Samsung SDI: AI Data-Center Tailwinds Fuel a Faster-Than-Expected Turnaround
Q2 2026 profit, driven by high-power ESS/UPS batteries and tariff refunds, marks a decisive pivot from EV-led losses to AI-infrastructure growth
006400.KS · Earnings Call · 2026-07-30
Return to Profitability, Ahead of Schedule
Samsung SDI (006400.KS) reported Q2 2026 revenue of KRW 3.8 trillion, up 19% year-over-year, and operating income of KRW 204 billion — a return to profit after seven consecutive quarters of losses. Management credited "rapid revenue growth and improved profitability across business units, coupled with favorable exchange rates and tariff refunds" for the earlier-than-expected turnaround “we were able to return to profitability sooner than expected” — Yoontae Kim, Executive Vice President of the Finance and Accounting Team · 2026-07-30. The company had initially targeted a second-half recovery, but the accelerating momentum in data center-driven battery demand pulled the inflection forward.
AI Data Centers: The New Growth Engine
The most striking shift is the growing contribution from high-power batteries for utility ESS, UPS, and BBU applications. EVP Hanjae Cho noted that
Driven by the expansion of AI data centers, we expect battery sales from both UPS and BBU applications to grow by more than 70% Y-o-Y this year.
This segment now commands an estimated 40–50% global market share, with high entry barriers that support "higher profitability than other product categories." The company is leveraging its strength in high-power cylindrical cells to capture demand from AI infrastructure, a clear contrast to the sluggish EV market that dominated the narrative in prior quarters.
The Non-PFE Moat and LFP Ramp
A key strategic differentiator is the company's push into non PFE (non-PRC/FE) supply chains, a critical requirement for U.S. customers. EVP Yonghui Cho explained that "In the U.S., prismatic LFP batteries that combine superior safety with compliance with non-PFE supply chain requirements are strongly preferred by customers" . The company is on track to begin cell production for its U.S. prismatic LFP battery ESS line in October, with deliveries of the SBB 2.0 solution within the year. Management has secured LFP cathode material volumes through partnerships with Korean and U.S. suppliers, and other key components are also non-PFE compliant through partner localization. This positions Samsung SDI to benefit from the realignment of U.S. supply chains away from Chinese components, a theme echoed in global earnings calls and policy shifts.
Beyond EVs: A Diversified Future
While EV battery losses are expected to narrow as new projects ramp, the company is actively diversifying into high-growth applications. Small batteries, particularly for power tools, are running at full capacity, and the company is expanding into humanoid robots, aerospace, and HEV cylindrical batteries. On all-solid-state, EVP Hanjae Cho reaffirmed the timeline: "we are preparing to begin mass production of all solid-state batteries in the second half of 2027" . Management expects humanoids to be the first commercial application, with samples to be delivered in the second half of 2026.
Contrast with Prior Sluggishness
This turnaround is especially notable given the company's recent struggles. A year ago, the CFO described the primary driver of "continued weak performance" as "the slowdown in demand for SDI EV batteries" . The company had also cited tariff headwinds as a major drag, with over 70% of ESS sales exported to the U.S. from Korea, incurring a mid-single-digit operating margin impact . Today, the same tariff policy has flipped into a tailwind via refunds, and the company has pivoted to local U.S. production and non-PFE sourcing to mitigate future risks.
The second half is set to build on this momentum. Management expects ESS sales to expand significantly, with the LFP line ramping and AMPC benefits continuing. Battery sales from UPS/BBU are on track for 70%+ growth, and the semiconductor materials business is also seeing rising demand from AI-driven chip manufacturing. As Jae-kyun Oh noted, "The second half will be important not only for improving performance but also for preparing for medium- to long-term growth" . With a robust order pipeline, diversified applications, and a clear non-PFE strategy, Samsung SDI appears to have turned a corner — and the market is taking notice.