Chinese company Lenovo, the world’s largest computer manufacturer, saw its net profit fall by five percent to USD 340 million in the second financial quarter, falling significantly short of analysts’ estimates. However, the company increased its adjusted net profit, which is adjusted for one-time and non-cash items, by 25 percent. Sales were record-breaking, the company announced in a press release today.
The company’s revenue grew by 15%, and the AI division is growing rapidly despite losses
Revenue for the three months to the end of September rose 15 percent to $20.5 billion. According to an LSEG survey, analysts had expected net profit of $449.4 million and revenue of $20.3 billion.
Revenue from the computer, tablet, and smartphone division increased by 11.8 percent in the quarter. This division accounted for more than 70 percent of total revenue. Revenue from the digital infrastructure division, which includes artificial intelligence (AI) server businesses, rose 24 percent. However, the division reported an operating loss of $118 million due to investments in expanding AI capacity.
Global AI boom drives up memory chip prices
The company recorded double-digit year-on-year revenue growth in all major business groups and sales regions. The share of AI-related revenue in total revenue increased by 13 percentage points year-on-year to 30 percent. The company also announced that it had signed a long-term contract for the supply of memory chips. It wants to ensure it has enough chips at a time of rising prices due to the sharp increase in demand for artificial intelligence.
Memory chip prices are rising globally due to demand from data center operators for AI servers. Chip manufacturers have therefore shifted their capacity to high-bandwidth memory (HBM), which is used in AI chip sets. This has reduced the supply of less attractive chips used in smartphones, computers, and gaming devices. Chinese company Xiaomi warned this week that smartphone prices are likely to rise next year due to the sharp increase in memory chip prices.
Source: Reuters
