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Lenovo Software And Services Hit $1 Billion Mark As PC Sales Surge

Lenovo’s PC and Smart Devices Group, meanwhile, hit a revenue high of $11.1 billion during its third fiscal quarter, helping to boost the company’s stock 6 percent Thursday morning.

Lenovo’s software and services business is now running at a $1 billion quarterly run rate as the company’s gross profit jumped 10 percent year over year in its fiscal third quarter.

Software and services sales jumped 41 percent year over year and now contributes to 7 percent of the company’s total revenue. Following Lenovo’s positive third fiscal quarter earnings report, the company’s stock has climbed 6 percent Thursday morning to $14.73 per share.

Lenovo’s shining star during its third fiscal earnings report was its PC and Smart Devices Group, which set a revenue high of $11.1 billion as the company overcame an industrywide CPU shortage.

“Last quarter, despite the geopolitical uncertainties and industrywide supply shortages, we delivered a record-setting performance with geographical balance, operational excellence and solid strategy execution. Both group revenue and pretax income reached all-time highs,” said Yang Yuanqing, Lenovo Chairman and CEO, in a statement.

[Related: Park Place Technologies CEO: 5 Red-Hot Growth Investments In 2020]

Lenovo continues to capture a larger share of the North American PC market. The company finished 2019 with a 14.9 percent share of the U.S. PC market in the fourth quarter, up from 14 percent the year before, as shipments climbed 11.2 percent, according to research firm Gartner. Lenovo said it is confident its market share will enable it to drive premium-to-market growth and massive profitability.

"Our growth continues to explode," said Matthew Zielinski, president of Lenovo's North America Intelligent Devices Group, in an interview with CRN during CES 2020 in Las Vegas last month. "And that remains a true testament to the health and the engagement and the loyalty we have for one another with our channel.”

Overall, the Hong Kong-based infrastructure and PC giant reported gross profit of $2.26 billion with total sales of $14.1 billion, representing flat growth year over year in the third quarter. Net income was up 11 percent to $258 million compared with the same quarter one year ago.

Revenue from Lenovo’s Data Center Group (DCG) remained flat year over year. It is key to note that Lenovo did not provide a revenue figure for its DCG business in the third quarter.

The company said its data center business witnessed flat growth due to sharp component price reductions that decreased average system prices. Lenovo saw server shipments grow by 18 percent year over year. Lenovo data center enterprise and SMB sales grew nearly 16 percent year over year while revenue in China alone was up 46 percent. Software-defined infrastructure and storage sales both saw revenue growth of more than 40 percent year over year.

In Lenovo’s Smart IoT division, revenue nearly quadrupled year over year to $90 million, driven by growth in augmented reality/virtual reality, consumer smart home and smart office. Smart infrastructure revenue grew more than 50 percent year on year driven by growth in software-defined infrastructure and network functions virtualization, according to Lenovo.

Lenovo is a $50 billion company with 57,000 employees and operations in 180 markets across the globe.

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