Lenovo Aktie

Good morning, good afternoon and good evening. Welcome to Lenovo's Earnings Investor Webcast. This is LIxi Yuan, Director of Investor Relations at Lenovo. Thanks, everyone, for joining us.

Before we start, let me introduce our management team joining the call today. Yuanqing Yang, Lenovo's Chairman and CEO; Winston Cheng, Group CFO; Luca Rossi, President of Intelligent Devices Group; Ashley Gorakhpurwalla, President of Infrastructure Solutions Group; Ken Wong, President of Solutions and Services Group; and Sergio Buniac, Senior VP of Mobile Business Group and President of Motorola. We will begin with earnings presentation. And after that, we'll open the call for questions.

Now let me turn it over to Yuanqing. Yuanqing please?

Hello, everyone, and thank you for joining our earnings call today. Our strategic foresight and from execution enabled us to deliver the best year in Lenovo's history while navigating a complex and challenging external environment.

Last quarter, despite the supply shortages and rising component costs, we committed to sustaining growth and improving profitability, leveraging our operational excellence. We delivered and achieved a significant increase in group revenue and the net income both reaching the highest year-on-year growth in the last 2 quarters. We promised to maintain our PC revenue momentum despite a slowdown in PC shipment due to rising costs. We delivered. We shifted our mix towards premium to improve average unit revenue, and our PC shipment growth continued to outperform the market. Our PC revenue significantly increased by 28% year-on-year.

Regarding our Infrastructure Solutions Group, we promised to return it to sustainable profitable growth. Once again, we delivered. Through business transformation, strategic restructuring and by capturing the AI trend we achieved not only revenue hyper growth, but also record profit. Looking ahead, we are fully charged to lead in the area of AI democratization and create long-term value for our shareholders.

Now let me dive into our fourth quarter performance. On the group level, we achieved a record fourth quarter revenue of $21.6 billion, up 27% year-on-year, the highest growth since the pandemic.

Adjusted net income doubled year-on-year. And Hong Kong IFRS net income increased nearly sixfold.

AI has become our leading growth engine. AI-related revenue grew added 4% year-on-year to account for 38% of the group total.

IDG, or Intelligent Device Group, delivered the exceptional results with a strong growth momentum. Revenue increased 24% year-on-year. For our PC and Smart Devices business, we achieved a strong revenue growth, up 26% year-on-year, the highest in the past 5 years. Especially in PC, we maintained a significant profit lead against the competitors while continuously outpacing the market by nearly 6 percentage points. We are the only vendor among the global top 5 to deliver consecutive positive year-on-year shipment growth for the past 10 quarters.

Our PC market share reached our fourth quarter record high, widening our lead over the #2 player to a 15 years' high. And our leadership was further solidified in IPC, premier PC and the gaming PC. Taken together, this clearly proves the strength of our overall competitiveness from innovative product portfolio to excellent business model and operations.

For our mobile business, Motorola smartphone achieved record fourth quarter shipments with double-digit revenue growth. IST, or Infrastructure Solutions Group, delivered the turnaround as we expected with the highest ever operating profit and margins since we entered this business as well as a record quarterly revenue of USD 5.6 billion, up 37% year-on-year. This is a significant inflection point for ISG.

Our strategic transformation efforts are on track to turn our infrastructure business into another engine of both growth and profitability for the company. And we are seeing robust momentum across the board. Our AI server business has a strong pipeline of USD 21 billion, supporting continued growth momentum.

Our new Lenovo hybrid AI advantage solutions with NVIDIA are accelerating enterprise AI adoption in cloud scale deployments, enabling real-time inferencing. And the Infinidat acquisition that was completed in early April, strengthens our high-end enterprise storage capabilities. This unlocks additional long-term potential for margin expansion and a broader market opportunity.

SSG, or Solutions and Services Group, sustained its double-digit year-on-year revenue growth to USD 2.6 billion with a higher operating margin above 20%. A record 62% of revenue come from managed services and the project and solutions, reinforcing the shift towards value-added offerings and recurring revenue services.

Our subscription-based TruScale continued to gain momentum as enterprises increasingly demand more advanced, efficient and costly effective computing infrastructure in AI the era. Our solutions business also continued to rapidly across key verticals, including manufactured, retail and sport. That wraps up our outstanding performance in the fourth quarter. which brought the fiscal year to a strong conclusion.

Now let me briefly talk about our full year performance. Group revenue surpassed USD 8 billion mark for the first half at $83 billion, up 20% year-on-year. Adjusted net income grew 42% year-on-year, twice as fast as the revenue growth. All business groups achieved double-digit hyper growth, especially worth mentioned is ISG delivered a record revenue of $19.2 billion, successfully reaching full year profitability with a significant $140 million year-on-year operating profit improvement. ISG is now on a clear path to sustainable profitable growth.

With R&D expenses up 9% year-on-year, we are committed to increasing our investment in AI focused innovation. This January, at our Tech World @ CES event, we showcased our hybrid AI vision, strategy and innovation, reinforcing our global leadership beyond the PCs as a full step AI leader.

Looking ahead, while the external environment remains volatile, we view these challenges as opportunities for Lenovo to further strengthen our competitiveness and build on our advantages. Let the confidence starts with operational excellence, our balanced global business and the manufacturing footprint, combined with the global model has given us a structural resilience.

And that same confidence is fueled by our forward-looking hybrid AI vision and strategy. This has put us at the forefront of AI infancy and AI democratization. We are now ready to capture significant growth across both personal AI and the enterprise area.

On the personal AI front, guided by our one personal AI, multiple devices strategy, our on-device AI delivers secure personal and costly efficient intelligence.

In the coming year, we expect to deploy our personal AI super agents, Tianxi & Lenovo QIRA to millions more devices across form factors and platforms.

We are also exploring a wide range of next-generation AI native devices. This includes next-generation PCs and smartphones specifically for AI agent use, AI wearables as well as personal computing hubs.

On the enterprise air front, we continue to enrich our AI library and the Lenovo hybrid AI advantage framework. We are building repeatable AI solutions, both vertically across key industries and horizontally across areas like hybrid cloud and the digital workplace. We are also actively expanding our TruScale services to capture the surge AI inferencing demand. Our vision is to bring AI to every individual and every enterprise everywhere, anytime.

In closing, let me reiterate, at Lenovo, we do what we say, and we own what we do. This past fiscal year speaks for itself are the strongest proof. We delivered record revenue, record market share and a record AI momentum. But this is just the beginning of Lenovo's AI decade.

Looking at the market Lenovo has a big role to play as an official technology partner for the FIFA World Cup and the 22 Formula 1 Grand Prix races worldwide. These global stages will allow us to unleash our technology to support the teams and reinvent the best viewing experience while lending our AI strategy and elevating our brand at the scale.

At our global employee kickoff event, we set our target to become a $100 billion company in 2 years with operational excellence, and the innovation of our twin pillars. I'm fully confident in achieving this goal. We will continue to deliver strong shareholder returns and truly realize smarter AI for all.

Thank you. Now let me turn it over to our CFO, Winston. Winston, please.

Thank you, Yuanqing. I'm pleased to walk you through Lenovo's fourth fiscal quarter and full year results of '25, '26, a year that delivered record revenues with margin expansion and accelerating momentum in AI-driven growth across our entire product and services portfolio. We delivered record fourth quarter revenue of $21.6 billion, up 27% year-on-year, the highest year-on-year growth rate in the last 5 years.

This exceptional performance with broad-based strength across all business groups was driven by the strong AI-driven demand and underpinned by our resilient and operational excellence despite rising component costs in the war in the Middle East.

AI is at the heart of our multiyear growth trajectory. Our AI-related revenues grew 84% year-on-year, representing 38% of total group revenues for the quarter. This acceleration reflects strong demand across AI-enabled devices infrastructure solutions and enterprise services, underpinned by our global reach, scale, broad product portfolio and continuous innovation.

Across our business groups, IDG achieved record global PC market share for the fourth fiscal quarter while maintaining stable operating margins with industry-leading profitability despite component cost pressures. Motorola smartphone delivered its highest quarterly shipment volume for the fourth fiscal quarter with operating margin expansion.

ISG demonstrated solid transformation progress, etching record quarterly revenue and operating profit of $202 million. The business deliver full year profitability while establishing a clear sustainable road map to capture future AI infrastructure opportunities.

SSG achieved revenues of $2.6 billion with a record 62% of revenues from Managed Services and Project and Solutions, reflecting continued portfolio shift toward higher-value recurring and solution-led offerings. These result and profitable growth across all business groups clearly demonstrate our operational excellence, enabling us to turn macroeconomic challenges into opportunities while further reinforcing our core competitiveness in the AI era.

This has been a record year in our 40 years of history, and we will continue to drive higher revenues with profitability improvement. In a year of macro headwinds with tariffs, higher component prices and a war in the Middle East, we have delivered on what we promised leveraging the strength of our experience, global supply chain, manufacturing, strong execution and product innovation. We surpassed the $8 billion revenue against a challenging macro environment, and we have a clear ambition to become a $100 billion company in 2 years.

In fiscal year '26, all business groups delivered solid double-digit year-on-year revenue growth and further expanded market share across PCs , smartphones, infrastructure services and solutions. AI-related revenues more than doubled, growing 105% year-on-year.

In IDG, we strengthened our market leadership in all PC segments, while PC adjacencies continue to deliver double-digit year-on-year revenue growth with a clear uplift in margins.

In smartphones, we achieved record shipments and activation for Motorola with the highest premium shipment mix of 19%. ISG is well positioned for future growth and accelerated profitability improvement. We are experiencing accelerating growth momentum from AI training to enterprise inferencing.

This financial year, ISG achieved record revenues and profitability with a strong AI server pipeline for continued future expansion supported by an expanding global customer base who increasingly value Lenovo's ability to deliver an optimized AI portfolio. We continue to see strong demand across CSP and in SMB with AI infrastructure becoming a key growth engine for the year ahead.

In SSG, we reached a revenue milestone of $10 billion and more than doubled operating profits over 5 years. We enter the next year with strong momentum driven by growing demand for TruScale as customers increasingly look for financial flexibility and services in accelerating enterprise adoption of hybrid AI solutions.

In the fourth quarter, our adjusted operating income delivered 73% year-on-year growth and operating margins expanded to 3.9%. Our adjusted net income doubled during the quarter and grew to $559 million growing at nearly 4x the rate of top line, adjusted net margins increased to 2.6%.

For the full financial year, we deliver both operating and net margin expansion driven by operating efficiency gains, higher scale and strategic revenue mix improvements across the group. Adjusted net income grew 43% year-on-year, more than doubling revenue growth.

For fiscal year '25, '26, basic earnings per share reached USD 0.1563. The Board declared a final dividend of HKD 0.337 per share, combined with an interim dividend of HKD 0.085 per share. The total dividend for the fiscal year will be HKD 0.422 per share, our highest dividend ever.

Now let me turn to IDG. In the fourth quarter, IDG delivered 24% year-on-year revenue growth to $14.6 billion. Operating margin was 6.9%, supported by disciplined execution, operational excellence and continued innovation. PC shipments delivered a record fourth quarter global market share of 24.4%, up 1.3 percentage points year-on-year.

Premium PC shipment reached 50% in the fourth quarter, with shipments up 29% year-on-year, reflecting strong execution in the higher-value segment.

In smartphones, we delivered double-digit revenue growth year-on-year in the fourth quarter, expanding the year with record revenue. Looking ahead, smartphone profitability expansion will continue to be driven by scale economics, premiumization, AI and software ecosystem integration and monetization opportunities.

Our devices product road map continues to reflect focused innovation in areas where we see rising customer demand and market opportunities. In PCs, we launched our lightest ThinkPad T Series, designed for longer productivity with a high-density battery. We also enhanced the services offering to deliver greater life cycle value for enterprise deployments.

On the gaming side, we introduced Lenovo's first Legion gaming laptop bolt-on a unified memory architecture, bringing unmatched battery life and performance featuring pure site OLED display for better visual experience.

To capture demand from agentic AI, we launched a ThinkCentre Neo 50q with OpenClaw functionality designed for SMB customers seeking AI-driven productivity and enhanced performance for AI-assisted workloads.

In PC adjacencies our signature ultra-wide ThinkVision P40WD monitor delivers 34% lower energy consumption. Its energy-efficient features enable a 3-year payback and 0 cost of ownership, demonstrating how innovation can drive both customer value and sustainability outcomes.

In smartphones, the Razr family & Signature FIFA World Cup addition is titanium reinforced with exclusive tournament features, further strengthening our premium portfolio and brand appeal.

In personal AI, Lenovo and Motorola officially announced the rollout of QIRA in April 2026, our personal ambient intelligence super agent that captures the industry's broadest cross ecosystem for spanning PCs, tablets, smartphones and wearables.

And with privacy design hybrid AI architecture prioritizes on-device processing to keep personal data local, preserving personalized context aware assistance and connected user experiences across AI devices. Through a growing partner ecosystem, QIRA also creates ongoing opportunities for premiumization and monetization through value-added services on premium devices.

Now moving on to ISG. Our hybrid AI strategy is providing a clear and differentiated path to capture both AI training and enterprise interesting opportunities. The strategy is now translating into the strongest performance in ISG history.

ISG is positioned as a key player in the AI investment in super cycle reflected in record fourth quarter and full year results with hyper growth at a clear premium to the market. We continue to expand server market share, standing out as the only vendor ranked amongst the top 3 both globally and in China.

In the fourth quarter, ISG delivered a record revenues of $5.6 billion, up 37% year-on-year while operating profit reached a record $202 million. We will continue to strive for further margin improvements, benchmarking against the industry.

Full year revenue reached a record high of $19.2 billion, up 32% year-on-year and operating profit rose to $73 million. This is the major milestone for the business, marking not only the best revenue performance but also a clear proof that our transformation is driving sustainable profitability and long-term value creation for Lenovo shareholders.

