China’s Lenovo posts Q3 revenue growth, beats analyst estimates

(Corrects to show net income fell, not rose, in paragraph 4)

By Josh Ye

HONG KONG (Reuters) -China’s Lenovo Group (OTC:), the world’s largest maker of personal computers, on Thursday reported October-December revenue of $15.72 billion, up 3% from the same period a year earlier.

The result compared with the $15.25 billion average of eight analyst estimates compiled by LSEG.

Revenue started contracting in 2022 at the end of a boom in demand for PCs and other electronic products brought about by COVID-19. Lenovo then recorded five quarters of revenue decline, with analysts forecasting growth in the sixth.

Net income attributable to shareholders fell 23% to $337 million in October-December, versus analysts’ $309 million estimate.

Researcher Gartner (NYSE:) in January reported Lenovo’s third-quarter PC shipments grew 3.2% versus the same period a year earlier. Industry-wide PC shipments likewise grew, by 0.3%, reflecting market recovery after an almost two-year decline.

Lenovo controlled 25.6% of the global PC market during the period, Gartner data showed, with HP (NYSE:), Dell (NYSE:) and Apple (NASDAQ:) in second, third and fourth place.

The PC maker is working to improve profitability by expanding non-PC businesses, the most notable of which sells information technology services to enterprises. Revenue for its service business unit rose 10% to $2 billion.

Lenovo’s share price was down 0.58% in morning trade, versus a 0.15% increase in the benchmark .

Investors have been buying Lenovo shares over the past 12 months in part due to potential demand for “AI PCs”, or personal computers optimised to run artificial intelligence software. In that time, Lenovo stock price has gained more than 25%.

On Thursday, Lenovo said AI PCs – including those capable of running AI applications without being connected to the internet – will be a strategy focus for the foreseeable future. Last year, it unveiled more than 10 AI-capable PCs at the International Consumer Electronics Show.

“Looking ahead, our commitment to AI innovation, our pocket-to-cloud computing capabilities, full stack portfolio of smart devices, smart infrastructure, smart solutions and services, combined with our partnerships with other key leaders in AI, will ensure that we are well-positioned to capture the tremendous opportunities in AI,” said CEO Yang Yuanqing.

AI PC shipments will likely reach 50 million units this year and are set to more than triple to 167 million units by 2027, accounting for close to 60% of total shipments, showed data from researcher IDC. Lenovo, which owns the Motorola (NYSE:) smartphone brand, is also working on AI-capable smartphones. This month, Reuters reported Lenovo has partnered Chinese search engine leader Baidu (NASDAQ:) to equip its phones with Baidu’s large language model “Ernie”. Shipments of AI-capable smartphones are likely to reach 170 million handsets this year, making up 15% of the market, IDC data showed.