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Samsung's record profits can't hide slowing smartphone growth

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Samsung (STOCK)
Samsung (STOCK)

Earlier this month, Samsung released its guidance for its Q2 2013 earnings and today the company has essentially made them official, making 9.53 trillion won (around $8.5 billion) in operating profit on revenues of 57.46 trillion won (about $51 billion). As we noted when the guidance was released, both are the highest Samsung has ever posted in a single quarter but fell short of Wall Street's expectations.

When the guidance was released, investors and analysts had been hoping for more, and as a result Samsung's stock took a small, temporary hit on its already lowered price. The company touted that "smartphone shipments and revenue increased from the March quarter" thanks to the launch of the Galaxy S4 and that "quarterly revenue for the mobile sector climbed 9 percent compared with the prior quarter" — though there was a small quarter over quarter dip in profits. However, analysts believe that growth in the smartphone market — especially at the high end — is destined to slow, and Samsung's record profits were nevertheless below expectations. Samsung promised that smartphone sales would "pick up in the third quarter and outperform global market forecasts." That improvement may indeed happen, but growing consensus is that the high-end smartphone market may finally be plateauing.

One bright spot in Samsung's earnings was a 46 percent quarterly increase in its profits on display panels, buttressed by demand for large TVs, the company said. Turning to tablets, Samsung said that it expected to grow "in the mid-10 percent range with the introduction of new tablets." Earlier today it was rumored that Samsung was working on a new, high-end Android tablet destined to replace the Nexus 10 "in the near future," so it may indeed arrive in time for the current quarter.