A 24% decline in third quarter revenues, the largest in 14 years, hit the world’s largest PC manufacturer.
Lenovo announced third quarter results, reporting Group revenue of $15.3 billion and net income of $437 million. However, Group revenue from non-PC businesses reached a high of 41% and profitability remained solid as the company’s Solutions and Services Group (SSG) and Infrastructure Solutions Group (ISG) grew revenue to record highs of $1.8 billion and $2.9 billion respectively, up 23% and 48% year-on-year.
In the PC sector, Lenovo expects year-on-year growth to resume in the second half of the calendar year with end-user demand to be higher than pre-Covid levels. The company remains bullish on the performance of the PC sector, as a result. It is more than likely that most of the investment by the company will go into ISG and SSG. By 2025, the server market alone is expected to reach $135 billion. In the same time frame, the edge infrastructure market will grow 17% CAGR to reach $37 billion, and the storage market will exceed $35 billion.
| Q3 22/23 $ millions | Q3 21/22 $ millions | Change | |
| Group Revenue | 15,267 | 20,127 | (24%) |
| Pre-tax income | 605 | 855 | (29%) |
Lenovo is still the world’s number one PC maker with 23.1% market share, and continues to maintain healthy margins. It’s smartphone division grew by 74% YoY. The company’s Yogi Book 9i was a big hit at CES 2023 and it got some good coverage for its ThinkPhone by Motorola, its first B2B smartphone with enhanced security functions. Lenovo has told analysts that the market is dealing with excessive inventories that may hang around for the next two quarters, the fundamentals of the business are good.
It sounds like sitting at number one in the market is going to allow Lenovo to ride out the storm of inventory chaos and consumer sentiment in 2023 because, otherwise, there are no predictions that paint an optimistic picture for demand. If you look at how Samsung took SDC’s money, and how Lenovo is positioning itself in the server market, there may be something to be said for the hype around AI, and the growth of 5G networks, all of which are probably fueling investment in data centers. It just remains to be seen how hard demand will impact the display industry in the second half of the year.