We are seeing strong demand across CSP and ESMB, and AI infrastructure is rapidly becoming a material growth engine for ISG. Our AI server revenue delivered high double-digit full year year-on-year growth, supported by a strong $21 billion pipeline and more than 5,800 AI customer deployment with demand continuing to outpace available supply.

We are turning AI momentum into real customer value through faster time to first token scaled into rack shipments and continued innovation across our AI infrastructure road map. Last quarter, we shipped our first GB300 NVL72 racks, and we are preparing Rubin-based platforms for targeted time-to-market in the second half of this year.

We believe this is just the beginning of a multiyear world cycle and Lenovo is well positioned to benefit. Our product innovation, customer-focused, resilient supply chain, operational excellence and expanding production capacity give us the ability to scale with customers and navigated dynamic AI data center environment.

In early April, we completed the acquisition of Infinidat, a strategic step that strengthens Lenovo's position in high-end enterprise storage. This allows us to capture the $38 billion addressable enterprise storage market with critical IPs to capture full value across key verticals.

Infinidat brings industry-leading innovation capability, while Lenovo brings global scale, competitive infrastructure portfolio and a proven execution engine. Together, we are expanding our reach to deliver high-end storage solutions worldwide and create a stronger path to higher margin growth over time.

Turning now to SSG. SSG has continued to deliver consistent double-digit year-on-year revenue growth, growing significantly faster than the broader IT services industry. In fiscal year '25, '26 has reached a new revenue milestone of $10 billion and operating profit more than doubled in the last 5 years, reflecting the advantage of our tech-led labor-light delivery model.

In the fourth quarter, SSG grew 19% year-on-year to $2.6 billion, while operating margin reached 22.4%. Demand for consumption-based solutions remains increasingly strong as customers navigate inflationary pressures in a more complex macroeconomic environment alongside a search in AI-driven compute demand.

TruScale is a key to driver, enabling customers to move from infrastructure to AI in production through an end-to-end offering spanning design, build and operate. We're seeing strong DAS and infrastructure-as-a-service demand as enterprises and cloud providers look for greater cost predictability, supply assurance and more flexible ways to scale AI capabilities.

As agentic AI drives exponential growth in inferencing demand, enterprises increasingly need validated hybrid AI platforms that can deliver superior economics at scale, one of the biggest barriers to AI adoption globally remains uncertain return on investment, and this is exactly where a hybrid AI advantage is differentiated.

Combining private public environments to accelerate time to first token, improve token efficiency and maximize value per token, Lenovo hybrid AI helps enterprise customers shorten time to ROI to less than 6 months while delivering production-ready AI environment in as little as 90 days. The Rubin-based platforms deliver up to 10x lower cost per token versus previous generations helping customers bring AI workloads on premises with greater efficiency and stronger control over data and a clear repeatable business outcomes.

With Lenovo's hybrid AI advantage I Score, our AI library now includes more than 60 enterprise-ready use cases across sectors such as manufacturing, retail and sports with repeatable and measurable outcomes. Our AI-driven Lights Out contact center improves customer experience and also enhances operational efficiency by 60%, built on our spans manufacturing footprint and partnership we have deployed AI-powered RoboDogs across more than 50 ability sites globally, improving detection accuracy, cost savings and safety.

In sports, FIFA AI Pro demonstrates how our enterprise AI capabilities can scale across one of the world's most data-intensive environment. The solution analyzes more than 2,000 metrics to deliver real-time insights, supporting all 48 teams in the FIFA World Cup 2026 across 3 countries, delivering faster, more data-driven decision.

The group's long-standing commitment to strong governance, sustainability and inclusion continues through a global recognition. In 2025, Lenovo was named to CDP's Corporate A-List for climate leadership, maintaining a AA+ rating in the Hang Seng Corporate Sustainability Index and retains the EcoVadis Platinum metal, placing the group amongst the top 1% globally for ESG performance.

Building on this recognition, Lenovo continues to deliver concrete progress across operations and products. We remain on track to reach net zero emissions by 2050, have converted 90% of electricity used across global operations to renewable sources in the past 6 years and now include post-consumer recycled materials in 100% of our PC products. Smartphone packaging now uses 60% recycled materials and has reduced single-use plastics by 50%.

Beyond environmental leadership, Lenovo's people first culture continues to be recognized by Forbes as one of the world's top companies for women and one of the world's best employers. Sustainability and responsible growth remain foundational to our long-term success and shareholder value creation.

Looking ahead, our strategy remains focused and highly disciplined, with our proven operational excellence and agile supply chain, we continue to execute to outperform even in morale markets.

As we enter the next fiscal year, we're confident in our ability to capture multiyear opportunities and to accelerate into an era of growth with profitability expansion, delivering greater value for our shareholders.

Thank you. We will now answer any questions you may have.

[Operator Instructions]

Thank you, Winston. Now we will open the floor for questions, and this session will be English only. [Operator Instructions]

While we are waiting for the questions, Allow me to introduce the management team again. Other than our Chairman, Yuanqing Yang; and CFO Winston Cheng, we also have the following business leaders with us today for Q&A. Luca Rossi, President of Intelligence Devices Group; Ashley Gorakhpurwalla, President of our Infrastructure Solutions Group; Ken Wong, President of our Solutions and Services Group; and Sergio Buniac, Senior VP of Mobile Business Group and President of Motorola.

Now we'll begin our Q&A session. The first question is from Tony Zhang from. Questions he's asking what's your long-term revenue target and plan to drive sustainable market expansion?

I would like to invite our Chairman and CEO, Yuanqing, to answer this question. And perhaps also our CFO, Winston Cheng, to address the margin question part. Yuanqing, please.

Thank you, Tony, for the question. So definitely our strong Q4 and the full year results are the best testament to our commitment to hybrid AI innovation and operational excellence. Based on this foundation, so our long-term goal is to reach the $100 billion revenue target. So actually, it's not that a lot. So we want to achieve that in 2 years. We will continue expanding our margins to even more decent level. We will achieve the scope through 3 clear strategic pillars.

First, we will expand our leadership in devices, PC, smartphone, tablet, wearables while maintaining industry-leading profitability. Despite a challenging operating environment in short term, we continue to grow above the market, powered by innovative products, excellent business model and operational excellence.

I particularly want to mention our excellent supply chain, so give us a lot of advantage. So we leverage our scale, diversify the sourcing strategy, strong vendor relationship to support our business or to support our [indiscernible]. So to overcome the supply shortage and the increasing material cost. So we are very confident that we can navigate through these challenges, becoming even stronger than before. Stronger means we can further gain market share while we can further improve the profitability.

Second, so we will capture the multiyear infrastructure opportunity. Demand for both AI training and inference is accelerating. We are expanding our cloud service provider customer base, not just the in the hyperscale, but also in the new cloud. We are also seeing enterprise AI adoption pick up a real momentum. So Lenovo is a very unique company to address all these markets in the AI infrastructure area.

So we are top 3 vendors in both China and the rest of the world. We can leverage our ODM+ model to address hyperscale and no cloud. Meanwhile, we have been enterprise and the SMB business for more than 10 years. So that will give us a very unique strength to deliver the strong growth.

To turn this demand into sustainable and profitable growth, we are focused on 2 priorities: strong go-to-market capabilities and optimize the AI portfolio that delivers a clear value to our customers.

Third, so we will scale our service business with a tech-led labor light model, building recurring revenue streams. There is a strong demand for AI-driven consumption based solutions, with our TruScale end-to-end offerings and our AI library, we are well positioned to deliver value in production and at scale.

So taken together, so these 3 engines, we have given us the confidence and the road map to reach our long-term vision and the goal.

Thank you, Yuanqing. Winston, would you like to add any additional points?

I think just to the point of the $100 billion goal and margin expansion, we clearly have opportunities both in terms of our scaling effect on the gross margin front. As you can see from ISG this quarter, that scale and operational excellence has led to a significant dollar gain and margin expansion there. Clearly, as we continue to enter that area in terms of ISG profitability, I think that industry normal margins there is actually quite high in terms of the potential. And so I think that brings us a path that potentially could exceed some day of our IDG business, which also continue to have opportunities there as well.

So I think from that perspective, alongside the opportunity of AI infrastructure spend, as Yuanqing mentioned, in terms of TruScale, which is in our SSG business that continues to offer customers today an alternative to the CapEx and OpEx with respect to additional services that gives them the agility to plan their infrastructure spend. So I think from that perspective, our path is towards increasing margin expansion story as we capture the AI opportunity. So thank you.

Thank you, Winston. Second question is from Tina Wong from Citi. So for PC business, did you -- did the company see major pull-in happened in the first quarter of calendar year '26 to support a stronger result? Will there be any risk to the coming quarters on the demand side. Given the CPU and memory shortage, we see many years to lower their calendar year shipment target, this Lenovo experienced similar situation that the shortage is worse than originally expected? I would like to invite our IDG President, Luca to address this question.

Thanks, Tina, for the question. So in calendar Q1, our last fiscal Q4, we definitely observed strong demand, which might partially be linked to some pull in, but I don't think that it will be a substantial number. Our sell-out activation, both wear and are still very strong. and we also maintain the right level of inventory when we entered into the new history in April.

Definitely, we are seeing some tight supply in certain components, particularly as you probably know in the semiconductor area. However, we feel confident about our ability to procure the parts we need and we did not adjust our full year target based on supply constraints. Rather, we will align the shipment target based on the real market and demand in order to maintain a healthy channel inventory and with the goal of maintaining a solid premium to market like we did now for the last 11 consecutive quarters.

So we anticipate that units will be down year-over-year in this fiscal year. But at the same time, we expect to maintain or very likely grow our revenue linked to the significant growth of the AUR. And we are confident that we will also maintain our industry-leading profitability with our strong supply chain and definitely with our operational excellence and the global local business model. Thank you.

Thank you, Luca. That's great. Third question is coming from Tony Zhang from CLSA. What is the IDG business margin outlook for the coming quarters? Why are PC and smartphone margin maintained so well regardless of the cost incurs, which is more resilient between PC and smartphone business and made the BOM cost increase? I would like to invite Luca and past to Sergio to address his question. So Luca.

Yes. So as our Chairman and CEO just mentioned, we definitely have a very strong supply chain. And I think we are uniquely positioned to navigate this inflationary cost environment. Thanks to that supply chain capability, thanks to our procurement scale, and last but not least, I also say thanks to our design-to-cost capabilities.

With this in mind, I believe we will navigate this cycle like we just did many times in the past, sustaining our margins, protecting our profitability, which includes the margin side but also includes a tight discipline on expenses as we usually do. And I think you can apply this logic and this kind of philosophy to all our devices business. So that includes PCs and smartphones as well. Thank you.

Great. Thank you. Thank you, Luca. We'll move on to the next question, which is from Albert Huang from JPMorgan. Could you share more colors on how the level managed to improve the ISG business? Is mainly driven by scale or product mix change. Ashley, would you like to answer this question, please?

Sure. Thank you. I think there's a couple of questions that are probably combinable here for me to answer. First of all, I'll talk a little bit about the market, the AI infrastructure market and the customers that we have are really at an inflection point. Many are transitioning well beyond pilot for AI and into implementation.

And enterprise use of AI agents, coupled with the economics of more efficient tokens, but literally hundreds more token usage is really poised to grow the addressable market in hybrid AI for our industry to $1 trillion by 2029, and we have an awesome opportunity in front of us. In order to capture that opportunity, since I've joined Lenovo, we've been laser-focused on transformation into a world-class AI technology partner.

We're quite confident in how these changes are going to position us and have positioned us to assist our customers with their digital and their AI transformation.

Just some examples, we've completely revamped our internal delivery process to operate at AI speed now. Over -- today, going from 0 to now over 40% of our engagements are now handled in minutes, sometimes hours instead of weeks. We have had the biggest refresh of our product line in our entire history of the Think Series portfolio around AI inferencing and how to optimize token economics. We've used AI internally to accelerate our go-to-market engagements with our partners. Workflow is now simpler. It's much faster.

And as we discussed last quarter, our sales and technical engineering teams have gone an extensive skills transformation into the AI expertise domain. We've added state-of-the-art rack level manufacturing capacity into our network in order to meet the demand for -- that is accumulating in our AI pipeline.

We've introduced unique Gigafactory partnership with NVIDIA as a partner to deliver data center level capability to customers that require scale and speed to first token. And we've combined what is really Lenovo's unmatched HPC and supercompute IP expertise in legacy. For example, Neptune liquid cooling, which is now on its seventh iteration, was a commitment to day 1 availability of NVIDIA via Rubin and AMD Helios to give our customers the most robust AI portfolio from edge to data center to cloud.

So transformation for me is an infinite game, but we are very confident that we are on track. So our AI focus, combined with our world-class supply chain and as we mentioned before, our TruScale model and flexibility is really what is driving our $20-plus billion pipeline with literally thousands of customers that are new and long term to Lenovo.

Thank you, Ashley. Since you're talking about the AI server pipeline, we got a question from William Huang from Huatai Securities, asking the $21 billion active pipelines in impressive. Can management provide more color on the customer mix, specifically displayed between CSP, enterprise and SMB and sovereign AI customers? On the product type mix, what is the mix between training and inference?

Sure. Thanks for the question. Our -- because Lenovo and the hybrid AI advantage is able to actually address the entire marketplace from edge to data center to cloud. Our customer mix actually follows the market dynamics. We've seen an incredible rise over the last, say, 18 months of training at scale, mostly delivered through our CSP unique delivery model and capability.

And now we're seeing this inflection of enterprise AI capability that is mostly at the enterprise level, global account level, large enterprise level. Small, medium businesses are beginning now to move from pilot to production with AI and maybe are in the later part of the shift.

We also interestingly see a very balanced view across the globe in terms of our AI pipeline and mix. And I think we're uniquely as, Yuanqing, mentioned moving into third place across and share across both China and rest of the world. I think we're uniquely positioned across the industry to be able to help transform customers in all geographies.

Today, I think we are probably going to see the mix shift heavily over the coming year towards inference, and token economics, and that's why we're preparing with our product line for Inference. Our TruScale capability to help customers with flexibility and our product set to be able to span from data center to edge to cloud.

