By Josh Ye
HONG KONG (Reuters) -China's Lenovo Group (OTC:LNVGY) reported a 9% rise in fourth-quarter revenue to $13.8 billion on Thursday, as the world's largest maker of personal computers (PCs) exits a demand slump following the aftermath of the COVID-19 pandemic.
Revenue for the January-March quarter beat an average estimate of $13 billion drawn from eight analysts, according to LSEG data.
This marks a second consecutive quarter of revenue growth for Lenovo after it suffered five straight quarters of revenue declines amid the post-COVID slowdown.
Last month, research firm IDC said the global PC market has finally returned to growth during the first quarter this year after suffering nearly two years of decline.
PC shipments grew 1.5% year over year to 59.8 million during the quarter, with Lenovo firmly holding on to the No.1 title with a 23% market share, according to IDC.
But overall, Lenovo's revenue for the year ended March 31 fell 8% to 56.9 billion, coming slightly over analysts' expectations of $56.19 billion.
Lenovo's net profit for the January-March quarter rose 118% to $248 million, beating analysts’ estimates of $162 million.
Lenovo's shares fell 1% on Thursday in afternoon trading.
The company is also actively exploring opportunities in artificial intelligence (AI), while continuing to expand its non-PC business, such as smartphones, servers and information technology services.
Revenue for its service business unit rose 8.5% to $1.8 billion for the quarter.
AI PC Boom
Lenovo’s shares hit a 9-year peak, closing about 12% higher on Wednesday, after it unveiled two new AI PCs, a new breed of computers configured to effectively run AI applications.
Morgan Stanley analysts had said in a client note that Lenovo will likely be the main beneficiary of the AI PC boom in Asia. While AI PCs now account for just less than 5% of the market this year, about 64% of new PCs will be AI PCs by 2028, they said.
As such, AI PCs can generate up to 53% of revenue by 2028 for Lenovo, the highest among all the PC manufacturers, compared with the current 2%, they added.
During an interview with Reuters on Thursday, Lenovo CEO Yuanqing Yang said the arrival of AI PCs will "drive the PC replacement cycle".
The company began shipping AI PCs this month.
"Most people's next PCs will be AI PCs," he said, "By the end of the year, 10% of our shipped PCs will be AI PCs... By year 2026, this number could be increased to 50% to 60%."
While Lenovo is working with Microsoft (NASDAQ:MSFT) on AI PCs outside China, most of Microsoft's AI features will not be available in China where the government heavily restricts foreign AI services.
However, Yang said that it left room for Chinese companies including Lenovo itself to emerge as an AI service provider in China.
"Although clearly we cannot use 'Copilot' in China," he said, referring to Microsoft's suite of AI features, "We can offer our Chinese customers with a similar experience or even a better experience in some areas."