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Beginning of a structural shift

Earnings set to accelerate sharply

Samsung Electronics (SEC) is set to release preliminary 1Q26 results on Apr. 7. We estimate revenue at W124tr (+32.2% QoQ) and operating profit at W41.3tr (+105.9% QoQ), with the latter exceeding the consensus of W37tr. By division, we estimate operating profit at W37.2tr for DS (OP margin: 55.3%), W3.5tr for DX (OP margin: 6.3%), W0.2tr for Samsung Display, and W0.3tr for Harman.

For memory, we estimate DRAM and NAND bit growth at +4% and +8%, respectively, and blended ASP growth at +55% and +53% QoQ, respectively. Despite generally limited shipment growth, sharp price gains likely drove margins higher; we estimate OP margin at 67% for DRAM and 52% for NAND. For foundry/LSI, we anticipate an operating loss of W1tr, as utilization has yet to increase meaningfully despite increased order intake.

We expect operating profit to continue rising, reaching W56.8tr (+37.4% QoQ) in 2Q26 and W251tr (+475.7% YoY) for the full year. The stock is currently trading at a 12-month forward P/B of only 1.8x. Considering the likely narrowing of the stock’s valuation discount as foundry orders expand, along with its attractive dividend yield of around 5% (2026F DPS: W8,610), we view the current level as an attractive entry point.

Structural shift beginning

At the 2026 International Solid-State Circuits Conference (ISSCC) in February, SEC disclosed its HBM4 specifications. The chip delivers a maximum per-pin speed (a key performance metric in next-generation HBM) of 13Gbps, and it incorporates test circuitry via fully programmable memory built-in self-test (MBIST) technology, enhancing reliability for end-customers. These advancements were enabled by the adoption of a base die built on a 4nm FinFET process, signaling the beginning of meaningful synergies between the memory and foundry businesses.

In addition, at GTC 2026, SEC’s foundry was officially announced as the production partner for the new Groq 3 LPU, with shipments scheduled to begin in 3Q26. This marks SEC’s second major foundry order win from a big tech firm, following last year’s AI6 chip order from Tesla (W23tr). SEC’s full-stack model combining advanced-node foundry operations and memory is structurally difficult for competitors to replicate.

It is also worth noting that the company unveiled a prototype of its next-generation 4F2 DRAM at ISSCC 2026, demonstrating the architecture using wafer-to-wafer (W2W) hybrid copper bonding (HCB). We believe this highlights SEC’s position as a full-stack player spanning the entire memory hierarchy as well as advanced packaging, and we expect this structural differentiation to be increasingly reflected in its valuation.