Thank you, Ashley. There's another question on ISG from Kyna Wong from Citi. How would the Infinidat acquisition contribute to the ISG business? Could you share the running expectation synergy amplifying?

Sure. Thanks for the question. First, let me say how excited and happy I am to have the Infinidat net team joined the Lenovo family. Especially if you're listening to everyone, this is our first earnings announcement and One of the few questions we have is about you, and so you should know the importance that you have with our family, as I told you many times.

I'd also like to welcome all the Infinidat customers to Lenovo family. Your reliance on Infinidat's incredible performance, mission-critical storage capability, incredible latency capability and cyber resilience, backup and recovery is in good hands, and we look to expand the capability that we have with if d.

So what is important from an Infinidat standpoint is twofold. One, incredible IP and capability with InfiniBox and the Infinity Infuse OS.

We are a scale company. We help customers across the spectrum with AI, and now we have the capability to bring mission-critical storage into our Lenovo hybrid AI advantage layer. The data layer is incredibly important. We've addressed this with our mid-range storage product set, but we understand that there is a set of customers that require mission-critical capability that Infinidat brings to us. We'll be scaling that capability as we do -- as Lenovo has a history of bringing technology forward and driving incredible scale to that.

On the other hand, the Infinidat team brings incredible IP capability but also customer engagements that now are within the Lenovo family. And so we look forward to being able to have addressable 85% of the entire market, which is a $38 billion TAM and the highest value portion of the TAM in the AI industry. So again, early days, just closed last month. But already, the teams are working as a family, and we're very excited about this going forward.

Thank you, Ashley. A couple questions on SSG from Randy Abraham from UBS and also [indiscernible] from DBS. So the question is about AI-related service. Are you scaling up the AI and the services, the fastest today? And when can they start to drive the service revenue? And also from Jim, what percentage of the SSG revenue is now recurring or contract base? And what's the growth outlook of AI-related services compared to TrueScale and managed services tenants. Ken, please.

Thank you, Randy and Jim, for the question. So let me address, let me address the AI question because this is the most interesting question to me. So for sure, I think everyone is talking about AI. And especially in the services market, AI is resetting the whole landscape. When we talk to our customers, I think the challenges or the requirement is longer about experimentation.

It is about getting AI into production fast efficiently and at scale with real business outcomes. And I think this is what SSG is built for. So with our mobile hybrid AI advantage, we focus on three things: number one, time to first token, using our AI factory to integrate our global supply chain and also our infrastructure solutions matching organization and also access to accelerated to help our customers to achieve the shortest time to first token.

The second thing that we're focused on is actually value for token using our AI library and our set of AI life cycle services to help our customer to deliver measurable outcomes. And last but not least, both are underpinned by our upgraded our new TruScale offering, which begin deployment and operation, scalable, flexible and predictable. I think the predictability in -- as of now is super important, right?

When we talk to our customers because with all the fluctuation in commodity costs, uncertainty in terms of supply, this offering resonates really, really good with our customer because we TruScale offering across our devices, our edge and also our infrastructure, of course, right? With TruScale, we give peace of mind about supply assurance and also a predictable cost for the overall equation.

Now there's a question about the mix between recurring revenue and the other revenue. We don't disclose revenue in that way. But I think to me, the most important thing and the good news is that how are we creating, generating the intimacy with our customer how we're creating the stickiness with our customers so that we can continue to grow our business.

And this is exactly TruScale can offer that because TrueScale offer the full hardware, software and services in a consumable manner. With that, I think we can get to the customer to create outcomes, the better we understand the customer than with the more services and solutions and hardware that we can provide to our customers.

We continue to see a very good demand with our customers because the TrueScale solution resonating with the customer and we continue to see a high renewal rate for our existing to-scale customer when they renew the contract and also a very good momentum in terms of executing land and expand, meaning understanding more about customers and selling more of the novel technology to our customers. Thank you.

Thank you, Ken. Next question is from Jordan Pong from Franklin Templeton. The question is on Middle East a lot. Is there any update on the partnership with a lot or the Middle East conflicts, do you see any impact in production and development plans, what's the CapEx outlook for the coming financial year I would like to it our Group CFO, Winston to address the question.

Thank you, Jordan. First of all, it's a long-term partnership for us. So it's a very long-term strategic vision, and we're making a strong investment in the region. Clearly, in terms of the conflict, there are shipment delays there in the market, but I think we are trying to get critical supplies now back to the region. So only a couple of weeks of delays, so not really material from that standpoint.

In terms of overall business, I think our local colleagues are making strong headway and our strategic partner a lot -- in fact, one of the members was just really the action CEO, just visited us as part of the Board member duties. And so continue to be very much of a strategic a partnership, an important partnership for LALA as well in terms of Lenovo.

So overall, I think we're still keen in terms of AI initiatives for the Kingdom and for the region, and we're well positioned to capture that long-term opportunity there in the market.

In terms of CapEx outlook, there are some additional CapEx given the strong growth of ISG. And so I think from that perspective, there will be investments as part of the potential capture of additional opportunities in the ISG business that we will be spending to support that business. So thank you.

Thank you, Winston. Given the time that we have, we will not take further questions. There are still questions at the back end. If you would like to reach out to our company and senior management, please contact IR team. Thank you very much for attending today's earnings webcast. goodbye.

Thank you.

Good morning, good afternoon and good evening. Welcome to Lenovo's Earnings Investor Webcast. This is Lixi Yuan, Director of Investor Relations at Lenovo. Thanks, everyone, for joining us. Before we start, let me introduce our management team joining the call today. Yuanqing Yang, Lenovo's Chairman and CEO; Winston Cheng, Group CFO; Luca Rossi, President of Intelligent Devices Group; Ashley Gorakhpurwalla, President of Infrastructure Solutions Group; Ken Wong, President of Solutions and Services Group; and Sergio Buniac, Senior VP of Mobile Business Group and President of Motorola.

We will begin with earnings presentations. And after that, we'll open the call for questions. Now let me turn it over to Yuanqing. Yuanqing, please.

Hello, everyone, and thank you for joining us today. I'm pleased to share that Lenovo achieved extraordinary results last quarter, delivering on every commitment we met. This once again proves that Lenovo not only navigated the market cycle with operational excellence, but also seized the growth opportunities through innovation. We are confident we can further build on this momentum to lead in hybrid AI and drive sustainable growth.

Now let's start at the group level. Last quarter, we delivered on our promise of double-digit growth with sustained profitability in the second half of the fiscal year. Our group revenue reached an all-time high of USD 22 billion, grew over 18% year-on-year with double-digit growth across all business groups. Our adjusted net income expanded 36% year-on-year, doubling the pace of revenue growth. AI is becoming a leading growth engine as AI-related revenue surged more than 70% year-on-year, now representing nearly 1/3 of the group total. Our IDG or Intelligent Devices Group delivered exceptional performance with revenue growing 14% year-on-year to almost USD 16 billion, while maintaining industry-leading profitability. Despite the industry-wide component supply shortages and rising costs, our PC and smart devices business enhanced its competitiveness even further. Its revenue sustained rapid growth at 17% and PC volume growth outpaced the market for 10 consecutive quarters.

Our PC market share for the 2025 calendar year was the highest in history. For our mobile business, we achieved both record volume and record activations for mobile business. Our ISG or Infrastructure Solutions Group continued its hyper growth, delivering record revenue of USD 5.2 billion, up more than 30% year-on-year, steadily moving the business closer to profitable growth. Just as I shared last quarter, the infrastructure market is undergoing an important shift from AI training on public cloud to AI inferencing, increasingly happening on-prem and at the edge for enterprises. To better capture this trend, we carried out a strategic restructuring. This initiative is designed to boost the productivity by optimizing our cost structure, address market opportunities by refining our product portfolio and enhance competitiveness by optimizing our business models and upgrading our sales force.

The restructuring is expected to deliver more than USD 200 million annualized net savings in the next 3 years and put ISG on a solid path of sustainable and profitable growth. SSG, our Solutions and Services Group achieved over 22% operating margin at 18% year-on-year revenue growth with accelerated growth in focused vertical industries, including manufacturing, retail, sports, transportation and smart cities. Looking ahead, we firmly believe in the trend of AI democratization. As AI becomes deeply integrated into individuals' daily lives and enterprise operations, it's far from a bubble, but a technological advancement that delivers tangible value.

Lenovo will continue driving hybrid AI through personal AI and enterprise AI to capture the significant growth opportunities here. This is not just a vision. We are already delivering significant outcome for customers. This January, we successfully held the Lenovo Tech World at CES, showcasing the progress in hybrid AI as well as announcing breakthrough innovations and products. In personal AI, we introduced our AI super agent, Lenovo Qira to the global market, along with a series of innovative AI devices. In enterprise AI, within the framework of Lenovo Hybrid AI advantage, we shared how we bring AI inferencing closer to where data is generated on-prem and at the edge. We also launched xIQ platforms and announced AI Cloud Gigafactory in partnership with NVIDIA. We will start shipping Qira embedded devices as soon as the next quarter. So stay tuned for more updates.

While leveraging innovation to drive growth, we will also continue leveraging operational excellence to navigate market cycles and come out even stronger. With our scale, resilient global supply chain and strong partnerships, we have proven we can outperform the market again and again during the pandemic, trade tariffs and more recently component cost increase and supply shortage. In each cycle, we have consistently secured components, gained market share and improved the profitability. Looking ahead, no matter how the market changes, Lenovo is fully prepared to drive continuous revenue growth and profitability enhancement with even greater resilience and stronger execution.

In closing, I'd like to share we do what we say, we own what we do. This is Lenovo culture. Last quarter, we delivered on our promise and achieved outstanding results on all fronts. Lenovo has entered an accelerated era of growth and profitability, reaching a whole new level of innovation and operational excellence. I have every confidence in our ability to deliver substantial returns to our shareholders and bring smarter AI to all.

Thank you. Now let me turn it over to our CFO, Winston. Winston, please.

Thank you, Yuanqing, and a good day, good afternoon and good evening, everyone. I'm pleased to walk you through Lenovo's results for the third quarter of fiscal year '25-'26, a quarter that delivered record revenues, accelerating profitability and continued AI revenue expansion. We delivered record high fiscal quarter revenue of $22.2 billion, up 18% year-on-year with double-digit year-on-year revenue growth across all business groups. Despite a year of tariffs and component supply-demand imbalances, Lenovo continues to demonstrate resilience. In the third fiscal quarter, our strong top line growth was driven by expanding market leadership in PCSD, record volume in activation and smartphones and all-time high revenues from both ISG and SSG. AI is a multiyear growth engine for Lenovo, underpinned by our unmatched scale, diversified global portfolio and continued investment in innovation.

Our AI-related revenue grew 72% year-on-year and now represent 32% of total group revenue, driven by strong demand across AI devices, infrastructure, services and solutions. Adjusted operating income was $903 million, an increase of 28% year-on-year, demonstrating operating leverage, efficiency gains and a higher revenue contribution from premium offerings. Adjusted net income grew to $589 million, while adjusted net margin expanded to 2.7%. Excluding onetime gains and charges for third quarter fiscal '24-'25 and third quarter fiscal '25-'26, on an operating basis, adjusted net income for the quarter increased by 36% year-on-year, doubling with growth of revenues.

Key exclusions from adjusted operating and net income include a $285 million onetime restructuring charge relating to ISG and enterprise sales, a $186 million noncash fair value gain on warrants and $29 million notional interest mainly from zero coupon convertible bonds related to our strategic partnership with PIF, Alat.

Now let me walk you through the key highlights of our business groups. IDG delivered another exceptional quarter, strengthening Lenovo's position as the world's PC leader with continued market share gain. We expanded our global PC market share to 25.3%, up 1 percentage point year-on-year, extending our lead over our closest competitor by 5 percentage points and marking our second consecutive quarter as the only vendor to surpass 25% global PC market share since IDC data became available. Despite supply shortages and component cost pressures, PCSD delivered double-digit revenue growth year-on-year and stable operating margin driven by operational excellence and continued innovation. AI PC momentum continued to accelerate with revenue growing at high double digits year-on-year. Non-PC adjacencies also posted strong double-digit growth with a clear margin uplift.

On the mobile side, our Motorola business also delivered a record quarter. Volume and activation reached an all-time high growth across major sales geographies. At Tech World at CES, we expanded our AI native device portfolio with some of our most innovative product launches yet. We introduced the new Aura lineup, including the latest ThinkPad X1 2-in-1 and Yoga Pro 9i , bringing next-gen personalized AI features to our flagship premium notebooks. We also debuted the ThinkBook Plus Gen 7 Auto Twist, featuring an adaptive motorized dual rotation hinge designed to seamlessly ship between work and presentation modes. In desktops, our new ThinkCentre X Series delivers modern AI-ready performance complete with a dual screen setup for connected content creation. And in mobile, Motorola unveiled the Moto Signature, our new ultra-premium franchise and first thinnest smartphone in its class and the Moto Razr Fold, the first book-style foldable featuring an expansive display and advanced AI capabilities.

Together, these launches demonstrate how Lenovo is redefining the future of hybrid AI across PCs, desktops and smartphones. At Tech World CES 2026, we also unveiled Qira, a cross-device AI super agent that brings our one personal AI multiple devices vision to life. Qira is unified entry point for LLMs to engage directly with end users and serves as the intelligence layer across the Lenovo ecosystem. It is a user's personal assistant and AI Twin across devices capable of executing tasks using both on-device and cloud AI and continuously learning from user context while maintaining privacy by design. With Qira at the center of our end-to-end super agent ecosystem, we're elevating device value, deepening our integration with partners and developers and expanding opportunities for services and subscription models. Together, Qira and our hybrid AI architecture enable a seamless unified intelligent experience that strengthens our competitive advantage across both personal and enterprise AI.

