Lenovo Group (00992.HK) reported revenue of $18.796 billion for the third quarter of the 2024/2025 fiscal year, which ended on December 31, 2024, marking a 20% year-on-year increase, marking the third consecutive quarter with over 20% growth. Under non-HKFRS standards, net profit reached $430 million, also up 20% year-on-year.
Lenovo’s performance exceeded market expectations. According to data from the London Stock Exchange Group (LSEG), analysts had previously forecasted quarterly revenue of $17.82 billion and net profit attributable to shareholders of $368 million. However, Lenovo reported actual net profit attributable to shareholders of $693 million.
Lenovo’s core businesses include the Intelligent Devices Group (IDG), which focuses on personal computers (PCs), tablets, and smartphones; the Infrastructure Solutions Group (ISG), which mainly deals with servers; and the Solutions & Services Group (SSG), established in 2021 to integrate service-related businesses.
Both IDG and ISG have significant operations in the US, with supplies mainly sourced from factories in the US and Mexico. On February 1, US President Donald Trump signed an order imposing a 25% tariff on imported goods from Canada and Mexico, raising concerns about the impact on Lenovo’s performance.
In response, Lenovo Chairman and CEO Yang Yuanqing said during the earnings call that while the company is still assessing the specific impact, he does not believe tariffs will significantly affect Lenovo’s performance. He emphasized that Lenovo has factories worldwide, including in Argentina, Brazil, India, Japan, Hungary, Germany, Mexico, and the U.S. Additionally, Lenovo employs both in-house and outsourced manufacturing strategies, which give it an advantage over competitors in mitigating tariff increases.
By region, the Americas remain Lenovo’s largest market, accounting for about 33% of revenue, the EMEA (Europe, Middle East, and Africa), China, and Asia-Pacific markets contribute 25%, 25%, and 18% of revenue, respectively.
In terms of business segments, IDG generated $13.8 billion in revenue for the quarter, up 12% year-on-year, accounting for about 69% of total revenue. The operating profit margin stood at 7.3%, remaining steady from the previous quarter.
Luca Rossi, President of Lenovo’s IDG business, expects PC shipments to grow at a mid-to-high single-digit percentage (5%-9%) starting in the current quarter, driven by demand for device upgrades due to Windows 10’s end-of-support and the rise of AI PCs.
The global PC market rebounded in 2024. According to market research firm IDC, PC shipments had surged during the pandemic, reaching 261 million units in 2019, 275 million in 2020, and 349 million in 2021. However, demand began to decline in 2022, with shipments dropping 16% year-on-year to 293 million units, and in 2023, shipments further fell 13.9% to 254 million units, dipping below 2019 levels. In 2024, global PC shipments reached 263 million units, representing a 1% year-on-year increase.
Lenovo remains the world’s largest PC manufacturer by market share. IDC data shows that in Q4 2024, the top five PC makers were Lenovo, HP, Dell, Apple, and ASUS, with market shares of 24.5%, 19.9%, 14.4%, 10.1%, and 6.9%, respectively.
For ISG, revenue reached $3.9 billion in the quarter, a 59% year-on-year increase, while operating profit reached $1 million. In comparison, ISG reported an operating loss of $36 million in the previous quarter and a $38 million loss in the same period last year. Lenovo attributed the growth primarily to cloud IT infrastructure, which has seen revenue grow over 90% year-on-year for three consecutive quarters.
During the earnings call, ISG President Ashley Gorakhpurwalla, who took over in November 2024, did not provide profitability guidance for the segment. He highlighted two key drivers of ISG’s growth: AI model development and enterprise AI deployment, emphasizing that energy efficiency remains the core competitive factor. He also pointed out that Lenovo’s leadership in liquid cooling technology gives ISG a strategic advantage.
Gorakhpurwalla joined Lenovo in November 2024, replacing Kirk Skaugen as head of ISG. Lenovo had acquired IBM’s x86 server business for $2.3 billion in 2014. Skaugen, who joined Lenovo in 2016, led the server business until its first profitable quarter in Q4 2021. However, the segment fell back into losses starting in Q2 2023. Skaugen left Lenovo in June 2024.
SSG posted quarterly revenue of $2.3 billion, up 12% year-on-year. This segment includes support services, operational services, and project & solutions businesses, such as smart city initiatives and data center projects. The operating profit margin remained stable at 20% for several consecutive quarters.
Lenovo’s stock price has been surging driven by the global asset repricing of Chinese tech stocks following the rise of DeepSeek. Since hitting a low on January 13, Lenovo’s stock had gained over 40%, before a pullback on February 20.