Performance will hit directly| The turnaround in ISG business helped Lenovo’s Q3 net profit increase by 106%, but its share price overfell by 6% that day.

Source: Visual China

Blue Whale News, February 20 (Reporter Zhai Zhichao)Despite Lenovo Group’s strong growth in various data this fiscal quarter, after the results were announced, as of the close of February 20, Lenovo Group’s share price fell by 6% to close at HK$11.78, with a total market value of HK$146.1 billion.

According to Lenovo Group (HKSE:992)(ADR:LNVGY)’s third-quarter results for the fiscal year 2024/25 ended December 31, 2024, Lenovo Group achieved revenue of 135.1 billion yuan in the quarter, a year-on-year increase of 20%; Net profit was 4.98 billion yuan, a year-on-year increase of 106%.

Yang Yuanqing, chairman and CEO of Lenovo Group, said at the performance call that“As our infrastructure solutions business turned a profit, it promoted a significant increase in the overall turnover and net profit of the group.& rdquo;

In terms of business segments, Lenovo Group’s global market share of personal computer business reached 24.3% this fiscal quarter, leading the second place by nearly 5 percentage points.

Growth in the mobile phone business continued in the fiscal quarter, with revenue increasing 21% year-on-year. Both revenue and shipments have risen to the top five in international markets outside China. In addition to the two traditional core markets of North America and Latin America, revenue in China, Asia Pacific, Europe, the Middle East and Africa increased by 156%, 155% and 28% respectively year-on-year.

“The reason why we are unwilling to just focus on Latin American and North American markets, but are resolutely expanding into the Asia-Pacific market, Europe, the Middle East, and Africa, even if we need to invest a lot of financial resources, is for sustainable profitable growth and to create a more large-scale business foundation.& rdquo;Yang Yuanqing explained.

It is worth noting that the Infrastructure Solutions Business (ISG) turned a profit during the fiscal quarter: ISG revenue increased by nearly 60% year-on-year to 28.3 billion yuan; cloud infrastructure (CSP) business revenue hit a record high; enterprise infrastructure (E/SMB) business achieved steady growth;AI servers began to usher in stable profits.

Yang Yuanqing said that correct strategy and firm implementation are the key. In the early days of the market’s shift to cloud computing, we made it clear that traditional E/SMB and emerging CSP are the two wings of ISG and need to go hand in hand. Over the past few years, we have built our CSP business from scratch, and we have persisted in investing even if a certain stage will affect the profitability of the overall business. To this end, we have established a unique ODM+ model. Today, our CSP business is growing into a business with an annual turnover of more than 10 billion US dollars and can make profits independently. We also took advantage of the scale advantage established by the CSP business to feed back the E/SMB business and help it optimize costs, thereby promoting the continuous improvement of the profitability of the entire ISG business.” rdquo;

At the same time, Lenovo Group’s SSG solution services business revenue hit a record high this quarter, reaching 16.2 billion yuan, and operating profit margins continued to remain high (20.4%). Non-hardware-driven operation and maintenance services and project and solution services accounted for nearly 60% of SSG’s overall business.

Lenovo Group announced that it will deploy the DeepSeek model locally on the end-side of AI PCs, making it the first PC manufacturer in the world to deploy this model on the end-side.

Yang Yuanqing said that“The new model, as well as higher reasoning efficiency and lower computing power costs, provides a more realistic path for the popularization and application implementation of artificial intelligence. It will accelerate the maturity of end-side intelligence and edge-side intelligence, and will also promote and accelerate the deployment and customized application of artificial intelligence in enterprises. rdquo;

“In addition, Lenovo Group will also accelerate the implementation of hybrid artificial intelligence, covering personal intelligence and enterprise intelligence. In terms of personal intelligence, PCs, tablets, mobile phones and other terminals will be pre-installed with large-scale models with higher efficiency. Users can experience the convenience of generative artificial intelligence without having to go to the cloud or connect to the Internet, and better protect privacy and data security. rdquo; Yang Yuanqing continued.

However, industry insiders pointed out that many technology giants have invested heavily in AI research and development, application, etc., and have a profound accumulation of technology, while Lenovo has been relatively late in the AI field. Although Lenovo actively promotes AI-related businesses, it still faces huge technological and market competitive pressure to stand out in the highly competitive AI field.