Moving on to ISG. ISG delivered a record quarter, generating revenue of $5.2 billion, up 31% year-on-year. We saw strong momentum across the business driven by record CSP revenue from an expanding customer base, enterprise and SMB transformation and accelerated AI server momentum. Operating performance improved sequentially. Our AI Server business achieved high double-digit revenue growth with a robust $15.5 billion pipeline. We also deployed the first Lenovo GB300 NVL72 base rack scale solution, marking a significant milestone in next-generation AI infrastructure. Our Neptune liquid cooling revenue grew 300% year-on-year, supported by higher customer adoption across CSP, enterprise and SMB businesses. We announced a onetime restructuring program this quarter in ISG, which we believe is a crucial step to realigning the cost structure and accelerating the transformation towards a sustained improved profitability in the business.

Through cost structure realignment and operating model optimization, we are investing in our highest priority growth areas and positioning ourselves to capture the enterprise AI wave. ISG transformation program provides a clear path to profitability as early as next quarter and is targeted to achieve over $200 million annual run rate net savings over the next 3 years. By scaling customer value, innovation and driving One Lenovo execution, we're well prepared to capitalize on expanding opportunities. Our high-velocity transaction model simplifies the engagement, deployment and maintenance experience for our customers and partners. These initiatives will boost sales efficiency and accelerate time to market, unlocking customer acquisition and positioning us favorably to capture multiyear CSP training and ESMB inferencing tailwinds.

Our AI infrastructure portfolio continues to differentiate Lenovo across every major segment of the market. In CSP, our strategic collaboration with NVIDIA on the AI Cloud Gigafactory positions us at the forefront of hyperscale AI deployments. In enterprise and SMB, we expanded our AI inferencing portfolio with newly launched servers and solutions designed for various workloads, enabling enterprise customers to achieve accelerated deployment and scalability. In high-performance computing and AI, our Neptune liquid cooling technology continues to set the industry benchmark. Processor level warm water cooling, for example, now enables reliable live Formula 1 broadcasts.

SSG delivered a record revenue quarter, growing 18% year-on-year, marking the 19th consecutive quarter of double-digit year-on-year growth. Operating margin reached 22.5% near historical high. Revenue mix continued to shift toward high-growth areas this quarter. Managed Services and Project & Solutions together grew to 59.9% of SSG revenue. By enabling faster deployment and offering greater cost predictability, TruScale Device as a Service and Infrastructure as a Service saw accelerated growth this quarter, driven by GPU and AI workloads. Our AI-enabled services, which have reduced cloud cost by more than 70% for Shiseido and enable 98% on-time delivery for Yili are driving measurable outcomes for leading global organization that trust Lenovo to support their strategic AI initiatives. Our hybrid AI advantage, which powers iChain, Lenovo's AI-driven supply chain orchestration platform and Football AI Pro, the FIFA co-developed AI knowledge assistant that delivers real-time performance analytics continues to accelerate enterprise AI at scale, enabling the creation of next-generation super agents.

SSG is strategically positioned in the fastest-growing areas in the IT services industry, capturing a total addressable market of $360 billion and levered to the growing opportunities in Managed Services and Project & Solutions. In areas such as digital workplace services, hybrid cloud, AI and sustainability, SSG is growing at double the rate of market growth. These offerings allow us to scale the revenue at 4-year CAGR of 23.9%, enabled by our differentiated technological expertise, long-term engagement models and strength of our hybrid AI advantage. At Tech World at CES, we announced the next phase of our hybrid AI advantage with the launch of Lenovo Agentic AI, a new full life cycle enterprise solution for creating, deploying and managing AI agents and Lenovo xIQ, a new suite of AI-native delivery platforms designed to simplify and accelerate AI across the enterprise. Lenovo Agentic AI and xIQ seamlessly extend our solutions and services portfolio strengthening our role as the execution engine to enable organizations to rapidly move from strategy to deployment.

Before concluding, I want to highlight our success at Tech World at CES 2026. Lenovo won a record number of over 200 awards, including 3 of the prestigious CTA Official Best of CES 2026 Awards. With 14,000 attendees at the Sphere in Las Vegas and millions more viewing online, we brought together key industry partners such as Intel, AMD, NVIDIA, Qualcomm, Microsoft, FIFA and of course, the Sphere. This showcased the industry's broadest product portfolio at scale and our latest innovations for the global AI ecosystem, reinforcing our leadership in innovation and our unwavering commitment to hybrid AI.

Along our success at CES, we continue to advance our sustainability agenda. We received a Global Lighthouse Network Award from the World Economic Forum with our Mexico manufacturing site added as our second lighthouse, a clear recognition of how we are applying the innovation to strengthen our resilience, boost efficiency and reduce environmental impact. Looking ahead, our strategy remains sharply focused and highly disciplined. With our global scale and proven operational excellence, we continue to execute reliably and outperform even in volatile markets. As we enter an accelerated era of growth with improved profitability, our hybrid AI strategy positions us to drive sustained profitable growth for our stakeholders with even greater resilience and executional strength.

Thank you, Winston. Now we will open the floor for questions, and this session will be English only. [Operator Instructions]

While we're waiting for the questions, allow me to introduce the management team again. Other than our Chairman, Yuanqing Yang; and CFO, Winston Cheng, we also have the following business leaders with us today for Q&A. Luca Rossi, President of Intelligent Devices Group; Ashley Gorakhpurwalla, President of our Infrastructure Solutions Group; Ken Wong, President of our Solutions and Services Group; and Sergio Buniac, Senior VP of Mobile Business Group and President of Motorola.

We'll begin the Q&A session by addressing several frequently asked questions leading up to the earnings, which we believe are especially relevant to this quarter's performance.

So the first question, at Lenovo's 2026 Tech World during CES in January, we witnessed the successful launch of new products and services. As Lenovo continues to enhance its global brand and demonstrate its position as global tech leader, what do you see as the most significant opportunities in AI? How is Lenovo strategically positioned to capture these opportunities?

For this question, may I please invite our Chairman and CEO, Yuanqing, to address it. Yuanqing, please?

Thank you. So this January, we successfully held Lenovo Tech World at CES comprehensively showcasing our plan and progress in hybrid AI, including personal AI as well as enterprise AI. In personal AI, we introduced our AI super agent, Lenovo Qira to the global market, along with a series of innovative AI devices. So we will start shipping Qira embedded devices as soon as next quarter. So stay tuned for more updates. In enterprise AI within the framework of Lenovo hybrid AI advantage, we demonstrated how AI inferencing is brought closer to where data is generated on-prem and at the edge. We also launched xIQ platforms and announced the AI Cloud Gigafactory in partnership with NVIDIA.

In fact, so market continues to question whether AI is overheating. But in my view, there may be a bit more investment in certain areas, for example, frontier models, pretraining and pursue AGI. So these are worth exploring, but not necessarily the only right path forward. However, looking at the AI as a whole, it's fundamentally a data technology, the technology that fully leverage all forms of data accumulated throughout the human history to generate the intelligence. And that is absolutely not a bubble, but a technological advancement that delivers tangible value.

So looking ahead, we firmly believe AI democratization is irreversible and unstoppable trend, but it will shift from public AI and cloud to AI inferencing increasingly happening on-prem and at the edge and more enterprise AI use cases vertically or horizontally. So Lenovo has developed and implemented this hybrid AI strategy through the dual engine of personal AI and enterprise AI to capture the significant growth opportunity brought by AI democratization. So this is not just a long-term vision, but also a strategy we are executing with a full commitment. So you can see the number from our last quarter results. So our AI-related revenue grew more than 70%. Now it has already accounted for 1/3 of our total revenue. So we will continue that pace. Thank you.

Thank you, Yuanqing. The next question is on the component cost increases. So with the rising memory costs impacting the entire hardware industry, how is Lenovo preparing to navigate this challenge? Looking ahead to the next financial year, how should we evaluate the market demand in the context of increasing component cost?

For this question, may I please also invite Chairman, Yuanqing, to give your answers. Yuanqing, please.

Yes. So definitely, the supply shortage and rising cost situation is precedented and still not finished. The DRAM cost increased by 50% last quarter, but the current quarter versus last quarter almost doubled again even with the contract price. So this structural imbalance between supply and demand is not simply a short-term fluctuation. It's likely to have a prolonged impact on the industry throughout this year. So we are closely monitoring the situation and taking agile action as necessary. But on the other hand, a volatile market could become an opportunity for Lenovo. As I always said, we have already proven ourselves many times. So you should remember when tariff hit about a year ago, so we were quite concerned or you are quite concerned and expecting us to be heavily impacted. But instead, by leveraging our operational excellence and our global local model, so we not only navigated that highly volatile period smoothly, but even further expanded our market share with improved profitability.

Also, you can see from our last quarter's result, we actually effectively mitigated this impact through a lot of approaches, broad sourcing capability, diversified sourcing strategy, flexible and resilient supply chain and long-standing trusted relationship with suppliers to ensure consistent component supply at a competitive cost. Looking ahead, so high material cost will probably constrain the demand for PC smartphone. But that's just from a unit volume point of view. But given the higher pricing and the market shifting to the premier segment because of AI PC, AI phone. So we believe the overall PC revenue market will still grow year-over-year for sure, because our strong supply chain and resilience.

So we also -- we are confident to continue to drive the premier to the market. So definitely, we cannot avoid the impact of the market cycles, but we can ensure stronger competitiveness. So actually, we are still confident to deliver double-digit growth in our PC as well as infrastructure business in the next couple of quarters. Thank you.

Thank you, Yuanqing. Thank you very much. So we'll move on to the questions that we've just collected from analysts. The next question is from Cherry Ma from Macquarie. What is the outlook for PC and smartphone for the market and for Lenovo in 2026 in terms of shipment volumes, margins and ASPs? So may I please invite Luca and perhaps followed by Sergio to address the question on PC and smartphone, respectively. Luca, please.

Yes. Can you hear me okay?

Yes, clear. Thank you, Luca.

So thank you for the question, Cherry. And I think there are multiple questions within one question. So I'll try to address them step by step. So let me start with the market. So given the inflationary cost environment, we think the market will see some decline year-over-year. At the moment, we are modeling a mid-single-digit decline for the units. But that decline will be offset by a higher ASP and likely a favorable product mix. Hence, the value of the market will not decline. For Lenovo, we will continue to grow at premium to market. It's something we did in the last 10 consecutive quarters. We see opportunities with the end of service of Windows 10. There is still a significant portion of units to be upgraded. We estimate more than $100 million. AI PC refresh, a large base of devices that are now 4, 5 and even 6 years old. So with that, we are confident we will navigate this inflationary environment and this shortage supply dynamic better than our peers with large-scale procurement, our long-term strategic partnership with the key players in the industry and of course, with our innovation capabilities.

Let me emphasize that our growth in shipments and premium to market is not just in shipment. We are also winning in activations. Our channel inventory is very healthy and our sellout is very strong. So that to talk about the market. Regarding the average selling price, ASP or AUR, we expect it to go up in 2026. We will see how this plays out. Some customers might prefer to scale down the configuration. Other customers will just accept the price increase. At the moment, we are modeling something in the mid-single-digit growth in average, and we will continue to track quarter-by-quarter.

Now last but definitely not least, regarding our margins, as we mentioned, it will be an inflationary environment, particularly driven by memory, DRAM and NAND. There will be also certain platform cost up due to silicon cost. This situation, I will say, is not new to Lenovo. We have demonstrated many times that we are able to challenge -- to navigate those challenging environments. We are able to mitigate cost, manage prices and at the end, maintain the strong profitability with market share gains. So I think we are confident we will navigate in the next few quarters in a sustainable way. We will continue to deliver industry-leading profitability. We will continue to win in the market.

And let me close in this way. At the core of all of this, it remains innovation and operational excellence as the foundation of our success.

With that, I'll pass to Sergio.

So I mean, very similar to the PC, we expect a high single-digit decline for the mobile market. We also are seeing 10 quarters of premium to market. Last quarter, not only we saw premium to market, but we saw premature market in every geography. We expect the premature market to continue in the moving quarters. And while units decline, revenue expected to go up, there are, I think, besides the adjustment on the commodity cost, we are moving further ahead to premium in our mix. We just launched at CES, our new signature ultra-premium franchise. We just announced a new Razr Fold. So I mean, we believe we will sustain a premium to market in all yields, revenue price adjustments that we need to manage, but also a significant improvement in mix as we move in the new launches that start in the next 2 months.

Thank you, Sergio. We move on to the next question is on ISG. So it's from Leping from Huatai Securities. Congratulations on the strong performance of ISG this quarter. We saw a shift of AI demand from training to inference. With the restructuring plan announced this quarter, how is the company strategically positioned its product portfolio to capture the fast-growing AI inference market? What is the rationale behind the ISG restructuring plan? And how do you envision ISG's growth trajectory and profitability in the coming years as a result of the plan. I'll probably invite Yuanqing to address this question first and then followed by Ashley to give more granularity. Yuanqing, please.

Okay. So just I shared at the beginning, the infrastructure market is undergoing an important shift from AI training on public cloud to AI inferencing increasingly happening on-prem and at the edge for enterprises. Thus, I would say, the restructuring we just made is more of a transformation towards the new trend of bringing AI inferencing closer to end users. So we are making agile, fast and decisive moves to build new capabilities and to boost the efficiency and productivity by simplifying our traditional compute portfolio, meanwhile, address market opportunities by strengthening AI-related product portfolio, particularly AI inferencing product portfolio. So meanwhile, we are enhancing competitiveness by optimizing our business model for SMB and large enterprise relationship customers, respectively.

We are also upgrading our sales force to meet the huge demand. So with this focus and transformation, we are narrowing the loss every quarter with our ISG business. And now we are on track to turn around this business as early as in the current quarter at a onetime cost of -- we booked $285 million restructuring cost last quarter, but we expect to deliver more than $200 million annualized savings over the next 3 years. So we are very confident and have a strong conviction that with this clear strategic move, our ISG business will start the sustainable and profitable growth and deliver improving performance going forward.

So probably, Ashley, you can add more color.

