Lenovo Group, the PC maker, reported a 24 per cent fall in revenue for the April-June quarter, reflecting the continued impact of a global downturn in demand for personal computers.
The company’s Q1 performance marks its fourth consecutive quarter of sales decline, as the tech giant grapples with economic challenges compounded by the ongoing COVID-19 pandemic.
Lenovo’s revenue for the second quarter amounted to USD 12.9 billion, falling short of market expectations and averaging below the USD 13.84 billion forecast compiled by Refinitiv from seven analyst estimates. This decline comes on the heels of a 14 per cent drop in annual profit for the fiscal year ending in March, representing the first annual profit decrease since 2019.
Lenovo has been navigating a challenging landscape as the global PC market grapples with the aftermath of the COVID-19 pandemic. The initial surge in electronics sales during the pandemic gave way to contraction as demand weakened due to rising interest rates, soaring inflation, and shifting work dynamics. Retailers have faced unsold inventory, prompting PC manufacturers and suppliers, including chipmakers, to adjust production volume and prices.
Despite these hurdles, Lenovo remains optimistic about its PC business’s prospects, forecasting a potential year-on-year recovery in the latter part of 2023. The global PC market also showed signs of improvement, with a 12 per cent decline in shipments during the second quarter of 2023, a notable improvement from the more than 30 per cent drop witnessed in the preceding two quarters.
Sales within China were particularly hard-hit, with Lenovo reporting a steep 29 per cent drop in quarterly revenue compared to the same period the previous year. China’s economy struggled to regain momentum even after lifting COVID-19 restrictions late last year. Lenovo’s CEO, Yang Yuanqing, however, expressed confidence in China’s long-term economic fundamentals, citing government measures to stabilize the market and encourage consumption.
Lenovo has been actively diversifying its revenue streams to improve profit margins, expanding into non-PC segments such as servers and information technology (IT) services. Nevertheless, its device business, comprising PCs, smartphones, and tablets, continues to make up a significant portion of the company’s overall revenue.
Lenovo’s infrastructure solutions business, responsible for selling servers and related equipment, experienced an 8 per cent revenue decline during the quarter. This marked the business’s first quarterly decline in several reporting periods and was attributed, in part, to an ongoing shortage of AI chips.
(Inputs from Reuters)