Samsung Elect Ltd

Hello everyone, and welcome to the Samsung Electronics 2026 Third Quarter Financial Results Conference Call. I will be your coordinator. All participants will be in a listen-only mode until we open the question and answer session following the presentation. As a reminder, this call is being recorded. I would now like to turn the conference over to the Investor Relations team. Please go ahead.

Welcome everyone. I would like to thank our shareholders and analysts. Thank you for joining us from all over the world for our third quarter 2026 earnings call. I'm Daniel Oh, head of investor relations, and it is a great pleasure to have you all with me today. Please be advised that all materials from today's call, including the presentation slides, will remain accessible on our IR website. Also, please be aware that today's remarks may contain bold-looking statements that could differ from actual results. For the full legal disclaimer, please refer to the presentation slide. For our agenda today, I will start with our third quarter financial performance and an update on capital expenditures, followed by our CFO Soon-Cheol Park, who will discuss our outlook and share the returns. The executive officers from our different businesses will then share their respective results and outlook. We'll end the presentation with a Q&A session, and we anticipate the call will last about an hour. The executive officers with us today are EVP Soon-Cheol Park, our CFO, EVP Jae-Joon Kim from Memory, EVP Jason Shin for System LSI, EVP Seok-Jae Kang from Foundry, EVP Charles Hur with Samsung Display, VP Daniel Arauo representing MX and VP Won Woo-Kin for visual display. Now let's begin with our financial results for the third quarter. Driven by record results in the memory business, Samsung Electronics reached new highs in both revenue and operating profit for the fourth consecutive quarter, delivering total revenue of 195.3 trillion won and operating profit of 107.4 trillion won, both substantial increases of 14% and 20% respectively. As a result, we became the first global tech company to post a quarterly operating profit of over 100 trillion won. Also, our operating margin improved to 55%, up from 52% in prior quarter. R&D expenses totaled 14.4 trillion won as we continued to actively invest in future growth. Net profit rose 5% sequentially to 75.1 trillion won and earnings per share reached new heights of 11,462 won for common shares and 11,492 won for preferred shares, both up 6% from the previous quarter. In the DS division, memory set another quarterly record while expanding HBM4 sales and meeting strong server demand. System LSI faced headwinds from weak mobile demand while Foundry continued its earnings recovery supported by growing sales from advanced nodes. In the DX division, the MX business recorded year-on-year revenue growth Thank you for your attention. The executive officers with us today will discuss their results in more detail shortly. Moving on to capital expenditures. CapEx in the third quarter was 29 trillion won, an increase of 12.2 trillion won quarter-on-quarter, and 19.8 trillion won year-on-year. Of this total, 27.2 trillion won was invested in the DS Division, while 1.1 trillion won was invested in display business. Over the first nine months of this year, CapEx totaled 56.9 trillion won, up 24.7 trillion won year-on-year, of which 52.8 trillion won was allocated to the S Division and 2.4 trillion won to the display business. For the full year of 2026, We expect total capex to reach 84.4 trillion won or 31.7 trillion won increase from last year. Of this amount, capex is projected to rise by 29.3 trillion won to 76.8 trillion won for the display DS division and by 1.1 trillion won to 3.9 trillion won for the display business. My business, in memory, full-year capex is expected to increase sequentially as we invest in new FAPs and other infrastructure to meet strong AI demand and ensure readiness for the mid- to long-term, consistent with our approach of aligning investment with customer demand. In the foundry business, we also expect annual capex to increase, focused mainly on our tail-off FAP In the display business, full-year capex is expected to increase, reflecting upgrades to existing production lines. Now I will hand the call to our CFO Soon-Cheol Park, who will discuss our outlook for the fourth quarter and 2,027 as well as shareholder returns.

