China’s Lenovo Group (0992. HK) on Thursday posted a worse-than-expected 24% fall in revenue for the April-June quarter, hit by a prolonged slump in global demand for personal computers that has left it and rivals HP Inc. and Dell Technologies Inc. scrambling to adapt. The world’s largest PC maker has now suffered four consecutive quarters of sales declines.
Amid the weakening demand, the company has shifted its focus to non-PC products and services like mobile devices and work-collaboration solutions. It also plans to invest in AI-ready and AI-optimized PCs to support the next generation of generative AI workloads.
But those moves haven’t been enough to offset the waning demand for its PCs. Revenue fell to $12.9 billion, well below analyst forecasts of $15.2 billion. The company’s Infrastructure-Solutions segment suffered from soft demand for servers as businesses shifted to cloud computing. The impact of currency headwinds and divestitures of low-margin businesses also hurt the PC business.
However, the company said it remains confident in its long-term outlook and that the PC market is expected to recover this year as businesses resume investing in a range of productivity-enhancing devices. The company has also been pushing its ZUK brand of smartphones, which are made in its factories in China, to compete with Apple Inc.’s iPhones in the fast-growing market for phones that run apps and augmented reality software.
The company’s Services business grew strongly, with revenue rising 18% year-on-year to $1.7 billion. That was driven by more robust growth in the DaaS, Managed Services for data centers, and IT services markets. The SSG also prioritized building comprehensive solutions for vertical industries and expanding its sustainability offerings.
But the growth in Services was offset by a sharp drop in the Mobility and Consumer segments. Both units compete with cheaper Chinese smartphones that have gained market share from Apple’s iPhones and other smartphone brands. They also face slowing sales in the US, a key market for the tech industry.
The weak performance in Q1 was a significant setback for the company, which has seen its stock price plunge more than 40% this year. But investors may be reassured by the fact that the stock has a Smartkarma Smart Score of 4 for growth and momentum, indicating that the company is poised to continue growing and expanding in the long term. In addition, the stock scores a 3 for resilience and dividends. Futurum Research does not hold equity positions in any companies mentioned in this article. Futurum Research engages in research, analysis, and advisory services with technology companies. This article is solely based on public information and not sourced from any company, individual or third party. Any opinions expressed herein are solely those of the author and do not reflect the views of Nasdaq, Inc. or its officers. This article does not constitute investment advice and should be viewed as a supplement to our reports’ research, analysis, and data.