Earlier this month, Samsung said that Galaxy S7 and S7 Edge pre-orders were much stronger than the company had anticipated. Now analysts estimate that robust Galaxy S7 sales would reverse the two-year decline in the Korean company’s mobile business, and help boost its quarterly profits. The newly launched flagship smartphones had seen strong pre-orders in key markets like China, Europe and India.
Samsung ships 9.5 million Galaxy S7 and S7 Edge units
Samsung’s smartphone profits and market share had been shrinking amid stiff competition from Apple in the premium segment and Chinese players in the low-end market. On Wednesday, several research firms increased their first-quarter earnings forecast for Samsung, citing the stellar performance of Galaxy S7 and S7 Edge. Korea Investment & Securities analyst Jay Yoo said Samsung likely shipped 9.5 million units of the S7 and S7 Edge in the first quarter, much higher than the preliminary estimate of 7 million units.
The S7 and its dual-edge sibling have been praised by users and critics alike, even though analysts said the phones offer only incremental upgrades. The new smartphones bring back the microSD card slot and water-resistance capabilities. The S7 and S7 Edge are also about 10% cheaper than their predecessors in most markets. Many were expecting the Galaxy S7 sales to be weak because it looked similar to the last year’s flagship phones. But design similarity helped boost Samsung’s earnings by reducing the component and development costs.
Analysts changed their outlook after solid S7 sales
Previously, analysts on average were expecting Samsung’s January-March profits to decline 16% YoY to 5.2 trillion won ($4.51 billion), largely due to challenges in the home appliances and chip segments. According to the Korea Times, analysts have revised their estimates, and now they expect 6 trillion won ($5.2 billion) in profits. The outlook turned positive after combined sales of Galaxy S7 and S7 Edge reached close to 10 million units in just 20 days.
Favorable forex conditions would also help Samsung’s earnings, said analysts. A weaker Korean won added to the price competitiveness of the new smartphones and other products. Industry experts said the electronics giant enjoyed forex benefits mainly in its chip and display segments. The company will release its Q1 earnings guidance on April 7.