Lenovo, the world’s largest PC manufacturer, has posted a sharp 64% decline in quarterly profits, citing a drop in warrant value and shrinking margins in parts of its enterprise operations. The company reported a net profit of $90 million for the quarter ending March 31—well below analysts’ expectations of approximately $225 million.
Despite the disappointing bottom line, Lenovo exceeded revenue projections, posting $16.98 billion in sales compared to the anticipated $15.6 billion. The uplift was largely driven by strong performance in personal devices and infrastructure solutions, which offered a silver lining amid broader challenges.
Server-related revenue surged 64% year-on-year, and cloud services climbed 22% to $2.2 billion, underscoring continued momentum in Lenovo’s infrastructure push. However, profitability remains under pressure from volatile financial instruments and tightening margins across its enterprise segments.
The firm is also navigating rising geopolitical and trade tensions. With a significant portion of its manufacturing based in China and more than a third of its revenue coming from the Americas, Lenovo finds itself vulnerable to the ongoing tariff standoff between the U.S. and China.
PC shipments grew 11% in Q1 2025, according to IDC, fueled by a rush from buyers anticipating increased costs from new U.S. tariffs on Chinese imports. Yet analysts caution that this boost may be temporary, with future quarters likely to reflect the cooling effects of inflation and tariff uncertainty.
Citi analysts warn that while consumer pricing can be adjusted swiftly, renegotiating commercial contracts—covering nearly 70% of Lenovo’s U.S. sales—will take longer to offset the financial impact.
CEO Yang Yuanqing remains optimistic, pointing to the launch of AI-powered PCs as a key growth driver. “This has been one of our best years yet, even in the face of significant macroeconomic uncertainty,” Yuanqing said. Lenovo’s annual revenue reached $69.08 billion, its second-highest on record, and full-year profit rose 37%.
Still, investors are wary. Lenovo’s shares dropped more than 2% following the results announcement, reflecting continued concern over profitability rather than sales growth.
The company maintains confidence in its long-term strategy, citing its global manufacturing footprint and diversified supply chain as buffers against volatility. “We are well-positioned to adapt to global market shifts,” Lenovo said in a statement.
Yet, analysts stress that even a flexible supply chain has limits. Exposure to trade shocks remains a critical risk that could complicate Lenovo’s financial trajectory in the months ahead.
