Lenovo’s Q1 profits exceed expectations, leading to a jump in share prices

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Lenovo is currently the world’s biggest maker of PCs. On Wednesday, the Chinese company posted better-than-expected first-quarter profits, leading to a jump in its share prices as the pandemic continues to make work-from-home arrangements necessary.

The company’s shares rose by as much as 9.7% after the results came out and were on track to hit the highest daily percentage gain since March 30 earlier this year.

Profits for the second quarter ended June 30 were up 119% to hit $466 million, compared to $213 million for the same quarter in 2020. The estimated average by analysts placed the expected number at $345.23 million.

The pandemic contributed

Revenue went up 27% to hit $16.9 billion, compared to $13.3 billion a year earlier. Analysts expected the revenue to only reach $16 billion. Lenovo also posted a net income margin of 2.8%, the highest it has reported in a long time.

The company said that a recovery in IT spending was behind the increased demand and allowed its products to be priced higher than the market average.

It is expected that the total PC market will continue to grow over the next half-decade. Chairman and CEO Yuanqing Yang said that the accelerated digital transformation has created “significant market opportunities.”

Lenovo in the lead

Yang added that Lenovo plans to continue investing in R&D, intending to double it over the next three years. The results were the first earnings the company released since the reorganization of its business groups in February.

Analysts say that consumer demand, driven by the pandemic, is starting to slow down. However, the global chip shortage, driven by higher-than-usual demand for products that usually have them, is concerning.

Lenovo is the industry leader and with the Q1 report, extends its lead shipping more than 20 million units for the third consecutive quarter. That gives it 24.4% of the market share, compared to HP, with 22.6%, and Dell at 17%.