(Bloomberg) — Samsung Electronics Co. beat earnings estimates and gave a cautiously optimistic outlook, predicting that new smartphones and gaming consoles will enhance demand for reminiscence chips within the second half of the yr.

Web revenue elevated to five.5 trillion gained ($4.6 billion) within the three months ended June, the corporate mentioned in a submitting on Thursday, in contrast with the 4.9 trillion gained common of estimates compiled by Bloomberg. The South Korean firm had reported preliminary numbers earlier this month that confirmed working revenue rose 23%.

Samsung, which is the world’s largest smartphone maker and in addition provides elements like reminiscence chips, is navigating the tumult of the coronavirus pandemic, together with the remainder of the tech trade. The corporate warned of a droop in its shopper enterprise within the second quarter. However gross sales of smartphones, televisions and different devices have began to get better, and the corporate mentioned demand is prone to get a lift from the introduction of recent sport consoles and telephone fashions, anticipated from Apple Inc. and Samsung itself.

“Covid-19 continues to cloud the demand outlook however structurally talking, the demand is there,” Bloomberg Intelligence analyst Anthea Lai mentioned. “We’re getting there to have extra 5G smartphones coming from Samsung and the expectation within the second half is to have extra demand from shoppers.”

Samsung shares rose as a lot as 1.9% in Seoul buying and selling, pushing beneficial properties this week to about 10%. The corporate mentioned it might not present annual monetary steering due to the coronavirus uncertainty.

Although it’s finest recognized overseas for its telephones, Samsung makes most of its revenue from reminiscence chips, utilized in every thing from telephones and consoles to servers that assist ship on-line providers like video and music. Samsung mentioned it anticipates the general DRAM market to be up.

“Wanting in direction of the second half, we do count on cellular demand total to get better and in addition graphic demand to develop,” mentioned Jinman Han, senior vice chairman of semiconductor enterprise. “For servers, reminiscence demand pushed by stay-at-home actions appears to proceed as Covid-19 and different uncertainties persist.”

The corporate’s personal cellular gadgets, set to be up to date with flagship Galaxy Notice and Galaxy Z Fold releases shortly, are anticipated to enhance income on a quarterly foundation, however the firm underlined that uncertainties associated to Covid-19 will proceed.

“We additionally suppose that prospects might have elevated their inventories through the 1H, so one other variable to the second half demand is the route of our prospects’ stock administration,” mentioned Han.

Samsung shares rose earlier within the week on information of Intel Corp.’s delayed 7nm chip manufacturing and sure have to outsource some future chipmaking to the likes of Taiwan Semiconductor Manufacturing Co. Samsung is likely one of the few corporations geared up to deal with superior semiconductor manufacturing, and the potential to garner extra Intel enterprise boosted market sentiment.

What Bloomberg Intelligence Says

Samsung’s foundry enterprise may benefit from Intel’s chipmaking retreat as trade chief TSMC might have a decent manufacturing schedule to meet the U.S. firm’s demand. Samsung is already a provider of Intel CPUs primarily based on the 14-nanometer course of.

– Anthea Lai, analyst

Click on right here for the analysis.

Except for the influence of Covid-19, geopolitical points are additionally prone to reposition the worldwide provide chain in a method that may have an effect on Samsung’s enterprise. Bans on Huawei Applied sciences Co. within the U.S. and U.Okay. open extra alternatives for Samsung to promote 5G networking gear and smartphones.

The cellular division of the world’s largest smartphone maker posted a 25% enhance in working revenue to 1.95 trillion gained. The Korean large is anticipating smartphone gross sales to rise within the third quarter with the launch of recent Android gadgets together with its foldable telephone lineup however warned of intensifying market competitors amongst smartphone makers that may try to make up for weak performances through the pandemic.

Learn extra: Samsung Teases New Cellular Devices For a Keep-at-Residence Era

“There’s a risk that the Galaxy Fold 2 will turn into a sport changer within the smartphone ecosystem,” mentioned Greg Roh, senior vice chairman at HMC Securities. “A lot of the shortcomings discovered within the previous mannequin have been overcome with the extremely skinny glass and a bigger show.”

Samsung’s show division, which provides natural light-emitting-diode-screens for Apple’s iPhones, posted working revenue of 300 billion gained. Though the show enterprise suffered because the smartphone market slumped as a result of virus, the loss was offset by reimbursement from Apple. Analysts have mentioned the quantity of cost was about 1.1 trillion gained.

The buyer electronics unit, which incorporates TVs and home equipment, posted 730 billion gained of revenue. Samsung expects a restoration in TVs and digital home equipment within the second half of this yr due to pent-up demand after the virus lockdowns and vacation spending.

(Updates with particulars from earnings name from third paragraph)

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