Lenovo Rides Work-From-Home Demand to Beat Q1 Profit Expectations

China’s Lenovo Group, the world’s biggest maker of personal computers, on Wednesday posted a better-than-expected jump in first-quarter profit as COVID-19 curbs continued to spur work-from-home demand.

Shares in the company rose by as much as 9.7 percent after its results, and were on course for their biggest daily percentage gain since March 30.

Profit for the quarter ended June 30 rose 119 percent to $466 million (roughly Rs. 3.470 crores), versus $213 million (roughly Rs. 1,590 crores) in the same quarter last year, and above an average estimate of $345.23 million (roughly Rs. 2,570 crores) from six analysts, according to Refinitiv data.

Revenue rose 27 percent to $16.9 billion (roughly Rs. 12,580 crores) from $13.3 billion (roughly Rs. 99,040 crores) a year earlier. Analysts expected revenue of $16 billion (roughly Rs. 1,19,140 crores). It also posted net income margin of 2.8 percent, which the company said was the highest in many years

Lenovo said a recovery in IT spending was fuelling demand and supporting higher average selling prices of its products, and it expected the total personal computer market would continue to grow over the next five years.

“The accelerated digital and intelligent transformation has created significant market opportunities globally,” Lenovo’s Chairman and CEO Yuanqing Yang said in a statement.

“We will continue to increase R&D investment, aiming to double it over the next three years.”

The results were the first earnings released by the company since it reorganised its business groups in February.

Analysts say pandemic-driven consumer demand for PCs is starting to slow, but shortages of components like chips, driven by stronger-than-expected global demand for PCs, tablets, and electronic cars, remain an industry concern.

Worldwide shipments of personal computers rose 13 percent year-on-year to hit 82.3 million units in the second quarter of 2021, with desktop shipments growing for the first time since the fourth quarter of 2019, research firm Canalys said in a report last month.

Lenovo extended its industry lead, shipping more than 20 million units for the third consecutive quarter to take 24.4 percent market share, compared with HP with 22.6 percent and Dell with 17 percent, Canalys said.

© Thomson Reuters 2021

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