Thank you, YY, and thank you for the question. It's hard to add more than our Chairman just added. He said it quite well. But maybe to be repetitive and add a little bit more. We all agree we're at an extremely important inflection point. And as YY and Winston both mentioned earlier, it's not quite certain if we are in the very beginning, early beginning middle. And I think we all know that as we look backwards, maybe 5 years out, we'll know the answer to that, but it's very clear with our customers and our partners that the era of AI inferencing and adoption into the -- into production and usage is just beginning, but it is beginning very quickly. That's why it is a clear inflection point and an opportunity for us to take very decisive action, not just to transform, but to accelerate the transformation to bring it in, to make it happen faster. And that's the very important part of the why.

We're focused on investing in targeted investments for enterprise AI era. And that's going to include optimizing our end-to-end transactional model. The faster, more agile methodology of the operating model allows our customers to also adopt their AI into their systems more iteratively, faster, quicker with better agility as well on their side. We simplify our portfolio to focus on digital transformation and AI adoption solutions. And as YY mentioned, we're increasing our go-to-market AI skill sets to really help partners, customers on their AI journeys as well as a trusted technology provider to them.

We believe these actions will increase speed, improve our agility and enable increased leverage from our operating model. I believe part of the question was why now? It's because we're certain and committed to leading in the AI era of AI democratization. Because we're only at the beginning stages, the opportunity to lead is right now. This onetime restructuring allows us to accelerate that transformation and the confidence is actually quite high in our stated goals of saving $200 million on an annualized basis over the next 3 years because we aren't just starting. We've been hard at work on the transformation project throughout calendar year 2025, and we get to see the significant progress on our internal indicators of increased AI productivity, portfolio optimization, increasing velocity on our operating model and increased sales capability. Thank you.

Thank you, Yuanqing. Thank you, Ashley. We're going to move on to next question, which is from Howard from Morgan Stanley. So aside from memory, which other components are you seeing pricing increases? And how would this impact IDG's margins over the next few quarters? Any strategy in place to address the potential issues?

So for that, I please invite Luca to address this question, please.

Sure. Thanks, Howard. So regarding other components, so I will say the cost increases are largely in the memory space. There are also additional cost up in the silicon or in the silicon area, given the demand and supply imbalance, particularly in certain manufacturing nodes. The rest of commodities of building PC or a phone, I will say, are largely stable and maybe there are even some opportunities for cost down in certain other areas. Now protect our margins is definitely one of our key objectives. And that is achieved through a combination of actions. You can think about product innovation, design to cost innovation, expanding our supplier base, making long-term strategic purchases, of course, dynamic pricing.

At the end, you still have a market to face and then pricing, I believe, will go up, tight expense management and definitely our laser precision in operations. Maybe it's also in the area of how to expand and protect our GP. We are also focusing and accelerating on what we call non-PC revenues. So all the adjacencies to PC services, accessories, these are all margin-rich and all areas where we have still a significant room to grow. So that will be part of the several actions that we are driving to navigate and to make sure we can protect our margin and our profitability. Thank you.

Thank you, Luca. Great. Next question is also from Howard Kao from Morgan Stanley, and this is on ISG. So could you please remind us the breakdown between AI server, general server for cloud and enterprise server within ISG? And can you help to give some color on the outlook for these 3 end segments for Lenovo this year? So Ashley, please.

Sure. Thank you for the question. We don't have a breakout of those segmentations. As we've said before, our AI server growth is quite significant, outpacing our general growth. So the mix is shifting towards AI server growth as we expected it would. For us, perhaps to give a little color on the market and outlook. If you take the bold statement that the market is effectively sold out from a high-value component perspective for, let's say, a quarter, 2 quarters, 3 quarters, then you'll see, as we've discussed earlier, that we'll see increasing costs from CPU flash, DRAM and other components going forward. And so infrastructure providers like Lenovo will be focused on efficiency, productivity, scale in order to minimize pass-through impacts to our end customers, but there will be increasing costs throughout 2026.

In the CSP space, we're likely to maintain or increase infrastructure CapEx spending. We don't actually see that being deflected by the increasing costs. We expect AI training and related DC spend to stay at double -- high double-digit year-over-year growth. For your question of CSP general versus AI, we're actually seeing that highly correlated. AI growth for training or frontier may be slightly different. But in general, what we're seeing is any growth related to AI increasingly is growing across data, compute elements in the cloud as well for our service providers. And we think our strategy there of having our own world-class manufacturing gives us an edge and a differentiation in efficiency and productivity because we can serve these at-scale customers with our scale.

And in a supply-constrained environment, we think other factors, and we know other factors will be prioritized like speed to deployment. Lenovo's already deployed, for instance, GB300 rack-scale infrastructure. And we just announced our joint effort that's been underway with NVIDIA called Lenovo NVIDIA AI Cloud Gigafactory. And this helps speed up our customers' time to first token, which is very important in an inflationary environment. In the enterprise space, we see that it's likely that CIOs, business leaders will be facing this challenge of increasing costs within their technology business, but also while driving AI adoption to help offset that with productivity.

Lenovo is going to help by prioritizing AI productivity business value projects and really focused on production deployments. Of the surveyed CIOs that we talk to, 93% are expecting a positive ROI from their AI deployments. This gets more difficult with the cost environment. And that's why, for instance, at Tech World, we've talked about not only being focused on delivering rack-scale solutions with NVIDIA and AMD, but that we're already leading the industry in enterprise AI inference solutions across a portfolio optimized for compute storage and software. A great example for me is the ThinkSystem SR650i. It's already set many inference benchmark world records. Now 84% of those CIOs have to leverage hybrid AI capabilities because they have to have the workload where the data is relevant. And that's why we've also announced our Lenovo Hybrid AI Advantage program.

That can span from private cloud economics like TruScale, which is becoming increasingly more important in this environment to industries that need reliable edge inferencing platforms like our SE455i. So I think -- when it comes to the enterprise side, we see the market very similar to as Luca discussed earlier, where perhaps there is downward pressure on units, but increasingly offset -- more than offset by richness of each unit and content. And so that becomes important because Lenovo differentiates our supply chain, our world-class reliability and our energy-efficient IP like Neptune will come together and help build that better ROI outcome for the customer despite the inflationary cost. So we believe that our differentiation in AI operations, high-performance systems delivered with extreme efficiency is going to be even more aligned to helping our future customers. Thank you.

Thank you, Ashley. The next question is from Cherry Ma from Macquarie. For SSG, what's our customers' IT OpEx versus CapEx spending trends? And what's the implication of our growth outlook this year? This question is for SSG. I would like to invite our SSG President, Ken Wong, to answer the question. Thank you.

Thank you, Cherry, for the question. Well, we definitely see an increasing trend of OpEx versus CapEx, probably at the rate of 2x that of CapEx. I think one of the reason is being, for example, our TruScale as a service across our devices and infrastructure one of the value proposition that resonate a lot with our customer, especially during the period of component price volatility is about predictability, right? And also our xIQ platform helped to optimize the compute and persona and make sure customers get the most out of their infrastructure and device investment. And from a Lenovo perspective, right, if we were able to get into a TruScale as-a-service engagement, there are a couple of benefits. One is when we look at the historical data, our retention rate for TruScale as a Service is usually more higher than 90%. So a very, very high retention rate compared to a CapEx motion.

The other thing is once we get into a contract, we're able to understand the customer better, understand the opportunity and as well as the challenges. And hence, that give us more opportunity to serve the customer on a broader basis. Last but not the least, right, such a contract is a multiyear contract and also with a scope way beyond the hardware scope, for example, include software and services, and that always result in a higher profitability for the company, right? So in a nutshell, I think we're still very positive about the pace of growth for our TruScale business for the reason that I shared. So thank you.

Thank you, Ken. The next question is from Tony Zhang from CLSA. How is AI reshaping the SSG business compared with the pre-AI era? What has adoption been like for your AI-enabled vertical solutions? And how are they ramping as they address customer business challenges? So this question is also for Ken from SSG. Ken, over to you, please.

Thank you, Tony. Well, a big question. So a couple of things, right? When I look at the customer requirement in the past probably 6 months compared to before, there are 2 main changes. One is from Gen AI to Agentic AI, right? Agentic AI is about resolving not just one problem, but a complex problem with a lot of steps, things like that, right? So that will be one change. The other change is very obvious is customers are no longer looking for proof-of-concept kind of project, right? They're looking for production -- real production and with impactful and meaningful outcomes. So those are the 2 changes. And as a result, I think our hybrid AI advantage, which is a comprehensive framework and offerings across compute, data, platform use cases and consulting services are really able to help our customer to adopt Agentic AI at scale.

A couple of examples. I think one is we successfully helped one of the world's leading dairy company to use Agentic solution to improve their supply chain operation efficiency by 20%. The other example is we worked with a Global 500 technology company to help to use Gen AI to modernize their customer service centers around the world. And again, this is by Agentic solution, which is a team of agents all with different roles and responsibility to achieve complex task. And with that, we were able to help this customer to improve the efficiency by 20% and also significant uplift in terms of customer satisfaction, right? So we continue to see the trend in terms of -- from POC to real production from Gen AI to Agentic AI. And I think Lenovo Hybrid AI Advantage is perfectly fit for this kind of requirement in the market. Thank you.

Thank you, Ken. Conscious of the time, we'll take one more question. The last question is from Jordan Pong from Franklin Templeton. Is there any update on the collaboration with Alat? What is the progress on the expansion in Middle East?

So this question, I would like to invite our Group CFO, Winston, to address. Winston, please.

So given the time, I think Winston is moving on to the next interview session. So this will be the end of this earnings webcast. And thanks to everyone for joining. Thank you.

[indiscernible] answer your question.

I was in the middle of answering. Is it over?

Please go ahead, Winston. Yes, we can hear you.

Yes. So the strategic investment, clearly very important. We're aligned. You can see the news. The Middle East continues to be very much investing in AI as part of our initiative. You can see our ISG business is very much aligned to this trend, particularly on global infrastructure spend. So very much aligned to capture this opportunity. Our plant is well on track. In fact, and started manufacturing. We'll have a grand opening of our office in our whole effort there in a few months' time, which will -- you'll see the news. And also, if you would like to attend in person, I think we'll be very open to have investors there as well. So for you to see in person. So absolutely. Thank you for your question.

Thank you once again. Thank you, everyone, for joining. This will be the last question and end of this earnings webcast. Thank you. Goodbye.

Good morning, good afternoon and good evening. Welcome to Lenovo's Earnings Investor Webcast. This is Lixi Yuan, Director of Investor Relations at Lenovo. Thanks, everyone, for joining us.

Before we start, let me introduce our management team joining the call today. Yuanqing Yang, Lenovo's Chairman and CEO; Winston Cheng, Group CFO; Luca Rossi, President of Intelligent Devices Group; Ashley Gorakhpurwalla, President of Infrastructure Solutions Group; Ken Wong, President of Solutions and Services Group; and Sergio Buniac, Senior VP of Mobile Business Group and President of Motorola.

We will begin with earnings presentations. And after that, we'll open the call for questions.

Now let me turn it over to Yuanqing. Yuanqing, please.

Hello, everyone, and thank you for joining us. Today, I'm pleased to share that Lenovo has delivered another quarter of record performance, capitalizing on the AI democratization trend, we have made significant progress in both Personal AI and Enterprise AI, driven by our clear strategy, operational excellence and the relentless innovation.

The results reflect not only our strong performance today, but also our strength to leading the AI era. First, let's start at the group level. Last quarter, our group revenue reached an all-time high of USD 20.5 billion, growing at almost 15% year-on-year.

Our profit grew even faster with adjusted net income increasing more than 25% year-on-year. All business groups and all sales geographies, delivered a double-digit year-on-year revenue growth.

While our AI-related revenues reached 30% of the group total increasing by 13 points year-on-year.

While uncertainties remain in the external environment, we are seeing positive signs of stabilization. We will continue to leverage our unique Global/Local model to navigate uncertainties, lead the industry with operational resilience and capture the tremendous hybrid AI opportunities.

We are seeing today's AI era unfold along a clear path. The first wave was marked by the emergence of large language models, which triggered a massive demand for AI infrastructure, and led to our explosion in cloud-based and training intensive computing power.

Now as large language models become increasingly commoditized, user priorities are shifting towards personalization and the private domain.

This is accompanied by growing emphasis on efficiency, response speed, security privacy and sustainability. This evolution is steering AI development towards a more human and enterprise-centric paradigm unlocking substantial opportunities in AI devices of diverse form factors, hybrid infrastructure of public cloud, private cloud, on-prem data center and edge computing as well as AI solutions and services tailored to diverse needs.

This very trend, the democratization of AI is now accelerating rapidly across both Personal AI and Enterprise AI.

In Personal AI, consumers are increasingly looking for AI outputs that are based on their own experiences, memories, behaviors and knowledge. At Lenovo, we are addressing this demand for hyper-personalization by landing our vision of One Personal AI, Multiple Devices.

You will witness this firsthand at our upcoming Tech World on January 6, 2026, where we will launch our Personal AI super agent to the global market. It orchestrates across wearable and ambient devices to see what you see, hear what you hear, and memorize what you have experienced.

Furthermore, it leverages portable devices and personal trusted computing hubs using personalized algorithms and models to continuously learn from your habits and anticipate your intentions, so that it can think as you would think and act as you would act, and ultimately becoming your Personal AI Twin. I invite you to join us for this spectacular event at Sphere in Las Vegas in person or via live stream.

Our IDG or Intelligent Devices group acts as the core engine behind the Lenovo's Personal AI strategy as demonstrated by strong results from last quarter.

Its revenue exceeded USD 15 billion with a 12% year-on-year growth. PC market share exceeded 25% for the first time in our history with a sustained industry-leading profitability.

Our AI PC leads the Windows AI PC category as a global #1. We also achieved a record-high Motorola smartphone volumes last quarter.

Our momentum in AI device is particularly encouraged with its revenue mix within IDG increasing by 17 points year-on-year to 36% now.

In Enterprise AI, the infrastructure market is undergoing an important shift from AI training in public cloud to AI inferencing increasingly happening on-prem under the edge.

It's significant because the scaling of infrastructure will potentially drive even higher growth of devices and applications, further expanding our total addressable market.

