Samsung Electro-Mechanics Posts Record Q3 Profit as AI Components Lift Sales and Margins

AI demand lifts operating profit to 691 billion won

Samsung Electro-Mechanics reported record quarterly operating profit of 691 billion won and revenue of 3.7633 trillion won for July through September, as demand for artificial intelligence infrastructure increased sales of capacitors and semiconductor packaging materials. Operating profit rose 165.5 percent from a year earlier, far outpacing revenue growth of 30.3 percent.

The electronic components affiliate of Samsung Electronics announced the results on October 28. Net profit reached 485 billion won, up 115.7 percent, although it fell short of the average analyst forecast of 509.9 billion won.

The results show how spending on AI reaches beyond the companies that design processors. Samsung Electro-Mechanics supplies small components that help servers manage electricity, connect processors to circuit boards and support the equipment inside data centers. Its automotive and camera businesses also contributed to the quarter.

Two divisions stood out. Component revenue increased 36 percent to 1.883 trillion won, while Package Solutions revenue climbed 58 percent to 939 billion won. Optical Solutions grew more slowly, rising 3 percent to 941.3 billion won, with contributions from smartphone cameras and shipments for electric vehicles.

Profit grew much faster than sales

Samsung Electro-Mechanics earned an operating margin of 18.4 percent, compared with 9.0 percent a year earlier. Operating margin measures how much revenue remains after operating costs: at the latest rate, the company retained about 18.4 won in operating profit from every 100 won of sales, against 9 won a year before.

The improvement of 9.4 percentage points means the company converted a much larger share of its sales into operating earnings. Operating profit also rose 56.9 percent from the preceding quarter, showing that the increase extended beyond the comparison with the same period last year.

Samsung Electro-Mechanics attributed its stronger performance to increased sales of AI products, semiconductor substrates for data centers and vehicles, and camera modules for future electric vehicle platforms. The faster growth in operating profit than revenue is consistent with a more profitable sales mix, although the announcement did not provide a detailed breakdown of each factor behind the margin increase.

Net profit tells a different part of the earnings story. It is the amount left after items such as taxes and financial income or expenses, while operating profit focuses on the business itself. The 485 billion won result was 24.9 billion won, or about 4.9 percent, below the average analyst estimate. Record operating earnings and a net profit forecast miss therefore occurred in the same quarter.

Capacitors put the component division at the center

The Component division generated 1.883 trillion won in revenue, almost exactly half of the company's total. Sales expanded across its application areas, led by products for AI infrastructure, including servers, networking equipment and power systems.

Multilayer ceramic capacitors, usually shortened to MLCCs, were a major contributor. These tiny electronic parts store and release small amounts of electrical energy. They help keep power steady and reduce unwanted electrical interference, allowing chips and other components to work reliably.

AI data centers need large numbers of electronic components around their processors. A powerful chip depends on the wider system supplying stable electricity and moving information reliably. Samsung Electro-Mechanics benefits from spending on that surrounding equipment as well as demand tied more directly to processors.

Automotive applications also supported MLCC sales. The company said it was working to fulfill long term supply agreements with major global technology companies and intended to develop advanced products earlier to strengthen its market position. Those commitments connect its current growth with customers' plans for future equipment.

At its third quarter results conference call on October 28, 2026, the company also said it would expand supplies of ultra-high-capacitance MLCCs as it continued to respond to major technology customers' requests for long term supply agreements.

Packaging sales rose fastest

Package Solutions was the fastest growing division, with revenue increasing 58 percent to 939 billion won. The company supplied more high value flip-chip ball grid array substrates, known as FC-BGA substrates, for server central processing units, AI accelerators and networking equipment.

The division's revenue also increased about 22 percent from the preceding quarter. Expanded supplies of high-performance substrates for AI data centers and autonomous-driving automotive applications drove the growth, the company said on its results conference call.

A substrate acts as a connection platform beneath a semiconductor chip. Its intricate electrical pathways link the chip to the larger circuit board. As processors become more complex, the platform carrying their connections must also meet demanding requirements.

Server central processing units manage a broad range of computing tasks. AI accelerators are processors designed to perform the calculations used in AI more efficiently. Networking equipment moves information among machines. Growth across all three applications gives Samsung Electro-Mechanics several routes into data center investment.

Samsung Electro-Mechanics confirmed in an October 21, 2026, official partnership announcement that it had entered a strategic partnership with Nvidia to supply ABF substrates for AI processors. ABF refers to Ajinomoto Build-up Film, an insulating material used in advanced packaging substrates. The partnership places Samsung Electro-Mechanics within the supply chain supporting Nvidia's AI processors.

Under the multi-year agreement, the companies will jointly invest in dedicated ABF substrate production facilities in Sejong and Busan, South Korea. Deliveries beginning in 2026 will cover Nvidia's compute chipsets and high-speed networking switches. Supply volume is expected to increase at a double-digit annual rate, with production allocated to Nvidia projected to represent a significant portion of Samsung Electro-Mechanics' annual package-substrate capacity by 2028.

