Samsung Shares Fall Despite Record Q2 Earnings Amid Spending and Demand Concerns

Samsung Electronics shares fell as concerns about spending and demand overshadowed record second-quarter earnings.

Shares closed nearly 7% lower Tuesday, even after it reported preliminary second-quarter operating profit of 89.4 trillion won ($58.4 billion), versus 57.2 trillion won in the prior period.

On a year-on-year basis, operating profit for the quarter is expected to jump more than 1,800%.

Revenue for the April-to-June period was 171 trillion won, up from 133.9 trillion won in the previous quarter. Compared to the same period a year earlier, sales more than doubled.

"The stock had priced in a historic quarter for months, and once the numbers confirmed it was significant but not far beyond what the market had already expected, there wasn't much to reward anyone stepping in," said Zavier Wong, market analyst at eToro. "It acts more like confirmation, and confirmation is what people sell into."

It's been "dragged down by concerns that AI infrastructure spending can't keep growing at the pace that has been driving memory prices," he said.

The results include deducted one-off expenses for employee bonus provisions. Earlier this year, Samsung agreed to scrap its 1,000% base salary bonus cap and earmark 10.5% of its operating profit for bonuses, capitulating to a weeks-long labor union protest that demanded a fair share of the company's earnings.

"A lot of negative news has been building up, so it looks like everyone wants a piece of that profit. The labor union wants it, and the Korean government wants it," Tom Kang, research director at Counterpoint Technology Market Research, told CNBC. Moreover, memory prices may have gone up too high, fueling concerns about demand, he said.

"Our monthly checks into the memory prices of consumer products, mobile products, servers all indicated that prices are still rising," he said, signaling that the price spike will continue through at least this quarter.

Samsung's latest pledge to build massive semiconductor fabrication plants in the southern part of the country is also dragging down shares, Kang said.

He noted that the location is far from the central part of Korea where traditional fabrication plants are concentrated, and since it is "new ground," Samsung will have to start from zero to build the infrastructure, a layout that deviates from investor expectations. Likewise, the market is viewing this as an unusual location that is not typically suited for high-tech equipment, he added.

Samsung's domestic peer SK Hynix's upcoming ADR listing this week has also played a part.

"It doesn't help that SK Hynix's ADR listing lands the same week, pulling some of that rotation appetite elsewhere," eToro's Wong pointed out.