Chinese tech giant Lenovo doubles down on AI after world's largest PC maker posts first quarterly revenue growth since late 2022

Lenovo Group, the world's largest personal computer (PC) maker, said it is doubling down on various artificial intelligence (AI) initiatives, including new computing devices and services that support the technology, after reporting a 3 per cent year-on-year increase in revenue in the December quarter.

The Beijing-based tech giant on Thursday said its revenue reached a better-than-expected US$15.7 billion, up from US$15.2 billion in the same period last year and ahead of analysts' US$15.4 billion average forecast, amid a recovery in global demand to halt the company's string of quarterly sales decline since late 2022.

Net income attributable to shareholders fell 23 per cent to US$337 million, which was down from US$437 million a year ago and below analysts' average estimate of US$309 million.

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"Looking ahead, our commitment to AI innovation, our pocket-to-cloud computing capabilities, full stack portfolio of smart devices, smart infrastructure, smart solutions and services, combined with our partnerships with other key leaders in AI, will ensure that we are well-positioned to capture the tremendous opportunities in AI," Lenovo chairman and chief executive Yang Yuanqing said in the company's earnings webcast on Thursday.

Computer giant Lenovo Group is expected to unveil its latest portfolio of artificial intelligence devices and infrastructure solutions at trade show MWC Barcelona, which will be held from February 26 to 29 in the northeastern coastal city in Spain. Photo: Lenovo alt=Computer giant Lenovo Group is expected to unveil its latest portfolio of artificial intelligence devices and infrastructure solutions at trade show MWC Barcelona, which will be held from February 26 to 29 in the northeastern coastal city in Spain. Photo: Lenovo>

Lenovo's sharpened focus on AI reflects efforts in the global PC industry to integrate the technology into their products and services, responding to a projected shift in demand to machines that can run generative AI tasks locally.

That trend is expected to stimulate another industry refresh cycle, as users require devices designed for more creativity and productivity, according to Yang.

Shipments of AI PCs, built with specific semiconductors designed to run generative AI tasks locally, are forecast to grow to more than 167 million units by 2027, up from nearly 50 million projected this year, according to a report by tech research firm IDC earlier this month. IDC predicted AI PCs to represent almost 60 per cent of the industry's worldwide shipments in 2027.

Lenovo, which operates in more than 180 markets worldwide, is rolling out its first-generation AI PCs in the first half of this year, according to executive vice-president Luca Rossi, who also heads the company's Intelligent Devices Group. He said Lenovo's portfolio of AI devices will "dramatically expand" from the second half of 2024 through 2025.

People pass by a Lenovo store in New Delhi, capital of India, on September 28 2023. Photo: Shutterstock alt=People pass by a Lenovo store in New Delhi, capital of India, on September 28 2023. Photo: Shutterstock>

Company executive vice-president Kirk Skaugen, who also serves as president of the enterprise-focused Solutions and Services Group (SSG), said on the same webcast that the company expects to double its market share in AI servers this year.

Lenovo's SSG achieved record revenue of US$2 billion and record operating profit, with more than 20 per cent in operating margin, in the December quarter.

The company's shares in Hong Kong closed up 3.27 per cent to HK$8.84 on Thursday after reporting its latest quarterly earnings.

Following its announcement last August of an additional US$1 billion investment over three years to accelerate AI deployment for businesses around the world, Lenovo on Thursday said it was continuing to add more resources. It said research-and-development headcount was up more than 25 per cent year on year, "with R&D expenses-to-revenue ratio for its full [financial year to March] on track to hit an all-time high".

Earlier this month, Chinese internet search and AI giant Baidu said its generative AI technology will be integrated into new smartphones under Lenovo's Moto brand, according to a Reuters report.

Smartphone shipments of Lenovo in the December quarter were up 32 per cent year on year amid increased demand across markets in the Asia-Pacific, North America and the Middle-East-and-Africa region, according to the company's financial results announcement on Thursday.

Lenovo's "AI for All" strategy received a major push in January at the CES trade show in Las Vegas, where the company unveiled a line-up of more than 40 new devices and solutions powered by AI. These included Lenovo devices under its Yoga, ThinkBook, ThinkCentre and Legion sub-brands for consumers and businesses.

Last October, semiconductor design firm Nvidia and Lenovo announced a new collaboration in which the computer giant will deliver fully integrated systems that "bring AI-powered computing to everywhere data is created, from the edge [of a network] to the cloud", enabling enterprises to easily deploy generative AI applications.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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