At Lenovo, we are driving our Enterprise AI strategy by helping businesses, turn data and knowledge into insights and value.

Specifically, we started with helping enterprises collect and process various types of data, organize it into knowledge, leveraging the computing power of our hybrid infrastructure. We then apply AI models and AI agents to turn data and knowledge into insights and outcomes or engage the business processes.

These are consolidated into repeatable, scalable solutions for horizontal functions or vertical industries are supported by our full-cycle services. Ultimately, our goal is to create Enterprise AI Twin for our enterprise customers.

ISG or Infrastructure Solutions Group is the key driver of Lenovo's hybrid infrastructure. Last quarter, its revenue grew 24% year-on-year to exceed USD 4 billion. We continue to execute our Cloud Service Provider, or CSP, and the enterprise SMB dual strategy.

For CSP, the business not only delivered a record fiscal Q2 revenue, but also demonstrated a robust growth in AI infrastructure with a strong pipeline.

For Enterprise SMB, we are optimizing and even rebuilding our business models to better serve the distinct needs of enterprise and SMB customers. We are confident our infrastructure business will return to profitable growth soon.

SSG, our Solutions and Services group. By leveraging the Lenovo Hybrid AI Advantage framework, strives to provide the solutions and services for enterprises on their journey of intelligent transformation.

Last quarter, SSG achieved 18% year-on-year revenue growth, its 18th consecutive quarter of double-digit expansion with our operating margin over 22%.

Projects & Solutions and Managed Services revenue mix further advanced to almost 60% of SSG's total revenue. We are accelerating this business further by unleashing the power of Lenovo Hybrid AI Advantage, combining the AI factory, AI services and the AI library of repeatable, scalable AI solutions for selected vertical industries and horizontal functions.

To conclude, we are proud of our record results, confident in our vision and strategy and determined to capture the enormous opportunities ahead.

It's our firm belief that by rigorously executing our hybrid AI strategy, we will not only deliver sustainable long-term returns to our shareholders, but also make AI truly personalized for every individual and every enterprise and eventually bring smarter AI to all. Thank you.

Now let me turn it over to our CFO, Winston. Winston, please?

Thank you, Yuanqing. I will now go through the Lenovo's Fiscal Year 2025, '26 Second Quarter financial and operational results.

The group continued its strong performance into the second quarter, maintaining strong momentum across our business groups and sales geographies. We delivered record fiscal quarter revenue of $20.5 billion representing 14.6% year-on-year increase with balanced double-digit growth across all business groups.

Our adjusted net income grew 25% year-on-year to $512 million, and adjusted net income margin expanded to 2.5%, driven by higher revenues.

Our second quarter results demonstrate our strategic potential to capture substantial AI opportunities. AI-related revenues now account for 30% of the group's total with high double-digit revenue growth year-on-year in AI servers and triple-digit revenue growth in AI PC, AI smartphones and AI services.

Our PC business continued strong growth momentum and continue to grow share, reaching historic high of 25.6% global market share.

Our smartphone business achieved a record high concurrent quarter activations, underpinned by solid end-user demand. ISG delivered strong revenue growth year-on-year and improved operating performance driven by growth in AI infrastructure and related industry demand.

SSG delivered a record revenue quarter while continuing to expand operating margin. All reported geographies delivered double-digit year-on-year revenue growth, reinforcing our balanced strength across 180 markets supported by our Global/Local strategy and resilience and agility of our supply chain.

Turning to liquidity and cash position. Our growth continues to be supported by disciplined financial management. In the second quarter, we delivered operating cash flow of USD 1.5 billion, while free cash flow climbed to $1.1 billion, supporting continuous investment in focused growth areas.

This was driven by robust operational cash and effective working capital management with days of inventory reduced by 10 days year-on-year as well as disciplined expenditure.

We also achieved a 31% year-on-year reduction in adjusted net finance costs, reflecting ongoing cost optimization and working capital efficiency initiatives.

Our HKFRS net income this quarter was $340 million, primarily impacted by noncash items related to warrants and 0 coupon convertible bonds associated with our strategic transaction with Alat, a wholly owned subsidiary of PIF.

Key adjustments to reported figures include $148 million noncash fair value loss from warrant revaluation and $28 million notional interest from the convertible bonds.

Further details on other noncash items can be found in the supplementary financial materials at the end of this presentation. We encourage investors and analysts to focus on adjusted operating profit and net income, which excludes these noncash, nonoperating impacts and better reflect our core operational performance.

Now let's turn to the performance of our business groups. IDG delivered another strong quarter. Revenue up 12% year-on-year to $15.1 billion, and operating profit climbed 11% to $1.1 billion.

This performance reflects expanded PC leadership globally, obtaining a record high global market share of 25.6%. Growth was driven by high-margin segments, premium PC shipments grew 25% year-on-year, and AI PCs are now a major contributor, accounting for 33% of Lenovo PC shipments, solidifying our #1 position with 31.1% market share in the global Windows AI PC market.

In China, AI PC with 5 key features now make up 30% of notebook shipments. Our cross-device AI ecosystem is creating a strong foundation for our Personal AI vision, delivering a seamless One AI, Multiple Devices experience that connects PCs, tablets and smartphones.

Our continued investment in AI-driven innovation and R&D are delivering strong results. Lenovo remains the clear leader in the PC industry across all major categories.

Globally, we hold the #1 position in both consumer and commercial segments, and we continue to expand market share in the second quarter. Within our PC portfolio, our leadership further extends into strategic categories, such as Windows AI PC, gaming and premium PCs.

These are critical growth drivers as the industry transitions to a more intelligent and immersive computer experiences. Our global leadership is balanced across the world with #1 market leadership in 4 out of 5 geographies and market share gains in every region during the quarter.

This broad-based growth underscores the strength of our manufacturing footprint and resilience of our global supply chain.

Turning to our Infrastructure Solutions Group performance in the second quarter. ISG continues to benefit from the strength of AI infrastructure spend and our leading product and technology for advanced computing, delivering 24% year-on-year revenue growth to $4.1 billion with improved operating performance, driven by new customer acquisitions in cloud service providers and advancing enterprise and SMB transformation.

ISG continued to experience strong growth in our Neptune liquid-cooling technology, which grew 154% year-on-year, reinforcing our leadership in sustainable high-performance infrastructure.

We continue to drive sustainable growth in high potential areas, advancing enterprise and SMB transformation to capture opportunities in AI infrastructure and inferencing.

Our AI server business achieved high double-digit revenue growth, fueled by rising AI adoption and supported by clear product launch road map.

In China, our operations delivered consistent operating margin improvement, leveraging uniquely localized offerings and our ODM+ model to drive differentiation.

In the second quarter, ISG broadened its customer base across CSP, enterprise and SMB segments with wins in the AI infrastructure, cloud computing and high-performance computing.

These deployments include AI training clusters, GPU as a service and liquid cooling solutions, reinforcing our position in next-generation infrastructure.

We also continue to see growing traction in AI inferencing workloads as customers deploy and scale AI applications across hybrid infrastructure, and we are actively accelerating our capabilities in this area.

The enterprise server and storage industry has evolved over the last few decades and benefited from the infrastructure spend behind some of the largest industrial revolutions underpinned by data compute and storage.

Lenovo's ISG business has an industry-leading technology and product excellence from its IBM x86 server heritage. Our leadership in high-performance compute and in liquid cooling positions in Lenovo well for the recent growth in demand due to AI training, and we are aligning our resources to capture the next future for AI inferencing in enterprise and SMB to traditional CSP and most recently, the emerging AI opportunities from CSPs.

Echoing Yuanqing's remarks, we're entering the next stage enterprise and SMB AI. This represents a significant opportunity as the AI transitions from training to inferencing, driving increased demand towards on-premise hybrid environments.

We've delivered another record revenue quarter marking SSG's 18th consecutive quarter of double-digit year-on-year revenue growth. Revenue rose 18% year-on-year to $2.6 billion, and operating margin expanded near historical high. SSG grew at twice the pace of addressable market driven by robust demand in high-growth areas such as hybrid cloud, AI and digital workplace solutions.

Growth in Project & Solutions was driven by enhanced AI solutions targeted at key verticals such as manufacturing and retail. Revenue from TruScale DaaS and Infrastructure as a Service also increased year-on-year with notable customer wins across global markets. In addition, both support services revenue and bookings growth accelerated.

Overall, SSG deferred revenue grew 17% year-on-year to $3.6 billion, providing strong visibility into future performance. With combined revenue for Managed Services and Project & Solutions now accounting for 59.9% of SSG's total revenue and AI services tripling year-on-year, we are capturing higher-value AI-led services business models.

Over the past 4 years, Managed Services and Project Solutions have grown at a 25% compound annual rate significantly outpacing the addressable market.

Our tech-driven offerings enable customers to optimize cost and deepen engagement, aligning with the industry shift towards subscription and consumption-based models that are gaining strong traction.

Meanwhile, support services remain a solid, profit growth driver, supported by rising attach rates from devices and sustainable recurring revenue streams.

We are proud to share that group continues to be recognized globally for our leadership in ESG. In 2025, Gartner Supply Chain Top 25, we ranked 8th highlighting our strong performance in building sustainable, resilient supply chains.

Lenovo's factory in Monterrey, Mexico was recently added to the World Economic Forum's Global Lighthouse Network, the second for Lenovo, among only 201 leading manufacturing facilities worldwide.

Our ESG scores also improved across CDP and S&P Global, and we maintain our AAA rating in the MSCI ESG Ratings for the fourth consecutive year.

We've continued to build on our strong foundation of inclusion, the group was recognized as the Best Place to Work for Disability Inclusion in the U.S., the U.K. and Brazil.

We're also honored as an Ambassador in the Workplace Pride Global Benchmark, reflecting our ongoing commitment to LGBTQ+ inclusion.

In addition, we've deepened our collaboration with the United Nations Industrial Development Organization, focusing on circular economy initiatives. We also joined the Coalition for Sustainable AI, an initiative led by French government in partnership with UNEP, demonstrating our commitment to responsible innovation and environmental stewardship.

These achievements reinforce our long-term commitment to sustainability, innovation and building a more inclusive future.

Looking ahead, we are hopeful of global trade improvements. Our Global/Local model remains a key source of resilience and differentiation. We're also elevating our brand through major initiatives like the upcoming FIFA partnership and Tech World at CES 2026.

With strong execution and continued focus on Personal and Enterprise AI, we are confident in translating our strategy into sustained profitable growth. Thank you.

We will now answer any questions you may have.

Thank you, Winston. Now we will open the floor for questions, and this session will be English only. [Operator Instructions] While we are waiting for the questions, allow me to introduce the management team again.

Other than our Chairman, Yuanqing Yang; and CFO, Winston Cheng, we also have the following business leaders with us today for Q&A.

Luca Rossi, President of Intelligent Devices Group; Ashley Gorakhpurwalla, President of our Infrastructure Solutions Group -- of our Solutions and Services Group; and Sergio Buniac, Senior VP of Mobile Business Group and President of Motorola.

Our first question is from Albert Hung from JPMorgan.

How big will the memory price impact on margin? What is our strategy to go through the memory cost hikes? And when do you expect to see the impact from inflated memory price? And what will be the memory impacts on our business segments? For these questions, I'd like to invite our Chairman and CEO, Yuanqing, to give some remarks. Thanks. Yuanqing, please.

Thank you, Albert, for the question. So if you look at the industry and the market, so 2 key -- 2 key dynamics are top of mind. First is top of AI bubble. And the second is concerns about the supply shortages and the rising component prices.

And I believe these 2 topics are related to each other. So let me give you my opinion. First, on the so-called AI bubble, my opinion is as with any major innovation, there will be intense investment and competition at the beginning, particularly in certain areas such as large language models.

But overall, we do not see a bubble. The substantial investments in AI infrastructure are laying the groundwork for the next major technology wave, much like the early Internet [ field ] explosive growth in PCs, particularly actually triggered the smartphones first for sure, more PC and mobile applications as well.

What's happening now is the next wave of AI democratization, spreading across both personal and enterprise use, which is perfectly aligned with Lenovo's strategy. So we are addressing Personal Hybrid AI as well as Enterprise Hybrid AI.

So because this AI adoption accelerates, the supply shortages and high component costs are natural consequences of rising demand. Addressing this issue, so first, this is not new for our industry, supply shortage or supply cost up and down the normal situation for the industry.

But I believe Lenovo is better positioned and more flexible and resilient than our peers to manage it effectively. So this is not just because of our scale. So indeed, we are probably one of the largest buyers in our industry, combining PC, smartphone, server storage business together.

But also, we have the best supply chain in our industry. So we are very proud of that. So actually, we are ranked #8 as again global supply chain -- top supply chain is [indiscernible].

And we have a much stronger and better relationship with the suppliers. And typically, we signed a long-term contract with some top upstream suppliers. So that we are very confident we can manage this situation better than our competition to ensure not only we have enough supply, not just for short term, but for entire year, next year.

But for sure, hopefully, the demand will not grow too fast than we forecasted. But also we believe we can get the most competitive cost so that we can remain competitive in the market while protecting our profit and margin.

More specifically, for the next 2 quarters, we are very confident we can continue to drive double-digit growth in both our PC business as well as our server and infrastructure solution business.

Meanwhile, we are confident that our margin and profitability will not be impacted during this period. Last but not least, from a longer-term point of view, so we have the mechanism in place to adjust the price and continue delivering on our commitment to ensure the market competitiveness while maintaining our margin and profitability. Thank you.

Thank you, Yuanqing. The second question is on PCs, and we also have a few questions on PCs as well. So we've got Anthony Leng from JPMorgan and Leping Huang from Huatai, asking about the PC outlook for the next year.

And from Leping, he mentioned congrats on the industry-leading 7.3% OP margin in IDG and looking ahead, how do you assess the headwind from the rising storage memory component prices? Are you confident in maintaining this margin profile via pass-through? Luca, can I invite you to answer the questions.

Thank you, and thanks, Anthony. Thank you, Leping. So maybe I'll start with the demand side. And here, I will say that we are definitely more optimistic than what we are seeing from some of the industry analyst reports.

