By Sherry Qin

Lenovo Group reported better-than-expected quarterly earnings, with solid revenue growth across segments, boosted by its bet on the fast-growing use of artificial intelligence.

Net profit for the three months ended December more than doubled to $693 million, the world's largest PC maker said Thursday, beating the $381.7 million estimate in a FactSet poll of analysts. The figure was partly boosted by a $282 million nonrecurring income tax credit.

Revenue was $18.80 billion, up 20% from a year earlier, also topping analysts' estimates. Lenovo's main business, the intelligent-devices segment, which includes PCs, smartphones and tablets, delivered a 12% revenue gain.

The results reflect a solid commercial PC replacement cycle but also show that the company is reaping the benefits after launching several AI PC models in China last May.

Lenovo Chief Executive Yang Yuanqing told The Wall Street Journal in November that AI PCs could make up 25% of its global PC shipments this year and reach 70%-80% by 2027 as the premium product becomes mainstream.

The company's Hong Kong-listed shares have risen more than 25% so far this year, driven in part by investors' exuberance over Chinese AI startup DeepSeek's breakthrough in January.

Lenovo has been touted as a key beneficiary of the tech advancement. Analysts at UOB said that cheaper, more accessible AI features introduced by DeepSeek could encourage more enterprises, especially small and midsize companies, to invest in AI equipment, which may accelerate replacement demand for PCs and servers.

"AI technology, with higher efficiency and lower costs, is accelerating the maturation of personal AI, particularly on-device AI and edge AI," Yang said in a statement.

The company has also continued diversifying its revenue channels, with its non-PC business making up 46% of overall revenue. The infrastructure-solutions segment, comprising server, storage and networking businesses in data centers, has been a significant contributor to Lenovo's non-PC success. It reported a profit turnaround for the quarter, driven by a 59% jump in revenue on solid demand for traditional servers.

Lenovo's smartphone sales also showed strong momentum, posting double-digit revenue growth.

The company attributed the resilient results, which came despite geopolitical tensions, to its expanding global manufacturing footprint and diverse supply chain. Lenovo last year raised $2.0 billion from a unit of Saudi Arabia's sovereign wealth fund and inked a deal to build a manufacturing hub serving the Middle East.

Write to Sherry Qin at sherry.qin@wsj.com

(END) Dow Jones Newswires

February 20, 2025 00:32 ET (05:32 GMT)

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