Lenovo Stock Pulls Back From New Highs as Third-Quarter Revenue Jumps 20%

Lenovo Group shares (HKG: 0992) dropped 6.36% today, as the company reported a significant fiscal third-quarter revenue growth of 20% year-on-year, reaching $18.796 billion. This surpassed the analyst consensus estimate of $15.58 billion and marked the company's highest quarterly sales in the past three years. It's also the second highest in the group’s history.

The decline on the day could in part be attributed to some profit taking, with the stock remaining more than 20% up year-to-date even in spite of today's pullback. Margin decline could also be seen as a negative, with the Lenovo seeing gross margin declind to 15.7% from 16.5% a year earlier. With Hong Kong markets now closed for the day, we can also take a quick look at the U.S listed ADR (LNVGY), down 4.47%.

Lenovo's share price did make fresh 52 week highs of 13.18, before dropping after the Hong Kong lunch break.

For the third consecutive quarter, all three of Lenovo's business groups achieved double-digit year-over-year revenue growth. The robust financial result was mainly driven by Lenovo’s hybrid AI strategy, the turnaround of the Infrastructure Solutions Group, and sustained growth in the Intelligent Devices Group and Solutions and Services Group.

The Solutions and Services Group reported a 12% year-over-year revenue increase, amounting to $2.26 billion with an impressive operating margin of 20.4%. Meanwhile, the Infrastructure Solutions Group saw a remarkable revenue growth of 59%, reaching $3.94 billion. The Intelligent Devices Group also saw a revenue increase of 12%, totaling $13.78 billion, which contributed to Lenovo achieving its highest PC market share in five years at 24.3%.

The company's PC business continues to expand its market leadership, with AI PCs expected to represent approximately 80% of the PC industry by 2027. Additionally, Motorola’s market share hit a five-year high with notable growth in the Asia Pacific and EMEA regions.

Tthe expenses-to-revenue ratio improved to 12.0%, down from 12.6% the previous year. Lenovo's net income rose significantly by 106% year-over-year to $693 million, and earnings per share (EPS) per ADR increased to $0.0535, up from $0.0264 a year ago.

As of December 31, 2024, Lenovo’s cash and cash equivalents were reported at $3.93 billion. However, in premarket trading on Thursday, Lenovo's stock LNVGY was down by 2.77%, trading at $31.10.