Lenovo posts another revenue decline as PC demand remains slow

China's Lenovo Group Ltd on Thursday posted a 16 per cent fall in revenue for the three months through September, meeting market expectations, as supply for personal computers (PCs) continued to outstrip demand.

Lenovo's quarterly revenue fell 16 per cent to $14.41 billion from the same period last year, marking the fifth consecutive quarter that the world's largest PC maker has suffered a sales decline as it continues to digest excess inventory accumulated during the COVID-19 pandemic.

The result compared with the $14.45 billion average of seven analyst estimates compiled by LSEG.

In May, Lenovo reported 14 per cent revenue decline for the year through March, its first annual fall since 2019, following a pandemic-induced boom for electronics manufacturers.

The COVID-19 outbreak brought a surge in both enterprise and personal electronics sales as the world embraced remote work. However, revenue started contracting last year as supply began to outstrip demand.

Worldwide PC shipments fell 7 per cent in the second quarter of 2023, showed data from researcher Canalys. Quarterly shipment decline surpassed 30 per cent late last year but the pace has slowed in recent quarters.

To help lift PC sales, Lenovo aims to release its first "AI PC" - or PC that can make use of artificial intelligence (AI) without the internet - in the second half of next year, said Chairman Yang Yuanqing.

"We definitely believe that this new category of PC will bring value to our users and customers and boost another round of sales in PCs," Yang told Reuters in an interview.

A key selling point of AI PCs is that users will not need to send data to the cloud to use generative AI tools, better-protecting user privacy.

Yang said Lenovo is still evaluating any impact of new U.S. curbs on AI chip exports, which barred U.S. chipmaker Nvidia (NVDA.O) from selling many bleeding-edge AI chips to China.

"The new U.S. regulations only restrict the high-end GPUs, (graphics processing units) particularly for AI training. But it's not all the chips," he said. "We have a very broad and comprehensive cooperation with Nvidia in gaming PCs, in workstations and in high-performance computing. I think, definitely, this business will not be impacted."

BEYOND PC

To improve profit margins, Lenovo has also been expanding non-PC businesses, such as smartphones, servers and information technology (IT) services.

Throughout the first half of its fiscal year, revenue from Lenovo's digital solution service business rose 14 per cent to $3.6 billion.

Overall net income attributable to shareholders in the second fiscal quarter fell 60 per cent to $249 million versus analysts' $235 million estimate.

The price of Lenovo shares fell 2.86 per cent in early afternoon trading in Hong Kong following the earnings release, compared with a 1.42 per cent decline in the benchmark index.