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Image source: Visual China

Author: An Ran

Editor: Ye Jinyan

Produced by: Deepnet·Tencent News Xiaoman Studio

Benefiting from a new round of commercial replacement cycle and the launch of the first wave of AI PCs, Lenovo Group recorded double-digit growth for the first time in two and a half years.

On August 15, Lenovo Group released its first quarter results for the 2024/25 fiscal year. In this quarter, Lenovo Group's revenue was RMB 111.9 billion, a year-on-year increase of 20%; net profit was nearly RMB 2.3 billion, a significant year-on-year increase of 65%. Although the personal computer business is still the core business of Lenovo Group, non-PC businesses accounted for nearly 47% this quarter.

Regarding the company's resumption of double-digit growth, Lenovo Group Chairman and CEO Yang Yuanqing explained to Deep Web, "AI factors such as AIPC, AI mobile phones, and AI infrastructure construction are the main factors driving the company's double-digit revenue growth, and are also the result of Lenovo's 3S strategy and accelerated AI transformation."

Regarding recent industry rumors such as "there is a bubble in AI" and "tech giants have spent trillions of dollars on AI capital expenditures but have not produced any substantial output", Yang Yuanqing stated, "AI is not a bubble. In the past two years, everyone has generally focused on large language models. But AI is not limited to large language models, but also includes a variety of other technologies and applications, such as hybrid artificial intelligence."

Yang Yuanqing used AIPC as an example to explain that in terms of intelligent terminals, AI PC is just the beginning. The ultimate goal is to create personal intelligent entities that can be placed in different forms of terminal devices for individuals, and to create enterprise intelligent entities supported by hybrid infrastructure for enterprises, just like "AI twins" of users and enterprises.

The figure shows Lenovo Group's revenue structure for the first quarter of fiscal year 2024/25

In terms of revenue structure, the Intelligent Device Business Group (IDC) business had revenue of US$11.22 billion this quarter, or RMB 80.342 billion, an increase of 11% year-on-year.

The Smart Devices Business Group consists of personal computers, tablet computers, smartphones and other smart device businesses. In this fiscal quarter, Lenovo's personal computer business had a global market share of nearly 23%, an operating profit margin of 8.8%, and high-end products accounted for 31.6%;

Tablet computer revenue increased by more than 30% year-on-year, and smartphone business revenue increased by 28% year-on-year.

Regarding the development of AIPC, Yang Yuanqing revealed, "More AIPCs based on other chips will be launched in September this year." According to Deep Net, Lenovo will launch a new artificial intelligence computer product based on the Arm architecture.

Regarding the penetration rate of AIPC, Yang Yuanqing predicts that the proportion of AIPC will reach 10% this year; about 25% in 2025; and the penetration rate of AIPC will be above 50% in 2026.

The Infrastructure Business Group (ISG) was the fastest growing business this quarter, with revenue of RMB 22.9 billion, a year-on-year increase of 65%. Among them, the revenue of storage, software and services business increased by nearly 60% year-on-year. In terms of energy consumption, the revenue of Poseidon liquid-cooled servers increased by more than 50% year-on-year.

The Infrastructure Business Group suffered a loss of US$37.274 million in the quarter due to increased investment in developing new projects and slower-than-expected upgrading of old projects.

The Solution Services Group (SSG) is the business with the highest operating profit margin. This quarter, SSG's revenue was RMB 13.65 billion, a year-on-year increase of 10%, and its operating profit margin was 21%, maintaining double-digit growth for 13 consecutive quarters.

Regarding the growth of SSG business, Ken Wong, executive vice president of Lenovo Group and president of Solution Services Business Group, told Deep Web, "This year, companies are more concerned about the implementation and application of large models. Many companies have realized that artificial intelligence may bring them opportunities for business transformation and growth."

According to Ken Wong, the current implementation of artificial intelligence in enterprises is divided into three key stages: new IT transformation, data modernization and AI application. Currently, 50-60% of enterprises are still in the first stage.Hybrid CloudThe solution solves the problem of upgrading traditional IT systems and provides a solid foundation for AI implementation.

30%-40% of enterprises have entered the second stage, the data modernization stage. At this stage, Lenovo has mature solutions and many ecological partners. For example, Lenovo’s recent cooperation with Databricks has prepared sufficient data infrastructure for AI applications.

10% of enterprises have completed the transformation of new IT systems and data informatization and have entered the third stage of deploying AI applications. At this stage, Lenovo Solutions Services Business Group provides AI solutions for vertical industries, including intelligent entities covering manufacturing, sales, marketing, customer service and IT operations, which are widely deployed throughout the entire value chain of customers' enterprises.