So with the visibility, order visibility we have, as of now, I think we are confident to continue that we will continue to grow at double digit, at least for the next 2 quarters and also for the remainder of calendar 2026, on top of that, Lenovo will continue to grow at a premium to market, so faster than the market while maintaining industry-leading profitability, which brings me to the second point and our Chairman and CEO already mentioned it.

So regarding the memory SSD commodity cost up trend, first of all, I want to remind to all that this is something we have been able to manage several times in the past, in the previous many years, generally speaking, always successfully expanding our market share without impacting our profitability trajectory.

And that is coming with the combination of our strong procurement power, strategic inventory preparation that you can bet we made and definitely also the ability to understand each single market globally so that we know how to price correctly.

So I think the combination of all these things bring me to say that we will price in the right way to expand the market share, to continue to gain market share, like we did in the past. Now it's 9 consecutive quarters that we are gaining market share and maintaining our industry-leading margin and our industry-leading profitability. Thank you.

Thank you, Luca. The next question is from Cherry Ma from Macquarie. So this is on smartphone. She's asking the smartphone outlook for 2026 and what is our strategy for new product launches and the pricing given the component price increases?

And what's the market to focus on given emerging market demand would tend to be weak when phone prices go up? So can I invite Sergio to address this question? Sergio, please?

Yes. So thanks for the question. I think, I mean, no different than what Luca mentioned. I think, number one, we expect the market next year to go single digit, a little faster in value for the price adjustments.

We are not changing our strategy. So we have been 9 quarters premium to market. I think in the last few years, it's not the first time we see component pressures. We have navigated those cycles very efficiently given Lenovo supply chain position.

Our strategy continues the same. I mean we are going to double down in double-digit market, share markets, continued expansion in B2B that is growing double digit, and we will continue to accelerate premium.

We believe the premium devices will be a little less affected by the component costs rising. Our Edge and Razr franchises are growing 28% year-over-year. We continue to see much faster growth in that segment. And we are now further investing in the [ $400 to the $700 segment ] and above [ $700 ], you'll see some announcements.

We also will continue to double down on ecosystem. It's a fast-growing segment for us, and not less important to continue to invest in monetization. Now market-wise, we are more diversified now. So we believe our footprint is not -- we're not going to change.

We are seeing strong growth in markets like India, Japan, Italy, Middle East, Latin America, North America. So I think the footprint is appropriate for what we see ahead of us in the next 18 months. But our expectation is to continue to grow premium to market in the next quarters.

Thanks, Sergio. We've also got another question on SSG. So how do you capture opportunities in hybrid AI infrastructure, both in and outside of China? And what medium-term targets do you have for managed AI compute under TruScale? Yes. Ken, would you like to address this question?

Yes. Thank you. Thanks for the question, Jim. Well, so when we look at the deployment of AI, and there's a lot of customer feedback in terms of key consideration, right? I mean those key considerations are cost, latency, sovereignty, privacy.

And that's why I think our hybrid AI strategy resonate a lot with our customers. And also, as you can see, it's proven in our performance. So that's number one.

Number two, that is why we introduced the hybrid AI advantage, which is basically 3 important components. One is about the AI factory. Second is for the AI factory to power the solution, the AI solution for our customer.

And lastly is to put together by all these things by our AI services in order to help our customers to accelerate their AI journey and help them to achieve the fastest time to token, right?

I think this is so important in AI deployment and also getting ROI out of it. The other thing that we focus on is that there's a lot of requirement on agility and flexibility.

And that is why when we put the TruScale as a service on top of our AI factory, I think that is even more resonate with our customers. So with that, if you look at the market and especially on our performance, I think this part of the business is actually growing much faster than the overall market.

If you look at the overall IT services market, it's growing at about low single digit, but this part of the business is actually growing at double digit, and we are for sure much faster than the market. So thank you for your question, Jim.

Thanks, Ken. So previously, we've also got a question from Randy from UBS asking, can we sustain the strong growth and margins on SSG? And moving forward, are we considering separating the warrant business? Would you like to take this question, Ken?

Well, thank you for the question. If you look at our business, I think there are 3 parts of our business. One is definitely the attached business, right? The attached services is basically to make sure to elevate and enhance our hardware experience from pocket to the edge to the cloud.

The other part of our business is an extension of the attached business, right, into managing all the hardware and software and services in the workplace, which is digital workplace solution.

Second is based on our compute leadership, right? We help our customers to build hybrid cloud. And lastly is the sustainability business. I think this is one of the most sought after all over the world, right?

And the last part is our AI services, which is, as I answered earlier on, this is what is every customer is asking for. But when I look at all these businesses, they're actually interrelated, right?

If you look at AI services, I think it's AI are all powered by hardware, powered by compute, right? So you need to make sure you have the world-class hardware as well as the world-class experience in order to deliver AI ROI, right? So my point of view is it has to be integrated and each part of our business plays an important part of the overall AI solution.

Thank you, Ken. The next question also comes from Leping Huang from Huatai Securities. It's on our Alat strategic partnership. So could you share a timeline for the MEA manufacturing hub coming online? And when can we expect material financial contribution? Can I invite Winston, our CFO, to answer this question? Winston, please?

Sure, thank you, Lixi. Thank you Leping for the question. I think in February, our Chairman, YY actually went to do the opening ground ceremony. And last month, he also visited the Saudi and saw now a group over a very well developed plant. So I think I personally was there as well, very much amazed by the progress.

I think this is even fast for China standards. So amazing progress in the foreign land. The plant is one of the most complete for us in the international market.

We will have desktop PC, mobile and server. So one of the most complete plants that we have in our supply chain. In terms of the timing, we'll start testing next month with volume production really by the middle of next year.

I think we are doing quite well in the business, particularly in the PC space, where we have a #2 position there and really continue to gain.

And so I think from that basis, we're looking to expand our business there by way of server and also mobile, where we will now have a more focused opportunity.

So a lot of dialogue, a lot of excitement for our plants, which have been recognized locally there as the most complete end-to-end manufacturing, not just simple assembly. So I think we expect to have quite a bit of traction and market expansion opportunity with the made in Saudi products coming out. Thank you.

Thanks, Winston. We've got more questions on ISG. So can you update us on the ESMB initiatives on ISG to drive profitability improvement? And how much should we factor offsets from the component cost? This question is from Randy Abrams from UBS. Can I invite Ashley to answer this question? Ashley, please?

Sure. Thank you for the question. Maybe I'll also address the general server market as well as part of that. Today, we're experiencing strong momentum in the ISG business. That's mainly driven by accelerating demand for AI infrastructure, various new customer engagements and also definitely our unique dual CSP and ESMB strategy.

And we think this momentum will provide a strong foundation for our commitment to long-term sustained profitability in our ISG business. If I elaborate in CSP, we're seeing our industry-leading scale and our unique Lenovo R&D deliver strong growth across the customer base of hyperscale to now emerging neo cloud AI providers.

And in ESMB, we saw a solid 30% year-over-year revenue growth, reflecting much stronger than market momentum. This is driven by our focus on new transactional models, commercial AI growth and Lenovo's high-performance infrastructure portfolio.

We saw Lenovo's AI server growth at high double-digit year-over-year. And we are really proud of the growth in our Neptune direct liquid-cooling solution, which grew well over market at 150-plus percent year-over-year.

So for all the reasons that YY mentioned earlier, we believe the server and data center infrastructure market will expand over the next year by high double digits in year-over-year revenue in the CSP segment and by high single-digit percentage year-over-year in the ESMB segment. We remain very optimistic that the compelling value of our AI portfolio and services continue to drive our ISG growth momentum and improving profitability. Thank you.

Thank you, Ashley. We've also got some follow-up questions on the general server demand in calendar year 2025. And how do you think the general server demand will trend into the next calendar year? This is from Howard Kao from Morgan Stanley. Perhaps if you can give a little bit more color on the general server demand side. Ashley, please.

Sure. Thank you for the question. As I said earlier, I think if we segment the server market through our lens of CSP and ESMB, we believe we'll see continued high double-digit growth in the CSP segment and high single-digit growth in the ESMB segment, which would include for us general server marketplace.

What we believe that as YY mentioned, AI democratization is a very compelling transformation and productivity enhancement for our customers, along with our capability to deploy in a very quick manner with our services capability. And we think this market remains impacted by AI going forward. And so we remain optimistic that the general server growth in the marketplace that we see this year will continue in the next calendar year.

Thanks Ashley, great answers. For AI PC, we've seen some interest from analysts and investor communities. So Lenovo appears ahead in AI PC penetration versus our peers. So what is the strategy driving this competitive edge? And how durable are these competitive edge to us? This is from Jim Au from DBS. Can I please invite Luca to answer this question? Luca?

Thank you. Thanks, Jim. So I will say we definitely have been working hard to build our AI PC franchise. And currently, as you probably know, we are the #1 in Windows AI PC with over 30% of share.

I would say that the current results come from our innovation capability, combined with time-to-market, combined with the best-in-class cost structure and then our operational excellence and our unique, what we call Global/Local business model.

So I think all these advantages that I mentioned, they are structural and they will continue to serve us in the future. But additionally, we are also not standing by, and we look forward to what will be the new AI native device era. And here, we will leverage our unique position for the breadth of our offering, PC, tablet, smartphone, IoT devices, all part of a single ecosystem driven by our vision of One AI, Multiple Devices.

So on this front, you will see us doubling down with new innovations, a lot of new innovation coming at the Tech World at the Sphere in Las Vegas coming soon in January 2026 during CES. So I believe that this innovation -- new innovation will also serve us to help us to solidify our competitive advantage. So to be frank, our ambition is to continue to expand our market share above and beyond where we are today while expanding profitability at the same time. Thank you.

Thank you, Luca. So back to ISG. We don't really break down the CSP and ESMB, but what is Lenovo's expectation on the growth rate in these 2 segments in the coming 2 years?

So this is from Robert Cheng from Bank of America. So actually, we've also got additional question from Jim Au from DBS and asking how do we capture the ISG opportunity through our Neptune liquid cooling service. Perhaps you can help address these 2 questions, Ashley.

Thanks for the question. As I said earlier, I think we remain pretty optimistic that the democratization of AI through both personal use and use by enterprise customers is a very compelling reason for our customers and what they tell us to drive enhancements in their infrastructure.

And so we don't break out, as we said, our segmentation revenue. But we see double-digit and high double-digit growth in the CSP market that we serve in that segmentation and high single digit in general or the ESMB space as well, mainly driven, of course, by many workloads with AI really becoming one of the most important workloads that our customers are deploying.

We believe that one of the factors in AI deployment for all customers, enterprise, small and medium business, global hyperscale Tier 2, it doesn't matter. It's really making sure that power consumption and the efficiency of power usage and cooling remains a factor within how they deploy, how they use, what they can afford.

And so this is where a multi-decade development of industry-leading direct liquid-cooling and water-cooling system, Neptune, which we're now on our sixth generation of development of has become a very important engagement with our customers through services and capability.

We believe that we've helped the most customers in the industry convert data centers over from air cooled to liquid cool, and that's reflected in our very, very high growth rates going forward.

We continue to invest in the business and in the R&D and technology on behalf of our customers. And so over the next 2 years, we believe this will become one of the dominant factors in choosing Lenovo AI infrastructure going forward.

Great. Thanks a lot, Ashley. Next question is on our smartphone. So what is our smartphone AI strategy in leveraging Lenovo's strong PC installment? What is the current monetization road map for Moto AI? Sergio, can I invite you to answer this question, please. Thank you.

Thanks for the question. Well, our strategy, One AI, Multiple Devices, so full leverage across Lenovo AI capabilities. Our mobile monetization strategy is anchored in providing our customers a differentiated and integrated experience, which will drive growth for the business.

So our approach links devices for multiple partners, Microsoft, Google, Perplexity, many others. And these efforts are fully integrated into the group AI strategy. So we believe the cross-device experience is going to be the key differentiator for our solutions in the future.

Now in terms of monetization, we are looking to the device value uplift. So AI features drive premium attach rates, AURs and volume increase, preloads and ads and of course, very strategic AI partnerships with shared revenue.

So a lot happening, and a lot of leverage from the broader group, and our vision is fully integrated with One AI, Multiple Devices.

Thank you, Sergio. We've got one more question on ISG. So in AI servers, you talked about the AI inferencing being a significant market opportunities. What is Lenovo's strategy to capture the potential growth upside? Ashley, would you like to answer this question, please?

Thanks for the question. In addition, as you mentioned, with the inference being a significant market opportunity, we think we're only in the beginning of that market opportunity.

We see through our -- especially through our CSP business, we're able to work with customers on foundational frontier model training, and we're beginning to see the move into production AI models, agents and capabilities into the enterprise, which requires a focus on inferencing services capability and infrastructure.

As an example, today, our recent addition to the portfolio of the NVIDIA RTX 6000 Pro family across, for instance, today, we're delivering on our ThinkSystem, SR675 V3 and the SR658, V4 has already become a significant portion of our AI server demand and delivery.

And so we expect as we continue to build out the world's best inferencing capability, as Ken said, really delivering time to token that this becomes a very important part of our business and of into our customers.

Thank you. We've got one more question. So on the overall outlook, it's from Randy Abrams from UBS. How are our business tracking into the year-end? And what is the initial view for first quarter versus our normal seasonality? I think with this question, I would like to invite our Group CFO, Winston, to answer it. Winston, please?

Sorry, the question is -- can you just repeat?

The overall group outlook into the year-end.

As stated earlier, and I think we reaffirmed today by our business leaders, I think we are reaffirming what we have in the Street estimates even prior to the recent changes by some of the analysts, in particular due to the DRAM cycle. So we continue to see strength in the order, particularly for PCs, as Luca mentioned earlier.

So we are confident of the estimates out there. I think they may be slightly lower, but haven't tracked in the past few days given some revisions in the target price, but maybe not the estimate. I don't -- this part of me I have not changed the check. But I think overall, we are reaffirming what we had outlook a couple a month ago or even before. So I think consistent with the [indiscernible].