Thank you, Damir. Good morning and thank you for joining our third quarter 2026 earnings call. I am Soon-Cheol Park, CFO of Samsung Electronics. Despite the rapidly shifting global market conditions, Samsung once again delivered record quarterly results backed by our differentiated technologies and nimble response to market changes. We also reached a historic milestone, becoming the first-ever global tech company to exceed $100 trillion won in quarterly operating profit. This achievement demonstrate both the strengths of our technologies and the ability to sustain growth. Our efforts remain fully focused on developing next-generation technologies and further advancing our leadership in the global market. Turning to the outlook for the first quarter and 2027. In the first quarter, We expect to continue delivering company-wide earnings growth supported by strong performance in the DS Division. However, the DX Division is expected to face ongoing pressure from macroeconomic uncertainty and rising component costs. Starting with the DS Division, We expect robust semiconductor market demand to continue, driven by the rapid spread of agentic AI. In memory, we'll solidify our market leadership by expanding sales of HBM4, high-performance DDR5, QLH SSDs, and server SSDs. based on our industry-leading products and unmatched scale. In system LSI, we will advance our flagship associates and also shift our revenue mix toward higher-resolution products by increasing sales of 200-megapixel image sensors. In foundry, We aim to accelerate earnings growth through the scaling of mass production at our advanced 2M4 nanonodes while we continue to build new orders for 2-nano products. In the display business, while demand uncertainty is expected to persist due to rising memory prices and other factors, will meet demand for premium products through our industry-leading mass production. In the DX division, our priority is overcoming profitability challenges by expanding premium product sales during the year-end peak season and improving operational efficiency. We'll drive sales of our key products by offering distinct AI user experiences and a broad range of sales support programs while improving our sales mix by targeting premium demand. In addition, by quickly adjusting our sales and channel operations in response to market trends and cost pressures, We will improve our cost structure and drive greater efficiency across the entire value chain. Next, let me turn to our outlook for 2027. In 2027, we expect the semiconductor market to remain strong, supported by historic AI investment and Supply Constraints. Driven by strong growth momentum in the DS Division, we are positioned to exceed our 2026 performance and achieve another year of record results. Meanwhile, the DX Division is expected to face continued profitability pressure from rising component costs and other business environment factors. In the DS division, memory demand will far exceed supply due to robust AI investment, while growth in foundry is expected to accelerate. In memory, as AI infrastructure investment continues to grow, will lead the HBM market by expanding HBM4 sales, followed by mass-producing HBM4 Eco, while also driving sales of high-value products such as high-performance DDR5, high-capacity QLC, and ESSDs. With these efforts, will bolster our market leadership through our superior technologies. In systems, LSI will secure new customers for custom SOCs and expand sensor applications beyond mobile devices. In foundry, growth will be driven by the ramp of mass production at our Taylor Fab In the display business, we'll utilize our technologies to expand sales of premium products, including foldables, and solidify our market leadership by growing our IT OLED business based on our Gen In the DX division, innovations in AI product experiences and a stronger profitability structure will bolster the foundation for future growth. We'll expand agentic AI experiences across spaces and devices in everyday life and the combination of our hardware innovation and enhanced performance will reinforce our leadership in the premium market. Moreover, we'll diversify our revenue streams by growing high-margin businesses such as services and platforms and rapidly improve our business fundamentals through AX-driven innovation and improved resource efficiency. Next, let me address the shareholder returns. Today, the Board of Directors approved a third quarter cash dividend of 4,601 Korean won for both common and preferred shares, including the regular dividend The total dividend for the third quarter will be $30 trillion won, including the regular dividend, under our three-year shareholder return policy for 2024 to 2026, and it is scheduled to be paid in November. Next, I will update our shareholder return plan for the rest of 2026. Of the estimated $92,110 trillion won in total shareholder returns for 2026 and with $35 trillion won already planned or completed, including the $30 trillion won cash dividend, We anticipate the remaining funds for shareholder returns to be $55 to $75 trillion won. In detail, for these remaining resources, our commitment is to return the amount to shareholders through cash dividends as well as a substantial share repurchase We are also holding in-depth discussions on the next shareholder return policy, which will take effect in 2027, aiming to achieve both sustainable growth and enhanced shareholder value. In addition, we recognize the growing market interest in the price gap Thank you, Mr. Chairman. The new shareholder return policy, along with the final amount of shareholder returns and the specific execution plans for the remaining funds for 2026, will be finalized at the Board meeting scheduled for late January 2027, with an announcement to follow. Thank you.