On July 7, JPMorgan (JPM) issued a research report stating that Samsung Electronics (005930.KS) disclosed strong preliminary results for the second quarter of 2026, with core profit metrics easily beating market expectations that had been lowered earlier. Despite a one-time provision of more than 15 trillion won in massive labor cost reserves in the first half of the year, the company demonstrated exceptional earnings resilience, driven by surging memory chip prices and the depreciation of the Korean won. JPMorgan reiterated its “Overweight” rating on the stock and set a target price of 480,000 won for December 2026.
Samsung Electronics’ preliminary earnings guidance released on the same day showed second-quarter sales of 171 trillion won (approximately $112.34 billion), a year-on-year increase of 129%; operating profit reached 89.4 trillion won (approximately $58.8 billion), a staggering 1,810% surge year-on-year, far exceeding the average analyst estimate of 84.2 trillion won. This figure even surpassed Nvidia’s operating profit in the previous quarter, making Samsung the world’s most profitable semiconductor company on a quarterly basis. However, this “explosive” earnings report drew a cold shoulder from the capital markets. On the day of the earnings release, Samsung’s stock opened with a sharp decline, plunging as much as 10% during trading, dragging SK Hynix down by over 6%, and sending South Korea’s KOSPI index tumbling nearly 6%, triggering a circuit breaker. The market interpreted the violent volatility as a classic “buy the rumor, sell the fact” scenario.
Behind the market’s lackluster response lie three major concerns. First, the positive news had already been fully priced in. Samsung’s stock price has skyrocketed more than fivefold since its low in July 2025, with the market having long priced in “beating expectations.” Analysts pointed out that when the data merely meets expectations, it instead becomes a trigger for profit-taking. Second, the foundry business is seeing widening losses. Beneath the luster of the memory business, the wafer foundry and logic chip divisions are likely to see further losses this quarter, pressured by bonus provisions and cost headwinds. Although the division achieved its first monthly profit in three years in June, with significant improvement in 4nm yield rates, a full turnaround still requires more time. Third, the sustainability of AI capital expenditures is coming into question. As some tech giants hint at possibly setting caps on AI investments, the market has begun to worry about a cyclical turning point in the semiconductor industry’s boom, with investors shifting their focus from current performance to the durability of future demand.
In the face of market anxieties, JPMorgan found reasons to maintain its bullish stance from the financial data. The report noted that operating margin rose from 42.8% in the first quarter to 52.3% in the second quarter, with memory chip price hikes serving as the core driver—NAND flash average selling prices surged by as much as 70%. Despite pressure on the foundry division, AI chip substrates have entered full production, and the company is in order negotiations with multiple major players. JPMorgan believes that Samsung’s current forward price-to-earnings ratio stands at only 5.2 times, making it the most undervalued premium memory asset globally, and that the stock price pullback actually offers a positioning opportunity for long-term investors. Going forward, the finalization of long-term supply agreements and updates to shareholder return policies are expected to serve as potential catalysts for the stock price. Samsung Electronics is scheduled to release its full earnings report on July 30, at which point the market will further calibrate its outlook on the trajectory of the AI cycle.
