Financial Services Association, Feb. 22 (Editor Feng Yi) Lenovo Group (00992.HK) announced the results for the third quarter of the 2023/2024 fiscal year.

For the three months ended 31 December 2023, Lenovo Group achieved revenue of US$15.721 billion (approximately HK$122.97 billion), an increase of 3% year over year, and net profit of US$337 million (approximately HK$2,636 million), a decrease of 23% year on year.

According to the announcement, Lenovo Group's revenue recorded three consecutive quarters of growth, up 9% month-on-month, and achieved a year-on-year increase in quarterly revenue for the first time in nearly a year and a half. Net profit declined 23% year over year due to a high base last year.

The PC and smart device business showed a recovery

By business, the revenue and operating profit of the smart device business segment, which mainly focuses on PCs, tablets, and smartphones, increased 7% year-on-year, and the operating profit margin was 7.4%, almost surpassing the historical peak in the same period of the previous year.

Notably, excluding the Chinese market, the smart device business saw double-digit year-on-year growth in revenue from other regions. During this period, Lenovo's personal PC shipments increased by 6 percentage points above the global average, and the commercial PC market share further climbed to 27%, the highest level in three years.

Demand for AI drives a recovery in infrastructure solutions

During the quarter, Lenovo's infrastructure solutions business revenue increased 24% month-on-month, the second consecutive quarter of growth. Lenovo said consolidated revenue from storage, services and software hit a record high of over $1 billion for the first time.

Furthermore, as the entire industry adjusted IT spending and demand turned to support investment in artificial intelligence, demand from cloud customers rebounded sharply this quarter. As corporate budgets shift drastically to support artificial intelligence infrastructure in the face of supply shortages, server revenue has also seen continuous growth.

However, due to the high cost and investment required to develop new projects, the division's overall profit was under pressure, with an operating loss of 38 million US dollars for the quarter.

Solution service business becomes a growth engine

This quarter, Lenovo Solution's service business revenue reached US$2 billion and net operating profit was US$412 million, up 10% and 11% year-on-year respectively, reaching record highs, with an operating profit margin of 20.4%.

According to Lenovo, this is mainly due to increased penetration rates and record high service order volumes for PremierSupport and PremierSupportPlus.

In addition, the Solution Services Business Group won the largest TruScale infrastructure-as-a-service order so far during the quarter, as well as the largest asset recovery service order in the same period in history. Project and Solution Services revenue grew 5% year over year, mainly due to strong demand for integrated complex solutions across all verticals.

The Europe-Middle East region drives revenue growth

Looking at the subregion, Lenovo's revenue in the Europe-Middle East-Africa market increased 20% year-on-year this season, mainly benefiting from a recovery in PC demand. The smartphone business achieved the best quarterly performance in some countries, while revenue in the American region increased only slightly by 1% year-on-year.

Revenue in the Asia Pacific region (excluding China) increased 7% year over year, and was mainly driven by a strong recovery in PC sales, particularly in the Japanese market. Meanwhile, revenue in China fell 10% year on year, and the decline was significantly narrower compared to the previous quarter.