The Chinese company Lenovo, which maintains its status as the largest PC manufacturer in the world, reported on the preliminary results of the second quarter of the fiscal year, which represented the company’s fifth consecutive period of decline in sales. The corresponding figure fell 16% year-on-year to $14.41 billion, but Lenovo expects sales growth in the PC and smartphone segment in the current quarter.
Lenovo CEO Yang Yuanqing eagerly distributed interview Leading news agencies reported an improvement in the demand situation in China and the lack of obvious consequences for the company’s business from additional restrictions on the supply of NVIDIA accelerators to China. According to Lenovo management, next year the market for personal computers and smartphones will be stimulated by interest in artificial intelligence technologies, and in the second half of the 2024 calendar year, demand for new PCs and smartphones will begin to grow. New device models will be able to locally accelerate some of the processes associated with artificial intelligence.
In its most recent quarter, Lenovo reported a 54% drop in net income to $249.2 million, but this figure was above analysts’ expectations. Sales of $14.4 billion were roughly in line with outside estimates. While the company’s revenue had fallen for five consecutive quarters, it was the fourth consecutive quarter in which net income declined. This was due not only to the continued overproduction in the PC and smartphone segment after the end of the pandemic, but also to the slow recovery of demand in the Chinese economy. The company’s net income fell 60% to $249 million in the fiscal second quarter.
In May of this year, Lenovo reported its first annual revenue decline since 2019, falling 14%. The corresponding 12-month reporting period ended in March this year. According to Canalys, global PC shipments fell 7% in the second quarter of calendar year 2023. In the second half of the next calendar year, Lenovo plans to launch a new generation of PCs with local acceleration of artificial intelligence systems. Without transmitting sensitive data to a cloud service, such PCs increase customers’ trust in artificial intelligence technologies in terms of information security.
Lenovo is trying to increase the share of revenue generated outside the personal device market. At the end of the last quarter, this share of sales was 40%, three percentage points higher than a year ago. In the last quarter, the company also managed to achieve a seasonal record in profit margin, which rose to 17.5%. By the way, the company’s revenue grew by 12% quarter-on-quarter, which exceeds seasonal statistics.
Lenovo’s services business increased revenue 11% year-over-year to $1.92 billion, and its infrastructure solutions business increased revenue 5% year-over-year to $2 billion. Ultimately, personal devices brought the company $11.5 billion in revenue, up 16%. Less than last year, but 12% higher quarter-on-quarter. At the same time, the share of devices that have no connection to the PC market in the division’s sales structure rose by 2.4 percentage points to 20% over the course of the year. The company intends to further increase the share of sales outside the PC market.