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Lenovo has reported its fifth consecutive quarter of declining revenues but said it was seeing clear signs of recovery in the technology sector that would power a return to growth for the world’s largest PC maker by shipments.
Despite macroeconomic headwinds that had caused a slump in demand, the PC market had “bottomed out”, said chief executive Yang Yuanqing during a Thursday call to discuss September-quarter earnings.
The Chinese company’s Intelligent Devices Group, which includes PCs, tablets, and smartphones, was poised to “resume growth and profitability as soon as possible”, he added.
Chief financial officer Wong Wai Ming said Lenovo’s Infrastructure Solutions Group, which provides storage, software and services for business, had seen “sequential and robust improvement, signalling momentum in demand recovery from a few challenging quarters”.
Lenovo has been battling a post-pandemic industry downturn. In the second quarter, global PC shipments declined 7 per cent, according to research firm Canalys. However, the pace of decline has slowed since a quarterly shipment decline of more than 30 per cent in late 2022.
In the three months ending in September, Lenovo’s net income plunged 54 per cent year on year to $249.2mn, which was a fourth consecutive fall in profits, while revenues declined 16 per cent to $14.4bn in a fifth straight drop.
However, the company achieved a quarter-on-quarter improvement for the second time in a row, indicating “an encouraging trajectory to recovery”, said Yang.
Lenovo is also banking on the growth opportunity of the global artificial intelligence boom and unveiled a full AI product portfolio for consumers and enterprise last month. Yang said he believed that AI would become “the most important growth driver for infrastructure and solutions”.
The company plans to release its first AI PC, a computer embedded with AI functions, in the second half of next year, which could help drive a replacement cycle.
Lenovo also offers AI infrastructure products, including servers with advanced chips from US companies such as Nvidia. These are expected to be hit by the US tightening restrictions last month on high-performance chips being exported to China.
Yang said the company was still communicating with the US government while assessing the impact of the latest chip measures.
Lenovo’s share price is up nearly 50 per cent this year, propelled by a boom in demand for servers to train AI and data centre construction.
The company has also been trying to diversify from its core business and sales from non-PC businesses accounted for 40 per cent of group revenues in the September quarter, up 3 percentage points year on year.
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