The PC market might stabilise sooner than expected this year, and the company will in the meantime raise efficiency and invest in innovation, Lenovo said. Such cost cuts helped Lenovo’s quarterly net income fall a smaller-than-expected 32 per cent to US$437 million.

“Real demand, reflected by users’ device activations, was much better than industry shipment data,” Yang said. The market is still working its way through pandemic-era inventory, he said. “We think the market demand is not as bad as many expected.”

Still, shares of Lenovo extended losses to more than 4.9 per cent in Hong Kong on Friday, in their biggest intraday drop in a month.

Softer corporate demand adds pressure on Beijing-based Lenovo’s profitability, as revenue contribution from lucrative services solutions declines, Bloomberg Intelligence analyst Steven Tseng said.

“Deteriorating enterprise spending amid slowing economic growth and geopolitical tension could be the culprit, and the headwind might persist in the near term,” said in a memo ahead of the earnings release.

In the coming quarters, China’s pledge to spur consumer spending could boost electronics sales. The country dropped its stringent Covid restrictions late last year following widespread protests.

But the recovery could be a bumpy one. While the smartphone market could see a modest recovery this year, PC sales could face more challenges because of lacklustre demand from corporations, Tseng and Sean Chen said in a separate memo.

“Companies might remain cautious in the near term and tighten spending on digital infrastructure,” they said. “Yet Lenovo could stand out as it’s poised to be the major beneficiary of China’s localisation push to replace foreign-branded PCs in the public sector.”