Despite stable revenue growth, yet a drop in income, Lenovo warns of continued memory shortages affecting global hardware through 2026, as AI demand drives up prices for key components.
Lenovo Group Ltd has warned that the ongoing memory chip shortage will continue to affect the global hardware industry for the remainder of 2026, a challenge that has already put pressure on profit margins.
Chief Executive Officer Yang Yuanqing shared this outlook after the company reported a 21% year-on-year decline in net income for the December (2025) quarter, expressing concerns about rising memory costs across the electronics sector.
The sharp drop in Lenovo’s earnings overshadowed its better-than-expected revenue growth of $22.2 billion, which had been driven by strong sales in the personal computer (PC) sector.
However, the company’s stock fell 4.7% during the quarter as investors remained focused on the challenges posed by surging memory prices, which rose 40%-50% for Lenovo alone in the last quarter.
Yang also cautioned that prices could continue to rise in the current quarter, potentially doubling the cost of memory components.
The shortage of memory chips and other key components is partly driven by heightened demand from the booming AI sector, which is increasingly drawing attention and resources from suppliers.
While holiday sales and advance orders ahead of expected price hikes have kept PC demand strong, with market growth of 9.6% in the previous quarter, the memory shortage is expected to intensify in the coming months, reducing overall availability.
According to a Bloomberg report, analysts predicted that although demand would remain high in the March (2026) quarter, the depletion of cheaper inventory would likely lead to further price increases, which could eventually impact consumer demand.
However, larger players like Lenovo are better positioned to secure priority with suppliers, and the company is also seeing strong growth in its AI server business. Lenovo’s infrastructure solutions group, which provides servers and storage hardware, posted a 31% revenue increase, reaching $5.2 billion.
Despite these challenges, major suppliers to the AI boom, including Nvidia and Taiwan Semiconductor Manufacturing Co., remain optimistic about continued demand for their products, even amid concerns about potential market bubbles.
