Lenovo Group ((LNVGY)) has held its Q1 earnings call. Read on for the main highlights of the call.
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Lenovo’s recent earnings call painted a picture of robust financial health, marked by record-breaking revenue and significant market share growth, particularly in the PC and Infrastructure Solutions Group (ISG) segments. Despite facing challenges such as tariff volatility and ISG profitability issues, the company expressed confidence in its strategic investments and technological advancements.
Record-Breaking Revenue and Growth
Lenovo achieved a record high first quarter revenue of USD 18.8 billion, representing a 22% year-on-year increase. This impressive growth was mirrored in the company’s net income, which also rose by 22% year-on-year on a non-Hong Kong FRS basis, while more than doubling on a Hong Kong FRS basis to over USD 500 million.
PC Business Performance
The PC business segment delivered over 20% revenue growth, marking the fastest pace in 15 quarters. Lenovo also achieved a record high global market share of 24.6%, with AI PC penetration now accounting for more than 30% of its total PC shipments.
Infrastructure Solutions Group (ISG) Growth
ISG experienced a 36% year-on-year revenue growth. Notably, the AI infrastructure business doubled its revenue year-on-year, while revenue from liquid cooling solutions grew by 30% year-on-year.
Solutions & Services Group (SSG) Success
SSG reached a record high quarterly revenue, growing 20% year-on-year with an operating margin exceeding 22%. The Managed Services and Projects & Solutions businesses were key drivers, contributing nearly 60% to SSG’s total revenue.
Strong Global Market Performance
Lenovo’s revenue in the PRC surged by 36% year-on-year. In the Americas, the company noted PC market share gains for the ninth consecutive quarter, while in EMEA, record bookings in Device-as-a-Service and software solutions were achieved.
Impact of Tariff Volatility
Despite the strong results, Lenovo acknowledged challenges related to tariff volatility and the geopolitical landscape. The company highlighted its unique ODM+ model as a strategy to mitigate these challenges.
ISG Profitability Challenges
ISG faced an operating loss of USD 86 million in the first fiscal quarter, attributed to strategic investments aimed at enhancing long-term AI capabilities and transforming the ESMB business.
R&D Investment Growth Deceleration
There was a noted deceleration in R&D investment growth, which increased by 10% over the last two quarters. This slowdown has raised concerns about the future pace of innovation.
Forward-Looking Guidance
Looking ahead, Lenovo reported a robust financial performance for the first quarter of the fiscal year 2025/2026, with a record group revenue of USD 18.8 billion, marking a 22% year-on-year increase. The company emphasized its strategic focus on AI, with AI-driven revenue growing significantly and AI PC penetration exceeding 30% of total PC shipments. R&D spending increased by 10% year-on-year to USD 524 million, underscoring Lenovo’s commitment to innovation and its hybrid AI strategy.
In summary, Lenovo’s earnings call highlighted a period of strong financial performance and strategic growth, despite some challenges. The company remains optimistic about its future, driven by its focus on AI and technological advancements, positioning itself well for continued success in the global market.