Chinese multinational technology company Lenovo has posted a disappointing first-quarter report, amid a slump in PC sales.
Lenovo reported revenue of US$12.9 billion, falling short of the US$13.84 billion average predicted by analysts’ estimates compiled by financial analytic company, Refinitiv.
Revenue slumped 24% to $12.90 billion, as sales of its main products Smartphones, PCs, and other devices, fell by 28%. The world’s largest PC maker’s net income stood at $177 million, which is a 6% difference from analysts’ estimate of $235 million.
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Notably, the decline in Lenovo’s PC shipments by 18.4% is not unique to the company. Globally, the PC shipment market is in rough waters, which has been negatively affected by macroeconomic challenges, weak demand from both consumers and businesses, as well as a shift in IT budgets away from device purchases.
Also, fears of a recession, higher interest rates, and global inflation have all contributed to a precipitous drop in PC sales.
Lenovo’s pre-tax income plummeted by 67%, and basic earnings per share decreased from US$4.39 to US$1.48. This decline comes on the heels of a 14% drop in annual profit for the year ending in March 2023, marking Lenovo’s first annual decline since 2019.
The company’s poor PC sales were partially offset by non-PC businesses. Revenue from the non-PC businesses accounted for 41% of Group revenue, with the service-led business achieving strong growth and sustained profitability further demonstrating the effectiveness of Lenovo’s intelligent transformation strategy.
It is worth noting that Lenovo pc sales in China were the most badly hit, compared to other regions, after it reported a 29% quarterly revenue decrease compared to this time last year.
Commenting on the unimpressive first quarter reports, Lenovo Chairman and CEO Yuanqing Yang said,
“Last quarter, the macro environment presented challenges, and our hardware business remained in a phase of adjustment, but we persisted in executing our strategy. Our service-led business achieved strong growth and sustained profitability.
“Our non-PC revenue mix of the group revenue further increased year on year demonstrating the effectiveness of our diversified growth engines and I remain cautiously optimistic about our business recovery over the next several quarters. As we continue to drive innovation and intelligent transformation, I am confident in the long-term position to deliver sustainable profitability and growth in the future.”
However, despite Lenovo’s unimpressive first-quarter reports (Q1), the company maintained its position as the top laptop brand, owning 23.2% of the market share, which saw it surpass its rival, HP.
The company further said that its PC business is well-positioned for an on-year recovery later this year. It also plans to make further investments to tap opportunities in Non-PC areas, including fast-growing accessories and work-collaboration solutions.
With that, Lenovo disclosed that over the next three years, it is committing US$1 billion in investment for AI that will focus on providing AI devices, AI-ready, and AI-optimized computing infrastructure, and embedded AI-generated content into the intelligent solutions of vertical industries to help customers improve their productivity.
The company revealed that it is seeing greater opportunities in AI-related applications and will leverage its expertise in smart devices to provide more intelligent experiences.
Looking ahead, Lenovo is leading the transformative shift in personal computing where to meet the needs of new generative AI workloads, the PC will also need to transform itself into an AI PC.
Lenovo sees the future of AI PCs as a disruptive, hybrid blend of client, edge, and cloud technologies, ushering in enhanced functionality, speed, creativity, and immersive realistic experiences.