Lenovo faces steep revenue decline amidst global PC demand slump

World’s largest PC maker sees fourth consecutive quarter of sales decline, cites hopes for late-2023 recovery

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Lenovo Group, the prominent Chinese multinational technology company, reported a significant 24% drop in revenue for the April-June quarter, reflecting a prolonged global decline in personal computer (PC) demand. This marks the company’s fourth consecutive quarter of sales decline, in a trend that began amid the COVID-19 pandemic.

The world’s largest PC maker’s revenue for the April-June quarter contracted to $12.9 billion, falling short of the $13.84 billion average estimated by seven analysts compiled by Refinitiv. Following the announcement, Lenovo’s Hong Kong shares initially plummeted by up to 6%, subsequently recovering some losses to trade down 2.9%. Meanwhile, the benchmark index gained 0.9%.

While the pandemic initially spurred electronics sales due to remote work and learning demands, the PC market began contracting due to various factors, including rising interest rates and inflation. Lenovo’s sales in China experienced a more pronounced decline than in other markets, with quarterly revenue plummeting by 29% compared to the same period the previous year.

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Lenovo’s CEO, Yang Yuanqing, expressed confidence in China’s long-term fundamentals and lauded the government’s efforts to stabilize the market and boost consumption. The company anticipates a recovery in its PC business in late 2023, stating that the segment is stabilizing and well-positioned for growth.

The global PC market has faced its own challenges, with PC shipments declining by 12% in the second quarter of 2023, a considerable improvement from the more than 30% drop witnessed in the preceding two quarters, as reported by market research firm Canalys.

Lenovo’s strategic efforts to diversify beyond the PC business have led to the expansion of non-PC segments, including servers and IT services. However, the device business, encompassing PCs, smartphones, and tablets, remains the primary revenue driver, accounting for nearly four-fifths of the company’s total revenue.

The company’s infrastructure solutions business, responsible for server sales, posted an unexpected 8% revenue decline during this quarter – its first such decline in several quarters. Yang attributed this decline in part to an ongoing shortage of AI chips, which has affected the availability of AI servers.

As Lenovo navigates these challenges, the company remains committed to optimizing profit margins and further diversifying its revenue streams to maintain a competitive edge in the ever-evolving technology landscape.