Samsung Electronics reported a sharp year-on-year increase of 277% in operating profits, reaching 9.18 trillion won ($6.6 billion) for the latest quarter. Despite the dramatic growth, the results missed market expectations, as the world’s leading memory chip manufacturer continues to grapple with difficulties capitalizing on the demand for artificial intelligence (AI) server chips.

The South Korean tech giant revealed that “one-off costs” were a major factor in the results, while unfavorable exchange rates added pressure. “The strength of the Korean won against the US dollar resulted in a negative impact on company-wide operating profit,” Samsung stated. Operating profit fell 12% from the previous quarter, despite being nearly three times higher than the same period last year.

However, Samsung posted a record quarterly revenue of 79.1 trillion won ($57.2 billion), up 17.35% compared to a year ago. The semiconductor division, the cornerstone of Samsung’s business, reported a 40% decline in operating profit from the previous quarter, totaling 3.86 trillion won. Samsung cited several challenges, including reduced inventory valuation gains, currency fluctuations, and incentive-related expenses.

The firm has struggled to compete with South Korean rival SK Hynix, particularly in developing high-bandwidth memory (HBM) chips in AI servers. Industry experts suggest that Samsung’s lag in HBM technology contributed to its disappointing performance in the high-demand AI market. This technological gap has raised concerns about the company’s future competitiveness.

In response to the underwhelming financial results, Samsung issued an unusual public apology earlier this month, acknowledging what it described as a “crisis.” Jun Young-hyun, vice chairman of Samsung’s device solutions division, issued a statement addressing the company’s struggles.

“Due to results that fell short of market expectations, concerns have arisen about our fundamental technological competitiveness and the future of the company,” he stated. He pledged that management would actively address the challenges and turn the crisis into a “resurgence opportunity.”

The disappointing financial performance has weighed heavily on Samsung’s stock market performance. Shares have plummeted 33% since peaking in July, resulting in a market value loss of over $120 billion. The gap in market capitalization between Samsung and SK Hynix has narrowed to its slimmest margin in 13 years. Despite the downturn, Samsung shares rose modestly by 0.3% in early trading on Thursday in Seoul.