By Kwanwoo Jun

Samsung Electronics guided for softer first-quarter operating profit but still beat market expectations, as strong smartphone sales likely helped buoy earnings and offset the delayed recovery of its flagship semiconductor business.

The mixed guidance comes as the world's largest maker of memory chips and smartphones braces for the challenges posed by U.S. President Trump's sweeping tariffs on trading partners.

Samsung said Tuesday that it expects operating profit of 6.600 trillion won, equivalent to $4.49 billion, for the January-March quarter. That's down 0.2% from the same period a year earlier but above the 5.239 trillion won forecast by analysts in a poll compiled by FactSet.

Quarterly revenue likely rose 9.8% to 79.000 trillion won, Samsung said.

The company is scheduled to release full quarterly results later this month. It gave no further earnings details Tuesday.

Analysts say that robust sales of Samsung's new Galaxy S25 smartphones were likely a main driver of the better-than-expected performance.

Citigroup analysts highlighted stronger-than-expected margins in Samsung's mobile-handset business, supported by increased smartphone shipments and lower prices for mobile components.

Samsung's MX division, which comprises smartphones and consumer electronics, likely "demonstrated solid profitability due to the Galaxy S25 effect and efficient cost management" in the first quarter, Seoul-based Hana Securities analyst Roko Kim wrote in a recent note.

Samsung had previously said that earnings improvement at its semiconductor business will be limited near term, citing sluggish demand for conventional memory chips amid intensified market competition.

The South Korean tech giant is also lagging behind its rivals in supplying high-end artificial-intelligence chips, including advanced high-bandwidth-memory products to U.S. AI chip maker Nvidia.

Some analysts don't expect Samsung to catch up until the latter half of the year.

Lower profitability at Samsung's memory-chip business and losses at its foundry business could continue to challenge the semiconductor division in the first quarter, Nomura analysts said in a recent note. Progress in advancing its 12-layer HBM3E or HBM4 products and industry-wide chip-production cuts could lead to a recovery in the year's second half, Nomura said.

Investors are now closely watching the potential impact of Trump's new tariffs on Samsung's television, smartphone and chip businesses.

Samsung makes most of the TVs it sells in the U.S. in Mexico, which is excluded for now from the hefty U.S. levies, but many of its smartphones and chips are still manufactured in Vietnam, India and South Korea, which are subject to steep U.S. reciprocal tariffs.

"However, we expect Samsung could mitigate the adverse impact due to its globally diversified production base, which allows the firm to flexibly shift manufacturing to lower-tariff regions," Citi analysts led by Peter Lee said in a note Tuesday.

Shares of Samsung were 2.6% higher after the preliminary earnings report, regaining ground after sliding more than 5% in the previous session amid U.S. tariff concerns.

Write to Kwanwoo Jun at kwanwoo.jun@wsj.com

(END) Dow Jones Newswires

April 07, 2025 22:16 ET (02:16 GMT)

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