KEY POINTS
- Lenovo reported strong Q3 revenue of $22.2 billion but saw a 21% decline in net profit.
- Worsening memory-chip shortages, driven by AI demand, are threatening production targets.
- The company has raised product prices to offset surging component costs.
Lenovo Group, the world’s largest personal computer manufacturer, warned on Thursday that a worsening global shortage of memory chips is placing significant pressure on its shipment targets. Despite reporting an 18% increase in third-quarter revenue that exceeded market expectations, the Chinese tech giant is navigating a volatile supply chain where soaring demand for artificial intelligence infrastructure is diverting critical components away from the consumer electronics market.
Chief Executive Yang Yuanqing confirmed that the company has already implemented price increases across its product lines to counter the rising costs of DRAM and NAND flash memory. Industry analysts note that while Lenovo has attempted to mitigate these risks by stockpiling inventory—holding roughly 50% more components than usual—the sheer scale of the AI-driven “perfect storm” is beginning to squeeze profit margins. The global PC market is now bracing for a potential contraction as cost pressures intensify throughout 2026.
Financial results for the quarter ending December 2025 reflected these challenges, with net profit dropping to $546 million. This decline was largely attributed to a $285 million restructuring charge as Lenovo pivots its strategy toward the high-growth AI inference market. This internal overhaul aims to reduce long-term costs by $200 million over the next three years while positioning the company to capture demand for “AI PCs,” which require significantly higher memory specifications than traditional models.
The shortage is being compounded by major suppliers like Samsung and SK Hynix prioritizing high-bandwidth memory for AI data centers over standard components used in laptops and smartphones. Experts suggest that the impact will be most severe on budget-friendly devices, where thin margins leave little room for absorbing component price hikes. As Microsoft’s Windows 10 reaches its end-of-life cycle, the resulting refresh demand may collide with these supply constraints, further driving up “sticker prices” for end users.
Looking ahead, Lenovo executives remain optimistic about their ability to navigate the crisis better than smaller competitors due to their scale and long-term supplier contracts. However, the company cautioned that the supply-demand imbalance could persist well into 2027. Investors are closely watching how the company balances its need to sustain sales growth with the necessity of passing on unprecedented 1,000% price inflation in certain semiconductor categories to the consumer.
