Lenovo Returns to Growth as Revenues Beat Estimates

The world’s biggest maker of PCs reported a net income of $357 million on revenues of $15.7 billion for the quarter ending December 31. Lenovo’s revenues were up 3 percent year-over-year (YOY), beating analyst estimates, and the quarter was the first in 18 months in which the firm saw revenue growth.

“Last quarter, we delivered on our promise and resumed year-on-year revenue growth, driven by both the resilience of our core businesses and the effectiveness of the service-led transformation,” Lenovo chairman and CEO Yuanqing Yang said. “Looking ahead, our commitment to AI innovation, our pocket-to-cloud computing capabilities, full-stack portfolio of smart devices, smart infrastructure, smart solutions, and services, combined with our partnerships with other key leaders in AI, will ensure that we are well-positioned to capture the tremendous opportunities in AI.”

In a post-earnings conference call, Yang said that while growth in its PC business was slower than hoped for, it is indeed moving in the right direction. Demand for PCs should improve, he said.

On that note, Lenovo’s Intelligent Device Group (IDG) delivered an operating profit of $912 million on $12.4 billion in revenues. This part of the business is responsible for Lenovo’s PCs, tablets, smartphones, and other smart devices, and it returned to growth, with revenues up 7 percent YOY. Lenovo owns 24 percent of the PC market by shipments overall, and 27 percent in the commercial space, its biggest share in over three years. Operating margins hit 7.4 percent, a near-historic high, and Lenovo touted its “industry-leading profitability.”

Lenovo’s Infrastructure Solutions Group (ISG) landed a net loss of $37.7 million on revenues of $2.5 billion. Lenovo blamed an “industry-wide correction in IT spending and a demand shift to support AI investment” for the stumble, the blow softened somewhat by cloud customer demand and infrastructure spending both improving towards the end of the quarter. And its combined revenues from storage, services, and software hit a record of over $1 billion for the first time.

Finally, Lenovo’s Solutions and Services Group (SSG) delivered an operating profit of $412 million on record revenues of $2 billion, a gain of 10 percent YOY. This business saw record-high premier support bookings in the quarter and “solid demand” for its Device-as-a-Service (DaaS) and Infrastructure-as-a-Service (IaaS) solutions.