What's going on?

Samsung said that it made significantly more money than it expected in its most recent quarter � and strong sales of its Galaxy S7 smartphone are a big reason why. It�s interesting that Samsung�s smartphone fortunes seem to be improving just as those of its main competitor, Apple, are declining.

What does this mean?

Samsung says that it will make a profit of about $7 billion from April-June (final figures aren�t available yet) – that would be 17% more than it made in the same quarter last year and its biggest quarterly profit in two years! Samsung had been struggling as Apple increasingly dominated the market for higher-end phones while Chinese rivals such as Huawei eroded Samsung�s market share in the lower-end. However, it seems that the success of the S7 as well as some overhauls of its cheaper models have helped fend off that competition. What�s more, Samsung�s profit was boosted by some aggressive cost cutting measures.

Why should I care?

For the stocks: Apple and Samsung�s sales peak at different times of the year. Samsung tends to launch its new phones at the beginning of the year while Apple typically does so in September (ahead of the holiday shopping season). That means that Samsung�s sales look strongest right about now � and Apple�s look the weakest. In 6 months time, after Apple has been selling its new phone for a few months, it will be interesting to see if Samsung�s more favorable comparison holds up.

The bigger picture: Smartphones are perhaps past their prime as a profit driver. Mobile phones have, clearly, undergone a massive transformation in the past 7 or so years � but even the most die-hard fan would have to concede that innovation is slowing. That�s why investors are pushing companies like Apple and Samsung to come up with new products. In Samsung�s case, it�s already built a venerable semiconductor (a.k.a. computer chip) division as a counterweight to the importance of its smartphone business.