Lenovo’s Profit Beats as AI Demand Drives a Gradual PC Recovery

(Bloomberg) — Lenovo Group Ltd. reported better-than-expected quarterly profit, affirming hopes for a gradual computing industry recovery driven by global AI spending.

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Net income grew 38% to $243 million in the three months ended June, Lenovo said in a filing on Thursday. That compares with an average estimate for $231 million. Revenue rose 20% to $15.4 billion.

The results reflect how growing demand for the servers essential in artificial intelligence development is lifting the computing hardware market from its post-Covid slump. From Amazon.com Inc. to Google and Baidu Inc., big tech companies are raising spending on data centers at a rapid clip, preparing for an envisioned boom in AI services.

Lenovo extended its lead over HP Inc. and Dell Technologies Inc. with 14.7 million units shipped during the June quarter, according to research firm IDC. But the Chinese firm’s stock has lagged its rivals this year, in part because of worries about the world’s No. 2 economy and exposure to geopolitical tensions.

Chief Executive Officer Yang Yuanqing is betting on AI-powered devices to boost its global business in coming years, though that market remains untested.

“Demand for AI-related PCs might only kick in from 2025, and there’s still a question about the sustainability of that market,” Bloomberg Intelligence analysts Cecilia Chan and Steven Tseng wrote in a memo ahead of the results.

Geopolitical risks, including possible new PC tariffs or chip-export restrictions by US or European regulators, remain a question mark for the 40-year-old company. The Biden administration has already slapped a series of curbs on exports to China of advanced chipmaking technologies and processors, including Nvidia Corp.’s highest-end AI-training chips. Lenovo is by far the top seller of servers in the country.