Samsung Electronics Co. Ltd. says its operating profit is likely to increase almost 15-fold during the second quarter from the same period a year ago, the jump thanks to the growing demand from enterprises for memory chips essential for artificial intelligence workloads, analysts believe.

The world’s biggest memory chip maker and leading smartphone and TV manufacturer said in its preliminary second-quarter earnings report late today that it’s expecting to deliver a profit of 10.4 trillion won ($7.55 billion) over the period. That’s even better than expected, as analysts had forecast the company to deliver a profit of 8.8 trillion won.

That number represents Samsung’s biggest profit since the third quarter of 2022, when it was still reaping the rewards of the COVID-19 pandemic-inspired global semiconductor shortage. One year earlier, Samsung recorded an operating profit of just 670 billion won.

The company added that its consolidated sales for the second quarter are expected to come to 74 trillion won, up from 60.4 trillion won one year earlier.

Analysts say the company’s growing profitability is thanks to a significant uptick in the global semiconductor market. Samsung is the world’s foremost supplier of dynamic random-access memory or DRAM chips, which sit at the heart of personal computers, servers and smartphones.

Its semiconductor business is by far the largest and most profitable, and regularly accounts for the bulk of the company’s revenue and profit. As such, its fortunes tend to rise and fall based on demand for memory chips.

Luckily for Samsung, enterprises currently have an insatiable thirst for DRAM, in particular the more advanced high-bandwidth or HBM memory chips that are viewed as essential for AI. The HBM chips are generally used alongside powerful graphics processing units or other AI accelerators to power the most demanding large language models, such as OpenAI’s GTP-4o and Google LLC’s Gemini.

Samsung didn’t provide any numbers regarding its chip business, and will hold off on providing a more detailed account until its full earnings report later this month. However, analysts have estimated that the chip business will deliver a profit of about 4.6 trillion won, compared to a loss of 4.36 trillion won in the same period last year. Given that Samsung’s bottom line profit crushed analysts’ forecasts, it’s likely that the semiconductor businesses’ profit is much higher than that estimate.

With companies like Google, Amazon Web Services Inc., Microsoft Corp., Meta Platforms Inc. and other big data center operators all scrambling to buy up as many memory chips as they can, prices have gone up significantly. According to TrendForce, DRAM prices have risen by between 13% and 18% since the prior quarter, while the cost of NAND flash chips, which is another type of memory, are up 15% to 20%.

Samsung’s results were mirrored by one of its biggest rivals in the memory chip industry, Micron Technologies Inc., which last month reported a 44% jump in revenue due to rising chip prices.

However, Samsung officials are likely to be concerned about the mobile business unit, which is responsible for smartphone sales. Analysts say its profit is likely to shrink compared to the previous year. They’re forecasting an operating profit of just 2.2 trillion won, down from a 3.04 trillion won profit 12 months ago.

The lower profit is said to be the result of the rising cost of smartphone components, plus higher marketing and development costs related to the new AI features in Samsung’s flagship handsets. Unit sales are expected to remain flat compared to the year-ago period.

Looking ahead, Samsung will be hopeful of an uptick in smartphone sales in the coming months, as it has scheduled a special media event that will take place in Paris on July 10. It’s believed it will use the event to unveil its latest flagship handset and other devices, including a smart ring that provides health monitoring.

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