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Lenovo Swings to Quarterly Loss Despite AI-Driven Record Revenue; Shares Surge 21%

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Lenovo Swings to Quarterly Loss Despite AI-Driven Record Revenue; Shares Surge 21%

Lenovo Group (HKG:0992) swung to a net loss in the fiscal first quarter ended June 30, even as revenue jumped 43% following a surge in its AI server pipeline, according to a Hong Kong bourse filing on Thursday.

Shares of the company jumped nearly 21% in late-afternoon trade in Hong Kong on Thursday.

The electronics company incurred a loss attributable to shareholders of $609 million during the quarter, reversing last year's attributable profit of $505 million.

Loss per share was $0.05, versus earnings per share of $0.03 a year earlier.

The loss stemmed mainly from a non-cash fair value loss of $1.69 billion on derivative liabilities tied to warrants issued in the previous fiscal year. Lenovo also cited higher employee benefit costs, which ballooned $211 million due to higher headcount, increased sales commissions and higher long-term incentive awards.

Lenovo also booked a $53 million increase in ad spending mainly due to promotional campaigns during the FIFA World Cup.

Meanwhile, revenue jumped to $26.9 billion from $18.8 billion, with all three business groups reporting record first-quarter results.

The Intelligent Devices Group saw revenue jump 27% to a record $17.1 billion, with Lenovo's global PC market share rising to 24.2% in the quarter from 23.7% a year earlier.

The Infrastructure Solutions Group nearly doubled its revenue to an all-time high of $8.5 billion, boosted by its strong AI server pipeline. Lenovo expects to benefit further from the growing need for AI infrastructure globally, saying its portfolio captures both AI training and inferencing opportunities.

Elsewhere, Lenovo's Solutions and Services Group posted a 28% jump in revenue to $2.9 billion, also boosted by the company's AI-related services.

Overall AI-related revenue during the quarter increased 60% year over year, accounting for 35% of Lenovo's revenue during the period.

Looking ahead, Lenovo said it plans to speed up its "Hybrid AI strategy" to attract growth opportunities and grow profit.

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