Record profits fail to impress Samsung investors

Even quarterly operating profit exceeding 100 trillion won ($74.65 billion) wasn't enough to impress investors in Samsung Electronics, whose shares have fallen about 30 percent from their June 19 peak.

On Thursday, the Korean chipmaker estimated third-quarter operating profit at 107.4 trillion won, an increase of 782.5 percent from a year earlier and its fourth consecutive quarter of record earnings. No company, not even tech giants like Apple or Nvidia, has ever surpassed 100 trillion won in quarterly operating profit.

Yet the blockbuster results did little to dispel investor skepticism over the sustainability of its earnings growth.

On Thursday, Samsung shares closed at 262,000 won, down 2.42 percent from the previous session. Foreign and institutional investors sold a net 348.5 billion won and 647.7 billion won worth of shares, respectively, while retail investors bought a net 959.7 billion won.

Foreign investors, in particular, have been net sellers for eight consecutive sessions since Sept. 28.

Nick Puckrin, cross-asset analyst and founder of Coin Bureau, said the preliminary results left a crucial question unanswered: How much longer can the memory chip boom last?

While demand for artificial intelligence (AI) chips remains insatiable and supply shortages are amplifying the rally, memory has historically been a highly cyclical business, Puckrin said. Investors remain skeptical that AI has fundamentally changed that dynamic, particularly as chipmakers race to expand production capacity.

"I don't think we're about to see a collapse, but the insane returns investors have enjoyed so far are likely a thing of the past," Puckrin said. "The audience will prove much more difficult to please than in the past."

Despite the recent sell-off, Samsung shares have surged about 296 percent since last September.

Some analysts argue that fears of another memory chip downturn are premature.

Sanjeev Rana, head of North Asia semiconductor research at CLSA, said he expects the earnings momentum to prove sustainable, arguing that the current memory upcycle could last longer than previous booms.

"This memory upcycle is bigger than all the previous cycles and will last longer as it will take time for the supply to catch up with demand," Rana said. "Memory has now become the most critical and strategic layer in the entire AI stack."

Larger shareholder returns could provide another catalyst for Samsung shares, with surging profits giving the company greater financial flexibility, according to analysts.

The company currently has a policy of returning 50 percent of its free cash flow generated between 2024 and 2026 to shareholders.

Douglas Kim of Douglas Research Advisory said investors were disappointed by Samsung's early announcement of "just" 30 trillion won in dividends and 15 trillion won in share buybacks intended for employee compensation.

"Samsung Electronics should allocate a much greater percentage of the shareholder returns for buybacks and cancellations — especially for its preferred shares — rather than dividends," Kim said.

The benchmark KOSPI closed at 6,625.93, down 2.62 percent from the previous session. The Kosdaq also extended its decline, falling 0.69 percent to close at 892.27.