Lenovo hit by global slump in PC demand following pandemic frenzy
Chinese computer maker Lenovo has reported a near quarter fall in revenues as global PC sales struggle to recover from a post-pandemic slowdown.
Lenovo revenue shrank 24 per cent between April and June to $12.9bn (£10.1bn), below average Refinitiv forecasts of $13.8bn (10.9bn), as computer sales declined.
Shares dipped over three per cent on Thursday morning after the update.
Profits also plummeted 66 per cent to $191m, down from $556m compares to the same period last year.
Lenovo chairman and chief executive Yuanqing Yang said the hardware business “remained in a phase of adjustment” in the first quarter but the firm stuck to their strategy.
Data from analyst company Gartner shows that computer sales dropped 16 per cent at the end of last year, following a boom during the pandemic as people rushed to buy new kit to work from home with.
On the non-PC side of the business, solutions and services revenue increased 18 per cent year-on-year, “demonstrating the effectiveness of our diversified growth engines”, according to Yang.
“I remain cautiously optimistic about our business recovery over the next several quarters,” he added.
Lenovo said although it experienced “challenging market and unfavorable macroeconomic conditions” in the past quarter, it believes the IT device market will recover and grow through the rest of 2023.
In the trading update, the Hong Kong-headquartered firm also announced a $1bn investment into artificial intelligence (AI) to provide “AI devices, AI-ready and AI-optimized computing infrastructure, and embedded AI generated content”.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “Shares in China’s Lenovo Group have fallen back after it revealed it’s been hit by the continued fall in demand for PCs around the world.
“The post-pandemic slump in sales of IT equipment following the frenzied buying during Covid, shows little sign of immediate reversal.
“China’s companies need resilient consumers around the world to offset lower domestic consumption as the recovery has stumbled, but as interest rates are hiked, confidence in buying bigger ticket items is falling,” Streeter explained.