Samsung posted its most profitable quarter in two years due largely to the success of its flagship Galaxy S7 phone. And the company said strong demand for handset components will likely continue to drive revenues through the rest of the year.
The world's largest smartphone vendor posted $5.2 billion in net profit during the latest quarter, up 1.7 percent year over year, as revenue increased 5 percent to $45.2 billion. The Korean company credited "a streamlined mid- to low-end smartphone lineup" in addition to sales of the Galaxy S7 and S7 Edge.
Samsung led all smartphone vendors with roughly 80 million units shipped worldwide, Canalys said earlier this week. The company has enjoyed tremendous success with its Galaxy S7 thanks to heavy carrier promotional support and Samsung's campaign to give its Gear VR headset to Galaxy buyers. Samsung's mobile division saw a 57 percent increase in operating profit in the latest quarter.
Samsung's earnings highlight a notable contrast with Apple (NASDAQ: AAPL), which earlier this week posted a 23 percent year-over-year drop in iPhone revenue. The world's No. 2 smartphone vendor reported $42.4 billion in quarterly revenue, marking a 14.6 annual decline, as iPhone sales fell in China, Europe and the Americas.
And while worldwide smartphone sales have slowed significantly due to saturated markets and lengthened upgrade cycles, Samsung expects demand for its handset components to remain strong through the rest of the year.
"Looking ahead to the second half of 2016, the company expects its solid performance to continue compared to the first half, mainly driven by earnings increase in the component business due to sales growth in high value-added products and stable demand and supply conditions," Samsung said in a press release. "In the third quarter, the company expects the component business to maintain its solid performance due to improved demand and supply conditions for memory chips and LCD panels," Samsung predicted.
The smartphone market is expected to heat up again in the second half of 2016, as Samsung releases the Galaxy Note 7 and Apple introduces its latest flagship handset. Meanwhile, Huawei continues to expand its worldwide smartphone business as it looks for an opening in the U.S. market.
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