Lenovo Weathers China Slowdown With 11% Jump in Qtrly Profit

By Ambar Warrick 

Investing.com-- Electronic devices maker Lenovo Group (HK:0992) posted a higher-than-expected quarterly profit on Wednesday as strong smartphone sales and a better international presence helped offset a COVID-led slowdown in its largest market, China. 

Net profit attributable to shareholders for the three months to Jun 30, 2022, rose 11% to $516 million, or 4.39 cents a share, Lenovo said in a filing. This beat expectations for earnings of 3.89 cents.

Quarterly revenue came in flat at $16.96 billion, largely in line with estimates. 

Lenovo saw improved margins as stronger smartphone sales and infrastructure services helped offset a decline in its key personal computer (PC) business. 

The company attributed this decline to a series of COVID-19 lockdowns in China. But strength in its international markets- particularly the Americas and Europe, Middle East and Africa region kept sales, and its margins buoyant. 

Lenovo holds a roughly 3% share of the global smartphone market, helped primarily by its mid-range offerings under the Motorola brand, which it acquired from Google (NASDAQ:GOOGL) in 2014.

But the company is looking to expand beyond just offering devices. Its software infrastructure segment logged a 14% jump in revenue this quarter, supported by growing demand for enterprise software as more companies shift to hybrid work models. 

This, coupled with a 12% jump in non-PC sales, were the main drivers behind Lenovo’s strong results. The company forecast steady demand for its infrastructure offerings, and also expects PC and smartphone sales to pick up in the second half of 2022. 

A series of COVID-19 lockdowns in China this year have battered technology majors that depend on the country for a bulk of their sales. Chip shortages have also dented supply chains for device makers, making it difficult for them to meet growing demand. 

But easing lockdowns towards the end of June helped spur a late-quarter recovery. iPhone maker Apple Inc (NASDAQ:AAPL) also logged steady sales in China for the June quarter.