Samsung Electro-Mechanics President and CEO Duck-Hyun Chang confirmed the partnership, saying the company would combine its advanced FC-BGA manufacturing capabilities with its high-reliability MLCC expertise to support timely deliveries of Nvidia's AI platforms. Nvidia Executive Vice President of Operations Debora Shoquist said the collaboration broadens its network of substrate partners and adds manufacturing capacity.

Nvidia said Samsung Electro-Mechanics would initially provide capacity from existing South Korean operations, supplemented by facility upgrades and new factories in Sejong and Busan. Agreements with Samsung Electro-Mechanics, Ibiden and Unimicron support Nvidia's plan to increase substrate capacity for its products 2.5 times over three years.

Samsung Electro-Mechanics plans to expand supplies of new, high value FC-BGA products for AI data centers and increase production capacity in line with demand. That makes packaging both a contributor to the latest earnings and a focus of its next production decisions.

On the results conference call, the company said it expected continued growth in demand for high-performance substrates used in AI data center server CPUs, AI accelerators and networking equipment. It plans to add capacity at its production sites to expand supplies of high-end FC-BGA products.

Cameras added growth beyond data centers

Optical Solutions recorded revenue of 941.3 billion won, up 3 percent from a year earlier. Its sales were slightly higher than those of Package Solutions, even though its growth rate was much lower.

New mass production of a camera with 200 megapixels and folded zoom contributed to the improvement. A folded zoom camera uses an optical arrangement that redirects light inside the device, making room for a longer zoom path within a thin smartphone. Megapixels describe the number of image points a camera sensor can record.

Camera module supplies for foldable phones and electric vehicles also increased. Samsung Electro-Mechanics reported higher shipments for the next generation of platforms being developed by global electric vehicle customers. A vehicle platform is the underlying design shared by a model or a group of models.

The company intends to expand camera module sales as those new vehicle platforms develop. Its automotive business therefore contributed through more than one product category: capacitors, semiconductor substrates and camera modules all featured in the account of the quarter's growth.

Three divisions reveal the changing sales mix

The division figures show a business with one large revenue base and two divisions of almost equal size. Components supplied about 50.0 percent of total quarterly revenue, Optical Solutions about 25.0 percent and Package Solutions about 25.0 percent, calculated from the reported figures.

Their growth rates were much less evenly matched. Package Solutions expanded 58 percent, compared with 36 percent for Components and 3 percent for Optical Solutions. Packaging revenue was therefore growing fastest, while Components remained the biggest source of sales in absolute terms.

AI demand supported both the largest division and the fastest growing one. Capacitors served servers, networking and power equipment, while substrates supported processors and related systems. This spread helps explain why investment in AI infrastructure had a broad effect on the company's results.

Division operating profits were not disclosed in the figures reported here. The revenue breakdown shows where sales increased, while the companywide margin shows how much more operating profit the business retained from those sales.

Fourth quarter plans focus on supply and capacity

Samsung Electro-Mechanics expected strong demand for advanced AI data center components to continue into the fourth quarter. Its plans focused on meeting customer commitments, supplying more sophisticated packaging products and adding capacity as demand requires.

The commercial challenge is concrete: customers need sufficient quantities of components that meet the requirements of their new equipment. For Samsung Electro-Mechanics, developing products earlier and preparing production capacity are linked to winning and fulfilling those orders.

The announcement did not give a numerical fourth quarter earnings forecast, the value of the long term MLCC agreements or a schedule and budget for the capacity expansion. The next developments to watch are the planned increase in FC-BGA supplies and continued camera module deliveries for new electric vehicle platforms.

The reporting period and the company's next steps follow this sequence:

• July through September: Samsung Electro-Mechanics generated record quarterly revenue and operating profit.
• October 28: The company announced its third quarter results and described the products driving growth.
• Fourth quarter: The company expected continued strength in demand for advanced AI data center components and planned to expand supplies.

Shares rose as investors weighed the results

Samsung Electro-Mechanics shares were reported trading 11 percent higher at 1,333,000 won at 12:44 p.m. in Seoul following the announcement. The intraday rise accompanied record operating results and the company's expectation of continued demand for AI components.

Investors also had a mixed earnings picture to assess. Operating profit increased sharply from both the previous year and the preceding quarter, while net profit missed the average forecast. The margin improvement, expanding packaging business and customer supply commitments provided additional measures of performance beyond the headline profit figure.

For customers, the company's plans point toward more supplies of advanced substrates and continued development of capacitors and cameras for new systems. For the business, the immediate task is to turn strong demand and supply commitments into further deliveries while preparing production for the products customers need next.

Key Points

• Third quarter operating profit reached a record 691 billion won, up 165.5 percent from a year earlier.
• Revenue reached 3.7633 trillion won, with Components contributing about half.
• Operating margin rose to 18.4 percent from 9.0 percent a year earlier.
• Package Solutions revenue grew fastest, increasing 58 percent from a year earlier and about 22 percent from the preceding quarter to 939 billion won.
• Samsung Electro-Mechanics and Nvidia confirmed a multi-year ABF substrate agreement with deliveries beginning in 2026 and joint investment in dedicated production facilities in Sejong and Busan.
• Net profit rose to 485 billion won but missed the average analyst forecast by about 4.9 percent.
• The company expected strong fourth quarter demand for advanced AI components and planned to expand substrate supplies and capacity.