Lenovo Isn't Fussed By Trumpian Tariffs Or Finding Enough Energy To Run AI

Lenovo believes its enterprise hardware business is finally on track to achieve consistent profits, if its customers can secure sufficient energy to buy more AI servers.

The Chinese hardware giant on Thursday announced [PDF] results for the quarter ended December 31, 2024, and reported $18.8 billion revenue, a 20 percent jump year over year. Profit popped 9.75 percent to $517 million.

The Infrastructure Solutions Group (ISG), the home of Lenovo’s enterprise hardware biz, posted record revenue for the third quarter in a row, this time booking $3.94 billion of sales, up 59 percent compared to the same quarter in 2023, and producing a million dollars of profit.

ISG has struggled for years and seldom produced substantial profits, but Lenovo’s earnings announcement states: “Since acquiring the x86 business from IBM, ISG has adapted to the rise of cloud computing by broadening its focus from enterprise computing to include cloud computing and storage.” CEO Yuanqing Yang said ISG “endured temporary losses for our strategic intent”. CFO Wai Ming Wong said ISG is “building a sustainable and profitable growth trajectory.”

Lenovo execs said similar things in 2022 after ISG produced profits for three consecutive quarters.

ISG president Ashley Gorakhpurwalla said the group now has the diverse product portfolio it needs to satisfy both cloudy customers and enterprises and is poised to cash in on demand for AI hardware.

“We believe firmly and are confident that AI servers will drive a very strong capital investment cycle for infrastructure in the markets that we serve,” he said, before predicting that demand for AI hardware will come in two phases.

One will fuel “continued investment in infrastructure for a large language model and gen AI development” and will be followed by “enterprise AI demand that's expected to grow as well as become more efficient and more available to our enterprise customers.”

“Both of these AI server growth vectors will likely be limited by power,” Gorakhpurwalla added, before touting Lenovo’s Neptune liquid cooling technology as likely to help customers run AI without busting their energy budgets.

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The company doesn’t think tariffs, in the USA or elsewhere, will slow AI or its other businesses.

CEO Yuanqing Yang said Lenovo already faces high tariff barriers to sell in markets like India and Brazil, and has developed in-house and outsourced manufacturing facilities around the world that allow it to avoid import duties.

The CEO was also pleased by the fact that more than 46 percent of Lenovo revenue came from sources other than PCs, reflecting a plan to diversify sources of income. The Solutions & Services Group (SSG), which offers managed services, IT-as-a-service, grew 12 percent to reach $2.3 billion quarterly revenue.

The Intelligent Devices Group, which covers PCs, Motorola smartphones, and lots of other gadgetry, also grew 12 percent to deliver $13.78 billion revenue. Motorola had its best-ever quarter as a Lenovo company, is now a top-five smartphone brand (except in China). Lenovo wants it to be a top-three brand, which would probably mean only Samsung and Apple shift more handsets. ®