By Sherry Qin
Lenovo Group is scheduled to report fiscal second-quarter results on Friday. Here is what you need to know:
NET PROFIT: The world's largest maker of personal computers is expected to post a 43% increase in net profit to $355 million, according to a FactSet poll of six analysts. That would compare with $249 million in the year-earlier period.
REVENUE: The PC maker's revenue likely came in at $15.97 billion, according to FactSet, up 11% from a year ago and 3.4% from the previous quarter.
Lenovo's Hong Kong-listed shares have lost about 13.5% this year after shedding 3.8% in July to September. The stock fell after results for the June quarter were announced in August, driven by concerns about the company's server business. Although server sales increased around 25% from the March quarter, profitability didn't improve materially. Its shares pared some of the losses in late September as Chinese equities rose broadly on Beijing's aggressive policy push.
WHAT TO WATCH:
--Investors will look for the management's updates on shipments of its artificial-intelligence-enabled PCs. In a note, DBS said Lenovo likely has a strong pipeline to expand its AI PC offerings through 2024 and 2025. Shipments of these products could more than double in the next two years, making up 20% and 47% of its total PC shipments in fiscal 2025 and 2026, respectively, DBS said.
--Lenovo's infrastructure-solutions business reported an operating loss in the June quarter despite solid results overall. Morningstar analyst Kazunori Ito has said it could take longer than expected for the segment to return to profitability. In addition to heavy research and development costs, Lenovo accepted low-margin projects to win orders from cloud-service providers, prioritizing orders to catch up in the AI server business, he said in a recent note.
--Lenovo's June-quarter operating margin dropped to 3.2% from 3.5% the previous quarter, prompting some concern among analysts that strong revenue growth isn't translating into profit growth. Investors will pay attention to the company's margins for the quarter ended September and the outlook for the final quarter of the year.
Write to Sherry Qin at sherry.qin@wsj.com
(END) Dow Jones Newswires
November 13, 2024 22:08 ET (03:08 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
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