Lenovo Shares Slide After Margin Concerns Outweigh Results Beat
Still, its shares sank as much as 5.4% in Hong Kong after the results, as investors worried about losses from its fast-growing cloud division. Chinese tech companies are also grappling with concerns stemming from a prolonged US-China trade and technology war.
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The impact from US tariffs is 'very limited' for Lenovo, Chairman Yang Yuanqing said.
'We have built more than 30 factories in more than 10 countries that give us a lot of flexibility and resilience,' Yang told Bloomberg News. He added that he expected the global PC volume to grow by a mid- to high-single-digit percentage in the fiscal year through next March, and that Lenovo will outperform the market.
The world's top PC maker said net income for the June quarter rose 108% to $505 million, beating the average of analysts' estimates by a wide margin. That's partly due to fair value gains from warrants issued earlier this year. Revenue climbed 22% to $18.8 billion versus an expected $17.6 billion.
Beijing-based Lenovo grew quarterly PC shipments 15%, outperforming competitors HP Inc. and Dell Technologies Inc., according to Counterpoint Research. The overall market grew 8.4%, its fastest pace since 2022, driven by a replacement cycle as support for Windows 10 ends later this year and customers front-load purchases. Like its rivals, Lenovo has touted so-called AI PCs equipped with more powerful hardware to perform workloads from real-time transcription to image generation.
What Bloomberg Intelligence Says
Lenovo's strong sales in fiscal 1Q — rising 22% and beating consensus by 7% — suggest the cloud segment, which expanded 36%, could play a bigger role in its growth, given robust AI server demand and fading front-loaded demand for PCs. Still, widening losses of the division indicate more investment might be needed to meet customer demand and frequent system upgrades, which could narrow the company's margins.
- Steven Tseng and Sean Chen, analysts
Click here for the research.
The impact of US tariffs could be felt in coming quarters as new, sweeping measures take effect.
'Due to the US tariff-related uncertainty, PC shipments will likely weaken year-on-year starting from the second half of 2025,' Counterpoint Senior Analyst Minsoo Kang said. US President Donald Trump has announced tariffs on imports from some trading partners and declared plans for a 100% levy on chips, raising concerns for the PC industry.
Lenovo has sought to expand its non-PC business. Its infrastructure solutions group, which sells products such as servers and storage, recorded a 36% jump in quarterly revenue to $4.3 billion, helped by AI infrastructure demand in Asia. The segment logged a bigger $85.5 million loss in the June quarter, however.
(A previous version corrected spelling of Hang Seng Index.)
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