Zinger Key Points
- Lenovo posts highest sales in three years, with Q3 revenue up 20% to $18.8B, driven by AI strategy and strong PC sales.
- Lenovo’s net income soars 106% as AI PC demand, cloud momentum, and smartphone growth fuel market expansion.
- China’s new tariffs just reignited the same market patterns that led to triple- and quadruple-digit wins for Matt Maley. Get the next trade alert free.
On Thursday, Chinese PC company Lenovo Group Ltd (OTC: LNVGY) reported fiscal third-quarter revenue growth of 20% year-on-year to $18.796 billion, beating the analyst consensus estimate of $15.58 billion. This marked the highest quarterly sales in the past three years and the second highest in the Group’s history.
All three business groups achieved double-digit year-over-year revenue growth for the third consecutive quarter.
Also Read: Baidu’s AI Cloud, Robotaxi Growth And Accelerated Buybacks Position It For Strong 2025: Analyst
The quarter’s results were driven by the Group’s focused hybrid AI strategy, the turnaround of the Infrastructure Solutions Group, and double-digit growth for both the Intelligent Devices Group and Solutions and Services Group.
The Solutions and Services Group (SSG) posted revenue growth of 12% Y/Y to $2.26 billion, a firm operating margin of 20.4%. The segment accounted for 31% of the total operating profit of the three business groups.
Managed services and Project & Solution Services revenue experienced double-digit growth.
The Infrastructure Solutions Group (ISG) revenue grew 59% Y/Y to $3.94 billion, driven by solid cloud momentum and strengthening enterprise business. The segment operating margin loss improved to 0.0% versus (1.5)% Y/Y.
Intelligent Devices Group (IDG) increased 12% to $13.78 billion, driven by substantial market share gain in PC and smartphone premium sales. It marked the company’s highest PC market share in 5 years.
The PC business expanded its market leadership to almost 24.3% market share. Hybrid AI created growth opportunities for the device market, with the PC market entering a new refresh cycle and driving the smartphone market refresh cycle.
AI PC can represent ~80% of the PC industry landscape by 2027. The segment operating margin stood flat at 7.3%. Motorola’s market share is at a 5-year high, with hypergrowth in Asia Pacific and EMEA. The non-PC revenue mix during the quarter stood at over 46%.
Gross margin declined to 15.7% versus 16.5% a year ago due to a higher sales contribution from ISG’s cloud business, which has a lower profitability profile. The expenses-to-revenue ratio was 12.0% vs. 12.6% the prior year.
Net income grew by 106% Y/Y to $693 million. EPS per ADR rose to $0.0535 from $0.0264 a year ago.
As of December 31, 2024, cash and equivalents stood at $3.93 billion.
Price Action: LNVGY stock is down by 2.77% to $31.10 premarket at the last check on Thursday.
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