Samsung Reports Significant Profit Decline for Q2 2025

Intermediate | July 15, 2025

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Samsung’s Latest Earnings Announcement

Samsung Electronics, a global technology giant, recently announced its preliminary operating profit for the second quarter of 2025. Contrary to some expectations of record growth, the company projected a significant decline, marking its weakest quarterly profit in six quarters. This news has certainly caught the attention of the global market.

A Sharp Drop in Profit

The preliminary operating profit is estimated to be around 4.6 trillion Korean won, which is approximately \$3.3 billion to \$3.5 billion USD. This figure represents a sharp 56% drop compared to the same period last year and falls far short of analysts’ predictions, which were much higher, between 6.2 and 6.7 trillion won.

Stable Sales Amid Profit Decline

Interestingly, despite this steep fall in profit, Samsung’s consolidated sales remained quite stable, showing only a slight 0.1% decrease year-over-year, reaching about 74 trillion Korean won.

Why Did Samsung’s Profits Fall?

Export Restrictions and AI Chip Inventory

Several factors contributed to this underperformance. One major reason is the U.S. export restrictions on AI chips to China. These restrictions directly impacted Samsung’s Device Solutions (DS) Division, leading to challenges like inventory adjustments for unsold AI chips and delays in shipments.

Delays in Certification

Another significant issue was the delays in getting certifications for its next-generation High Bandwidth Memory (HBM) chips. Samsung’s HBM3E 12-layer chips, essential for AI applications, have yet to be approved by key clients like NVIDIA, giving competitors such as SK Hynix and Micron an advantage in the AI supply chain.

Operational and Foundry Challenges

Furthermore, Samsung faced one-off costs due to inventory write-downs, which means reducing the value of products that are not selling well or have become less valuable. The company also experienced continued low utilization rates in its non-memory business, particularly in its foundry division, which manufactures chips for other companies. These operational challenges added to the financial pressure.

Looking Ahead: Challenges and Opportunities

Signs of Optimism for H2 2025

This profit decline marks the first time Samsung has seen a drop in profit in two years, and it’s also its lowest second-quarter profit in two years. This situation highlights the difficulties Samsung is facing in fully capitalizing on the rapidly growing demand for AI chips, an area where other companies are quickly expanding.

Path to Recovery and Growth Areas

Despite the current challenges, Samsung has an optimistic outlook for the second half of the year. The company expects the operating losses in its non-memory business to decrease and anticipates a gradual recovery in overall demand. This recovery might be driven by better utilization rates and potential new HBM sales to customers beyond Nvidia.

Product Launches and Tariff Concerns

Additionally, Samsung plans to launch new foldable phones, the Galaxy Z Fold and Z Flip 7, later in the year. However, potential new U.S. tariffs on smartphones and semiconductor equipment could add more uncertainty to Samsung’s future performance. Full Q2 2025 results are expected later in July.

Vocabulary

Projected (verb): Estimated or forecast for the future.
- Example: “The company projected a 10% increase in sales next quarter.”
Decline (noun): A decrease in something, especially numbers or quality.
- Example: “There has been a steady decline in the number of new students.”
Operating Profit (noun): The profit a company makes from its normal business operations, before taxes and interest.
- Example: “Despite high sales, the operating profit was lower due to increased costs.”
Plunge (noun): A sudden and dramatic fall or drop.
- Example: “The stock market took a sudden plunge yesterday.”
Consolidated Sales (noun): The total sales figures for a parent company and all its subsidiaries, combined.
- Example: “The annual report showed strong consolidated sales across all divisions.”
Underperformance (noun): The act of performing less well than expected or required.
- Example: “The team’s underperformance led to changes in management.”
Restrictions (noun): Official limits or controls on something.
- Example: “New travel restrictions were announced due to the pandemic.”
Certification (noun): Official approval stating that something has met certain standards.
- Example: “The product received its safety certification last week.”
Utilization Rates (noun): A measure of how much a company’s production capacity is being used.
- Example: “Low utilization rates in the factory mean that machines are idle.”
Tariffs (noun): Taxes imposed by a government on imported or exported goods.
- Example: “The new tariffs on steel imports caused prices to rise.”

Discussion Questions (About the Article)

What was Samsung’s estimated operating profit for Q2 2025, and how much did it drop compared to last year?
Despite the profit decline, what happened to Samsung’s consolidated sales?
Name two major reasons mentioned in the article for Samsung’s underperformance in Q2 2025.
Which key client has not yet approved Samsung’s HBM3E 12-layer chips?
What positive changes does Samsung anticipate for the latter half of the year?

Discussion Questions (About the Topic)

How do you think global economic events, like trade restrictions, can affect large technology companies?
Why do you think it’s important for companies to diversify their client base, not relying too heavily on one customer like NVIDIA?
What are some ways a company can recover from a significant profit decline?
How might delays in new product certification impact a company’s ability to compete in fast-growing markets like AI?
What are your thoughts on the potential impact of new government tariffs on international businesses?

Related Idiom

Fall short

Meaning: To fail to reach an expected or desired standard or level.
Example: “The company’s earnings fell short of analysts’ expectations this quarter.”

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This article was inspired by: Reuters | July 8, 2025| July 8, 2025