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China’s Lenovo Group, the world’s leading PC manufacturer, has announced stronger-than-expected earnings, with revenue returning to growth after five quarters of decline.
The company reported that revenue for the October-December period rose by 3% compared to the same period the previous year, reaching $15.72 billion. This figure exceeded analysts’ estimates, who had forecasted flat revenue at $15.25 billion.
The revenue decline began in 2022 after a surge in demand for PCs and other electronic devices during the pandemic-induced movement restrictions. However, the market is now showing signs of recovery, with vendors clearing excess inventory.
Third-quarter PC shipments for Lenovo grew by 3.2% compared to the same period last year, as reported by researcher Gartner. Industry-wide PC shipments also saw a growth of 0.3%.
According to Gartner, Lenovo held 25.6% of the global PC market during the period, with HP, Dell, and Apple in second, third, and fourth place respectively.
Despite the growth in revenue, profit for the quarter dropped by 23% to $337 million, which still exceeded market expectations.
Lenovo’s share price rose by 3.27% in afternoon trade after the earnings announcement, outpacing the benchmark Hang Seng Index’s 1.45% increase.
While Lenovo saw revenue growth in most markets, it experienced a 10% drop in revenue in China. The CEO attributed this decline to challenges posed by the slowdown in China’s economy.
Investors have been optimistic about Lenovo’s future prospects due to the expected demand for AI PCs – personal computers optimized to run artificial intelligence (AI) software. Lenovo unveiled over 10 AI-capable PCs at the International Consumer Electronics Show last year, indicating its commitment to this strategy.
Lenovo expects the AI PC market to reach 50 million units this year and predicts that by 2027, close to 60% of total shipments will be AI PCs, according to data from IDC.
The company is also poised to benefit from its role as a major manufacturer of AI servers, equipped with multiple processing chips developed by leading AI chipmakers such as Nvidia.
As the United States restricts exports of high-end AI chips to China, Lenovo’s partnership with Nvidia has come under scrutiny. However, Lenovo has stated that its supply of Nvidia’s AI chips has remained stable for its non-China business.
Lenovo’s CEO, Yang Yuanqing, emphasized that the AI server market is expected to grow twice as fast as the traditional server market, indicating a promising future for Lenovo in the AI space
