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Samsung confirms its first profit growth since the Galaxy S4

Samsung confirms its first profit growth since the Galaxy S4

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Samsung posted its third-quarter earnings today, revealing that — as it predicted earlier this month — the company is back to operating profit growth after seven quarters of decline. Samsung says it made 7.39 trillion Korean won ($6.42 billion) in operating profit during the Q3 period, a hefty year-on-year rise for the company, which posted a disappointing operating profit in Q3 2014 of just 4.1 trillion won ($3.6 billion). Both net profit and sales rose also increased from the same period last year, rising from 4.22 trillion won ($3.7 billion) on sales of 47.45 trillion ($41.7 billion) in 2014's Q3, to 5.46 trillion won ($4.8 billion) on sales of 51.68 trillion ($45.6 billion).

The Korean company said revenue was driven mainly by its semiconductor and display panel segments. Operating profits, on the other hand, jumped by 500 billion won ($440 million) thanks to a weak exchange rate between South Korea and other key currencies. While operating profit was up from Q2 this year, net profit was down, falling slightly from 5.75 trillion won ($5.06 billion).

Samsung's mobile division was less helpful, posting 2.4 trillion won ($2.1 billion) in operating profit for the quarter — a rise from last year's Q3 profit of 1.75 trillion ($1.54 billion), but a dip from 2.76 trillion ($2.4 billion) in Q2. Samsung said it saw "a significant" increase in sales of Galaxy Note 5, Galaxy S6 Edge+, Galaxy A, and Galaxy J phones. but while it shipped more mid-tier smartphones, the price cut of its flagship Galaxy S6 and S6+ contributed to a decrease in year-on-year profits in the mobile segment. In a bid to convert people from iPhones, Samsung cut the price of the newest Galaxy handsets earlier this year, sweetening the deal further by offering up to $120 back for US customers getting the phones on a carrier instalment plan. Samsung's decision to push the Note 5 out in August — a month earlier than normal — doesn't seem to have impacted the mobile division's profits greatly.

The company says it's expecting a stronger fourth quarter than third for smartphones, but specifies that competition — between its products, Apple's iPhones, and newer, cheaper challengers from Chinese companies — is getting stiffer. Next year will be even tougher for smartphones, Samsung says, as it expects the growth rate for the market to slow continuously. In response, the company says it will push its new payment service, Samsung Pay, and refocus on its wearables to "respond to market needs."

The company says the smartphone growth rate will fall in 2016

While an increase in operating profit and a year-on-year net profit increase points to a more positive quarter for the Korean company after two years of declining profits, Samsung has warned that it expects earnings to decline in Q4, driven downwards in part by unfavorable foreign exchange rates. Also worrying is the performance of its core smartphones. While the Galaxy S6 and S6+ were well reviewed devices, and the mobile division was able to record a year-on-year increase in profits over 2014's dismal Q3 results, Samsung mobile's profits dropped again quarter-on-quarter as people continue to buy iPhones.