Lenovo, the largest computer maker by volume, on Thursday ended a five-quarter losing streak. The company reported revenue of $15.7 billion for the quarter ended December 31, 2023, an increase of 3% from the same period a year earlier. This was the company’s first year-over-year revenue increase since the end of 2022, and surprised analysts who had instead expected flat growth for the quarter.
Lenovo personal computers generate about 80% of the company’s revenue. But the PC market has entered a prolonged crisis, due to macroeconomic headwinds and the end of the COVID-era work-from-home boom.
But despite the recovery in profits, the markets do not seem to welcome the news. Shares of the Beijing-based company fell as much as 8.5% in Hong Kong on Friday morning, although they pared losses later in the day.
Shareholders may be worried about the PC maker’s declining profits. The company earned $337 million in quarterly net income, a 23% decline from the same period a year ago. A Citi analyst note highlighted a weak near-term outlook, including a possible delay in PC purchases by enterprise customers in the first half of the year.
What is an AI PC?
Lenovo is turning to a popular trend in its bid to increase demand: artificial intelligence.
The company will begin shipping its first AI personal computers in the first half of the year, Luca Rossi, president of Lenovo’s PC division, said Thursday. These devices are equipped with dedicated processors to handle generative AI tasks locally on the device, rather than in the cloud. (Device makers, including Lenovo, are also exploring producing smartphones that can handle AI tasks locally)
CEO Yang Yuanqing said the PCs will be equipped with “a personal intelligent agent” and a “compressed local language model.”
Importantly, CFO Wai Ming Wong has suggested that AI PCs could drive a new cycle of premium-priced products and could be a “game changer for the PC industry.”
However, the rise of AI PCs may take a while to arrive. William Li, senior analyst at Counterpoint Research, predicts that the “peak season” for these devices will only come in the second half of 2024 through 2025.
Lenovo is the latest technology company racing to provide AI-related products and services. A recent report from technology market research firm IDC predicts that more than 167 million AI PCs will be shipped in 2027. Most AI PCs will be sold to commercial buyers, although consumers may also be interested in applications for gaming and digital creation, IDC wrote.