Lenovo Group GAAP EPS of $0.01 in Line, but Revenue of $12.9 Billion misses by $610 Million

Lenovo Group just reported its quarterly earnings. Its ADR ticker is LNVGY, and they rose yesterday, on August 16, by 1.31% (no premarket data for this stock). The PC-maker’s Q1 GAAP EPS of $0.01 (net income of US$191 million) stood roughly in line with expectations. Revenue of $12.9 billion (-23.9% YoY) missed by $610 million.

Revenue from the non-PC businesses accounted for 41% of Total Group revenue. According to the company’s press-release, its Infrastructure Solutions Group (ISG)’s comprehensive AI portfolio was ranked number three globally for suitability of its AI hardware infrastructure. It is also leading the way in designing the next generation of AI systems powered by NVidia. The Lenovo ThinkSystem SR675 V3 server will soon include the newly announced NVidia L40S GPUs that will help advance AI and bring generative AI applications like intelligent chatbots, search, and summarization tools to users across industries.

Having said all that, Lenovo generally continues its mildly bearish trend, with earnings weakening further due to PC headwinds and sub-par server profitability. While management believes the PC cycle will bottom out in 2H 2023, particularly in the business segment, this likely reflects nothing more than favorable YoY comparisons rather than a cyclical turnaround in PC demand. As such, we remain conservative on the demand outlook, especially if global economic data starts to deteriorate.