The growing global demand for AI technology is driving the demand for AI computing power to show an explosive growth trend.

According to IDC data forecasts, the total amount of global data will surge more than fivefold from 33ZB in 2018 to 175ZB in 2025. This also directly drives the demand for more powerful data processing capabilities, and improving computing power has become the key to meeting this challenge.

In this context, technology companies, especially those in the field of cloud computing, are increasing their investment in AI and computing power products to enhance their competitive position in the AI era.

The latest financial reports from overseas tech giants, represented by the big four cloud vendors, have intuitively verified this trend. In Q3 of this year, the capital expenditure of Microsoft, Amazon, Google, and Meta increased by more than 59% year over year. This shows the surge in demand for AI computing power and the global emphasis on computing power resources.

In response, Open Source Securities pointed out that AI giants' financial reports confirm that AI development is gradually entering a positive cycle, and companies' investment in AI infrastructure has increased, showing a positive attitude of continuing to be optimistic about the computing power industry chain. This trend shows that AI has been able to effectively drive the revenue growth of enterprises and has become an important driving factor for the future development of technology companies.

Recently, Lenovo released results for the second fiscal quarter of the 2024/2025 fiscal year ending September 30, 2024, which revealed a key signal: the hybrid AI strategic layout has paid off, and the growth flywheel has begun to accelerate.

In other words, in the new era of computing power, Lenovo's new hybrid AI architecture has long since broken away from traditional PC valuation logic and initiated a new development situation of AI value revaluation.

1. Overall increase in revenue and profit, breaking many new records

Performance data is a core indicator that intuitively shows the company's development trend. In this fiscal quarter, Lenovo achieved overall growth in AI hardware, AI infrastructure, and AI solutions by seizing the differentiated competitive advantage created by seizing the opportunities of hybrid AI.

According to financial reports, Lenovo achieved revenue of 127.9 billion yuan, an increase of nearly 24% over the previous year, with businesses other than PCs accounting for nearly 46% of revenue. This increase in ratio shows Lenovo's success in diversification strategies and its expansion in the non-traditional PC market.

When divided by business segment, revenue from all main businesses consistently achieved strong double-digit growth for the first time in three years.

In IDG's smart device business, the company achieved revenue of 96.8 billion yuan, an increase of 17.4% over the previous year. Among them, the revenue of the PC business increased by 12.1% year on year, exceeding the market average, and further widened the global market share gap with second place, exceeding 4 percentage points. Revenue from the smartphone business increased by 43% year over year, making it the highest quarterly sales volume in history and achieving the highest market share in ten years. According to IDC's latest statistics, the total revenue of Lenovo's mobile phone business in other markets around the world has entered the TOP5. In the second quarter, Lenovo's share in the vertical folding screen market reached number one in the world.

In the ISG infrastructure business, the company achieved revenue of 23.7 billion yuan, a year-on-year increase of 65%, and reached a record high for the second consecutive quarter. Among them, the total revenue of the storage, software and service businesses increased 35% year over year, and revenue of Poseidon liquid cooling servers increased by more than 48% year over year, all reaching record highs.

In the SSG solution service business, the company achieved revenue of 15.5 billion yuan, an increase of nearly 13% over the previous year, and an operating profit margin of more than 20%. This is the 14th consecutive quarter where SSG has maintained strong double-digit revenue growth. Among them, through AI-driven solutions, the company's revenue from operation and maintenance services, projects and solution services increased by 3 percentage points in SSG's overall revenue compared to the same period last year, to nearly 60%.

At the same time, Lenovo's profitability continues to be unleashed. According to non-Hong Kong financial reporting standards, the company's net profit reached nearly RMB 2.9 billion, an increase of 48% over the previous year; in the first half of the yearfree cash flowIt is almost three times that of the same period last year, with a year-on-year increase of 0.801 billion US dollars; the net cash balance increased to 0.595 billion US dollars, and sufficient cash reserves provide a solid financial guarantee for the company's future business growth.

Furthermore, Lenovo continues to maintain a high percentage of dividends and announced that it will pay an interim dividend of HK8.5 HK cents per share for the six months ending September 30, 2024, for a total of approximately $0.1355 billion.

If you lengthen the timeline, you can see that Lenovo has continued to pay dividends in recent years without interruption. According to Wind data, the company's cumulative number of cash dividends reached 20 times, and the total cumulative cash dividend reached 40.762 billion yuan, with an average dividend rate of nearly 50%. This continuous dividend strategy not only shows the importance Lenovo attaches to shareholders' interests, but also highlights the company's confidence in its own financial situation, as well as its unique value and investment appeal in the capital market.

2. The hybrid AI layout is showing initial results, and the growth engine rotates at an accelerated pace

Of course, the overall increase in performance is inseparable from Lenovo's active layout in the field of hybrid AI.

Last year at the 2023 Tech World conference, Lenovo first proposed the concept of “defining the future as hybrid artificial intelligence.” Yang Yuanqing, Chairman and CEO of Lenovo Group, once said that hybrid AI has become the core key word of Lenovo's future strategic layout, linking Lenovo's role as a PC manufacturer's past and future AI service integrator.

