.