Bernstein: Samsung Electronics: HBM4 ramps up rapidly, fourth-quarter memory shipment guidance beats expectations

Where did third-quarter growth come from, and why didn’t profits beat expectations across the board?

Samsung’s third-quarter revenue was 195.3 trillion South Korean won, up 13.9% quarter over quarter, above Bernstein’s forecast of 188.5 trillion South Korean won but slightly below the market consensus of 196.8 trillion South Korean won. Operating profit was 107.4 trillion South Korean won, up 20% quarter over quarter and broadly in line with consensus.
Higher memory prices supported growth: DRAM average selling prices rose about 20% quarter over quarter, slightly above Bernstein’s forecast; NAND rose by a high-teens percentage, slightly underperforming peers. The device solutions division’s operating margin rose 2.4 percentage points quarter over quarter to 72.4%, while margins in consumer electronics-related businesses were affected by rising component costs.
Net profit was 75.2 trillion South Korean won, 10% below market consensus; Bernstein believes foreign exchange losses may have been a factor. Group gross margin was 69.3%, also below the consensus of 71.1%.

Samsung guided for quarter-over-quarter DRAM bit shipment growth in the mid-to-high teens and NAND growth in the mid-teens in the fourth quarter, both well above Bernstein’s prior forecasts of 4.1% and 6.5%, respectively. Third-quarter bit shipment growth for both was broadly in line with the firm’s expectations.
Bernstein believes the strong fourth-quarter shipment guidance from Samsung and SK Hynix may be driven by the ramp-up of HBM4 and SOCAMM2. Faster shipment growth means the growth momentum is not coming solely from the earlier rise in memory prices.

Third-quarter HBM4 revenue tripled from its previous level, accounting for 60% of Samsung’s total HBM revenue. Bernstein concludes that Samsung’s HBM market share is now comparable to its overall DRAM share and may exceed SK Hynix’s; Samsung said its HBM supply for 2027 is sold out.
Samsung plans to mass-produce HBM4E in the first half of 2027 and ramp it up further in the second half. The company also expects the memory shortage to last until 2028; Bernstein believes AI demand will far exceed supply and worsen the shortage in 2027.
Samsung expects capital expenditure to increase significantly next year, but more funds will go to infrastructure, so supply bit growth will not rise in proportion to spending. The company wants 60%–70% of its medium- and long-term capacity covered by long-term agreements that can roll forward and be extended annually.

There was no update to the shareholder return policy, which Bernstein believes may disappoint. Samsung’s total return plan for this year remains 90 trillion to 110 trillion South Korean won; of the remaining 55 trillion to 75 trillion South Korean won, 30 trillion South Korean won will be paid as a dividend in the third quarter. The remaining arrangements and a new policy for the next three years will be decided at a board meeting in late January 2027.
Bernstein maintained its Outperform rating on Samsung Electronics and its 440 thousand South Korean won target price for the common shares, favoring its conventional memory exposure and improving HBM position. The target price applies a multiple of 6.5 to forecast earnings per share for the 5th through 8th quarters ahead; the firm noted that an earlier end to the favorable pricing environment due to weaker demand or increased supply would affect this assessment.