As a result, Lenovo continues to work to build a full-stack artificial intelligence product portfolio covering infrastructure, edge devices and services, and has been able to become an industry leader in the AI paradigm shift. Financial reports show that the company's R&D expenses increased 8% year-on-year in the current fiscal quarter, reaching 1.024 billion US dollars. The significant R&D investment is sufficient to reflect the importance it attaches to technological innovation.

At the 2024 Tech World conference in October this year, Lenovo teamed up with NVIDIA, AMD, Intel, Meta, Microsoft, and Qualcomm to launch a hybrid AI solution to provide enterprises with full chain support from edge to cloud, and accelerate the implementation of AI technology in various fields.

At the event, Lenovo showcased and launched a series of hybrid AI products, technologies and service layouts, providing customers around the world with more intelligent, efficient and reliable solutions, further consolidating its leading position in the field of hybrid AI.

These include Lenovo Hybrid AI Advantage (hybrid artificial intelligence advantage set) for enterprises, next-generation Lenovo Neptune liquid cooling server, the latest ThinkPad X1 2-in-1 Aura Edition AI PC, Lenovo AI Now, Lenovo Learning Zone (AI learning) software platforms, and conceptual verification of the impact of artificial intelligence on society, which fully demonstrates Lenovo's deep strength in the field of hybrid AI.

This is intuitively reflected in business empowerment. For example, Lenovo's multi-year layout in the AI PC field has paid off. Its Lenovo PC equipped with AI agents can provide various AI services such as personalized recommendations and voice interaction, which fully meets the needs of modern consumers for personalization and intelligence. Data shows that in the Chinese market, Lenovo's AI PCs already account for 14% of its laptop shipments.

Furthermore, in the ISG business, AI servers equipped with Neptune liquid cooling technology can reduce electricity consumption by up to 40% and help enterprises cope with increasing data processing and computing needs. This innovative solution not only improved the company's operational efficiency, but also enabled Lenovo to stand out in the global market and gain more market share and customer trust.

It can be expected that in an environment where global investment in the AI sector continues to heat up, Lenovo's ISG business is expected to be strongly driven to grow, thereby replicating its successful path in the PC and mobile phone business, and further consolidating and expanding its market influence and competitiveness in the field of infrastructure solutions.

Overall, AI technology is gradually penetrating into various industries and fields, becoming a key force for social progress and economic development. The in-depth application and practical benefits of AI technology have become a consensus in the development of the industry.

At this stage, the development of AI technology needs to balance safety and inclusiveness to ensure the reliability and wide applicability of the technology. Therefore, a hybrid AI model where public AI, personal AI, and enterprise AI coexist and complement each other has become an inevitable choice. While meeting the needs of different users and scenarios, it can also promote innovation and application of AI technology.

With a deep understanding of AI technology development trends, Lenovo has built an AI ecosystem covering hardware, software, and solutions by integrating cloud computing, edge computing, and intelligent terminal devices. This comprehensive layout not only reflects Lenovo's deep understanding of AI technology development trends, but also highlights its positive results in technological innovation.

I believe that as the company continues to advance technological innovation in hybrid AI, it will continue to maintain its leading position in the field of hybrid AI in the future, bring more innovation and value to users, and ultimately drive an increase in profitability and valuation.

3. When AI empowers and leads, and value reshaping is in progress

Looking back at the capital market, in the current global AI technology field, the price-earnings ratio of major giants is generally high, reflecting the market's high recognition and expectations for the future growth potential of such AI+ companies. According to Futubull Niu Niu data, Nvidia's price-earnings ratio is 66.56 times, Microsoft's is 34.27 times, and AMD's is as high as 119.38 times.

However, compared with these global AI tech giants, Lenovo Group's price-earnings ratio is only 12.34 times, which is far below the industry average. This phenomenon may mean that the market may not have fully recognized Lenovo's potential and intrinsic value in the AI field, and its valuation judgment is still limited to traditional PC valuation logic.

Looking at it from another perspective, Lenovo is one of the few technology manufacturers in the world that can establish a top ecosystem with the six AI giants NVIDIA, AMD, Intel, Meta, Microsoft, and Qualcomm. Its influence and business development potential in the global technology field should not be underestimated. This ecological relationship not only provides Lenovo with deep, strong and even exclusive technical support, but also provides sufficient impetus for the company to expand its business in the global market. Judging from the perspective of this rare top-tier ecosystem, Lenovo's market value is far more than the current 100 billion yuan, not to mention the role of a leader in hybrid AI.

Today, with the gradual integration of Lenovo's hybrid AI strategy, it continues to innovate and break through in emerging fields such as AI, cloud computing, and smart devices, which indicates that the company's potential for future growth will also be further unleashed. The market will also gradually recognize and reevaluate Lenovo's growth potential in these fields. We have reason to believe that Lenovo's market value will be reflected in line with its global influence and business potential. This is not only a recognition of Lenovo's current performance, but also an expectation of its future growth potential.

I believe in the value of Lenovo, the market will eventually make its own judgment.