By Sherry Qin

Lenovo Group is scheduled to report fiscal third-quarter results on Thursday. Here is what you need to know:

NET PROFIT: The world's largest maker of personal computers is expected to post a 13% increase in net profit to $381.7 million, according to a FactSet poll of seven analysts. That would compare with $337 million in the year-earlier period.

REVENUE: The PC maker's revenue for the three months ended December was likely $17.83 billion, up 13% from the previous year and roughly flat from the previous quarter.

Lenovo's Hong Kong-listed shares have risen 25% this year after falling 4.9% in the final quarter of 2024. Investors, whose sentiment was dented by U.S. President Trump's election win and tariff threats, found relief following homegrown AI startup DeepSeek's breakthrough in January. UOB analysts identified Lenovo as a key beneficiary of the tech advancement, as cheaper and more accessible AI features introduced by DeepSeek could encourage enterprises, especially small- and midsize companies, to start investing in AI equipment, in turn accelerating replacement demand for PCs and servers.

WHAT TO WATCH:

-- Investors will look for the management's comments on the impact of President Trump's tariffs on Chinese goods, as most PC brands still rely heavily on assembly capacity in China. UOB analysts estimated that Lenovo could face a 10%-15% hit to its bottom line for every 10% additional tariff on Chinese goods. Morningstar analyst Kazunori Ito said in a recent note that investors likely overestimated the tariff impact on Lenovo. "We believe Lenovo currently manufactures its servers outside of China and has already diversified its smartphone production globally," he said. Morningstar expects the company to shift some of its PC production outside China in the first half of 2025 to mitigate the potential impact.

--Thanks to DeepSeek, analysts now have better visibility of Lenovo's AI PC replacement cycle after the rollout of several AI PC models in 2024. Investors will be paying attention to the management's comments on the impact of DeepSeek as well as the company's guidance for AI PC sales this year.

Write to Sherry Qin at sherry.qin@wsj.com

(END) Dow Jones Newswires

February 18, 2025 05:00 ET (10:00 GMT)

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