Thank you very much. I think for the next question, we would like to invite Luca to answer. This is from Goldman Sachs, Verena Jeng, and she was asking if there's any plan for AI or AR glasses or new devices outside of our existing portfolio. Luca, would you like to give a few comments on this?

Sure. So as I alluded before, we are not standing by. And obviously, with this AI revolution that is in front of us, we are getting ready for that. That includes more AI native devices, more AI sensing devices.

But of course, today, I will not launch or announce anything, but I will invite all the analysts to follow us at Tech World in the Sphere in Las Vegas, in January. We -- that will be the beginning of a journey where AI ecosystem -- One AI, Multiple devices, will be at the epicenter. Thank you.

Thank you very much, Luca. It's an exciting journey ahead, and we're very looking forward to our Tech World next year. So this is the end of our earnings announcement and webcast, and thank you, everyone, for joining this webcast. Thank you. Goodbye.

Good morning, good afternoon and good evening. Welcome to Lenovo's Earnings Investor Webcast. This is Lixi Yuan, Director of Investor Relations at Lenovo. Thanks, everyone, for joining us. Before we start, let me introduce our management team joining the call today. Yuanqing Yang, Lenovo's Chairman and CEO; Winston Cheng, Group CFO; and Luca Rossi, President of Intelligent Devices Group; Ashley Gorakhpurwalla, President of Infrastructure Solutions Group and Sergio Buniac, Senior VP of Mobile Business Group and President of Motorola. We will begin with earnings presentations. And after that, we'll open the call for questions.

Now let me turn it over to Yuanqing. Yuanqing, please?

Hello, everyone, and thank you for joining us. Today, I'm pleased to report that Lenovo has started 2025, 2026 fiscal year strong with record-breaking first quarter results. This is a remarkable achievement amid the challenges of tariff volatility and geopolitical landscape.

Our group revenue grew by 22% year-on-year to USD 18.8 billion, an all-time high for our first fiscal quarter.

Net income on a non-Hong Kong FRS basis also increased 22% year-on-year. On our Hong Kong FRS basis, our net income more than doubled year-on-year, reaching more than USD 500 million. The difference is mainly due to the noncash fair value gain on warrants as a result of the share price movement. In the coming quarters, this factor may continue to have either a positive or negative impact. So we encourage the stakeholders to focus more on our actual operating performance and non-Hong Kong FRS measures.

All of our main businesses achieved a solid double-digit revenue growth year-on-year. Our PC business, in particular, delivered over 20% revenue growth, the fastest pace in 15 quarters. Our non-PC revenue mix now reached 47%, and all of our sales geographies delivered a higher or relatively high revenue growth.

To capitalize on the unprecedented AI opportunities, we have been firmly executing our hybrid AI strategy towards the vision of Smarter AI for all. Last quarter, we continuously drove innovation in both personal AI and enterprise AI with our R&D spending increased by double digit, by leveraging our ODM+-based end-to-end operation as well as our unique global local model, we have successfully overcome macro challenges, including tariff impacts.

In the past 2 quarters, we have committed to preserving competitiveness, maintaining market share and sustaining profitability against the challenging external environment. I'm proud to say that we have delivered on our promises. We are well positioned to continue navigating future uncertainties.

Last quarter, our IDG, Intelligent Device Group, delivered a revenue of USD 13.5 billion with 18% year-on-year growth. For PC and the related business, our revenue grew 19% year-on-year, and we maintained the industry-leading profitability at more than 80%.

All geographies achieved double-digit year-on-year revenue growth. Especially in China, our business returned to rapid double-digit growth. AI PC penetration continues to accelerate. Now accounting for more than 30% of Lenovo's total bus shipments strengthening our #1 position in the global Windows PC AI market.

For smartphones, we also achieved a relatively higher revenue growth at 14% year-on-year, with the sales volume outgrew the market for 8 consecutive quarters.

In markets outside of China, our market share reached a record high, and we are #1 in foldable with over 50% market share.

Looking ahead, we will continue to build agent-native devices of various forms while enriching application ecosystem for AI super engine to boost the agent user engagement. This will drive towards One AI, Multiple Devices, positioning agent-native devices as the entry point for personal AI.

Our Infrastructure Solutions Group, or ISG, delivered a solid 36% year-on-year revenue growth through strong execution of our CSP and enterprise SMB due strategy. We are firmly increasing investment on AI infrastructure market and R&D as well as enhancing our enterprise SMB competitiveness even as the profitability was impacted in the short term.

Our AI infrastructure business doubled its revenue year-on-year with a strong pipeline. Revenue from our industry-leading liquid cooling solutions grew 30% year-on-year. In China, we achieved a higher growth in revenue and a significant operating margin improvement.

The enterprise IT infrastructure market is a rapidly evolving market from a traditional enterprise computing to cloud computing and now to artificial intelligence computing. While each technology revolution has brought new demand and greatly expanded the market, it has also brought new requirements for corporate investment and commitment.

For Lenovo, we have always been able to anticipate these major shifts and proactively adapt increasing our investments to these opportunities. This has been proven by our ISG business in 10 years. So even though there is a short-term pressure on profitability, we remain firmly committed to investing in the transformation of the traditional enterprise SMB business model, in cloud computing and in AI infrastructure innovation and product development.

By persistently executing our hybrid infrastructure strategy, we are confident that the ISG business will not only sustain mid- to long-term growth, but also deliver stronger profitability returns.

Last quarter as our key profit engine, Solutions and Services Group, or SSG, delivered another record revenue quarter, growing 20% year-on-year with more than 22% operating margin. Support Services business achieved double-digit growth, the Managed Services and the Projects and Solutions businesses grow even faster, driving their combined mix to nearly 60% of SSG's total revenue. an increase of almost 3 points year-on-year. Our AI solutions have experienced a strong momentum, especially in manufacturing and supply chain.

Looking ahead, we will continue to build the capabilities in Lenovo Hybrid AI Advantage framework as our key differentiator. We will focus on developing horizontal building blocks such as digital workspace solutions, hybrid cloud, sustainability solutions, while at the same time, building simple and scalable vertical solutions powered by AI so that we can help solve customers' biggest needs and unleash Lenovo Hybrid AI Advantage.

On top of the business performance, let me also cover some of the major progress specific to lending our AI strategy across our businesses. In personal AI, we led the global AI PC market and launched the AI super agent in China in May. Now we are building a highly personalized user experience through agent-native devices and applications so as to boost the user engagement and we are encouraged by the steady growth momentum since Tianxi went live with our weekly active users rate averaging 40%.

Ultimately, we will realize a highly personalized user-centric experience, operating seamlessly across devices, ecosystems and orchestrated across the client edge cloud architecture.

In Enterprise AI, after launching [ Lusha ], our first enterprise AI super agent in China, we are building AI model factory and developing AI agent platform to make Lenovo AI Hybrid Advantage real. We will showcase our latest innovations at the Lenovo Tech World @ CES [indiscernible] Sphere in Las Vegas on January 6 next year. So stay tuned for more updates.

Before I close, I'd like to reaffirm our commitment to delivering more breakthrough innovations for our customers, generating higher returns to our shareholders and creating lasting value for our stakeholders and the communities. Regardless of market cycles or geopolitical uncertainties, when we make a promise, we deliver. You can count on Lenovo's track record and join us in building a smarter future for all. Thank you.

Now let me turn it over to our CFO, Winston, please.

Thank you, Yuanqing. I will now go through Lenovo's Fiscal Year 2025/'26 Q1 financial and operational results. Our group started the year with exceptional momentum, delivering strong growth across all our business groups. We achieved a record high first quarter revenue of $18.8 billion, a robust 22% year-on-year increase, surpassing the previous record set during the pandemic.

Net income attributable to equity holders on a HKFRS basis reached $505 million, up 108% from last year. On a non-HKFRS basis, net income grew by 22% to $389 million.

Our robust Q1 results highlight the success of our ongoing transformation, driven by diverse growth engines. Non-PC revenues account for 47% of group revenues. AI revenues continue to grow significantly, increasing as a percentage of overall group revenues. All key revenue streams, PC, smartphones, infrastructure and services and solutions achieved double-digit year-on-year growth.

Notably, our PC business secured a record high global market share of 24.6% while our smartphone business sustained year-on-year double-digit revenue growth for 7 consecutive quarters.

Our AI infrastructure business, supported by industry-leading liquid cooling technology, saw its revenue more than double year-on-year. Solutions & Services Group, SSG, revenues grew 20% year-on-year, reaching an all-time quarterly high revenue with operating margin expansion. The strong performance highlights our transformation into a diversified global tech leader, well positioned to benefit from AI industry trends underpinned by relentless innovation and agility and its resilience of our global supply chain.

All key regions delivered strong year-on-year growth in the first quarter, validating the strength of the group's global footprint in over 180 markets, supported by a global local strategy and ODM+ model. In the PRC, revenue surged by 36% year-on-year, fueled by robust momentum across all business groups with higher contributions from AI PC shipments and our leadership in the commercial segment.

In Asia Pacific, excluding China, revenue grew by 39% year-on-year with strong growth. PC and smartphone saw market share gains in key markets such as Japan and India.

In the Americas, we saw PC market share gains for the ninth consecutive quarter and in EMEA, record bookings in Device as a Service and software solutions, driving services revenue.

Our growth is supported by strong liquidity management. In Q1, our cash flow from operations reached $1.2 billion, marking the highest level in the past 11 quarters.

Free cash flow rebounded strongly to $751 million despite a higher CapEx. This was driven by robust operational cash flow and ongoing finance cost reductions. Net finance costs reduced by 9% year-on-year through optimization initiatives. Excluding the notional interest on convertible bonds, our net finance costs on a non-HKFRS basis dropped by 23% year-on-year. As a result, our Q1 cash balance was USD 4.5 billion, up 15% year-on-year, reflecting operational excellence and our disciplined approach to optimizing finance costs. This strong liquidity gives us the flexibility ability to navigate dynamic market conditions while continuing to invest strategically in innovation and growth opportunities.

Our R&D investment increased by 10% year-on-year to USD 524 million, reinforcing our long-term commitment to driving innovation to support our hybrid AI strategy. our R&D technical workforce reached nearly 20,000 employees, representing 28% of our total head count. Our continuous investment in R&D not only strengthen our technology leadership, but also position us to capture structural growth opportunities across personal and enterprise AI.

As part of our commitment to driving innovation, we continue to develop next-generation products that showcase Lenovo's engineering strength as well as customer-centric design.

Our concept devices leverage advanced solar technology to extend battery life, while our industry-first rollable display PC that enhance multitasking goes from concept to production.

On the infrastructure side, our proprietary Neptune liquid-cooling technology offers 100% heat removal to enable customers to operate high-performance server racks without specialized air conditioning. This is a critical differentiator for AI servers with rising cooling requirements. Each of these innovations reflects our strategy of combining performance, design and real-world use cases to drive differentiation across Lenovo's diverse portfolio.

Before we move on to our business group performance, I would like to bring your attention to our non-HKFRS reporting measures, which excludes the impact of noncash items related to warrants and convertible bonds, as part of our Middle East Alat strategic transaction. We encourage investors and analysts to focus more on the non-HKFRS measures, which offer a clear view of our core operational performance as the noncash items related to warrants and the notional interest on the convertible bonds are expected to persist through the end of fiscal year 2027 and '28.

For the quarter, the adjustments to HKFRS figures primarily include noncash fair value gain of $152 million from warrant revaluation and a notional interest of $28 million from convertible bonds. For further details on other noncash items, please refer to the supplemental financial materials included at the end of this presentation.

Now let's turn to the performance of our business groups. The Intelligence Devices Group delivered another outstanding quarter. Revenue reached USD 13.5 billion, up 18% year-on-year. with PCs, tablets and other smart devices delivering the fastest revenue increase in the past 15 quarters. The PC business achieved market share gains across all key sales geographies in the fiscal first quarter despite the ongoing tariff volatility, demonstrating our product excellence scale advantages, agility and supply chain strength.

Operating profit reached $950 million for the quarter, fueled by a strategic shift to our premium products. Our smartphone business continues to be one of the fastest-growing OEMs globally with 7 consecutive quarters of double-digit year-on-year revenue growth. Our premium smartphone segment also outperformed with this revenue mix rising to 37% of total, a 7 percentage point increase year-on-year.

Our leadership in PC and smartphone together with strong presence in tablets enabled by our cross-device AI ecosystem gives us a strategic advantage as we drive a seamless One AI, Multiple Devices experienced to enhance user AI interactions.

Our strength in driving innovation through continuous R&D investment in AI capabilities is reflected in our leadership across commercial, consumer and gaming PC segments as well as the new Windows AI PC category.

In the commercial PC segment, we lead the market with a 27.9% share, up 2.2 points year-on-year. our workstation, including our flagship in station portfolio, drive strong demand with its superior reliability and processing power.

On the consumer PC side, we also ranked #1 globally with a 20.2% market share, up 1.1 points year-on-year. The premium segment of our consumer business is experiencing strong growth led by our signature yoga series with its innovative 2-in-1 convertible design.

We also lead the gaming segment with 18.5% market share and our focus on sustaining this leadership with innovative products such as the award-winning Legion Pro 7.

In Windows AI PC category, we have a leading global market share of 30.6%. These results underscore the balance of our IDG business and our leadership position.

The Infrastructure Solutions Group delivered strong revenue growth in first quarter with revenue rising 36% year-on-year to $4.3 billion, propelled by strong momentum in both CSP and E/SMB segments, both achieved over 30% year-on-year revenue growth.

Our PRC business achieved higher growth during this quarter in terms of revenues. Our full stack AI-driven infrastructure product strategy successfully translates into a unique proposition despite regulatory challenges and continue to fulfill the rapidly rising local customer demand in the market.

ISG recorded an operating loss of $86 million in the first fiscal quarter. Profitability was temporarily affected by a strategic investments to enhance our long-term AI capabilities and accelerate the transformation of our E/SMB business. Continuous investments in AI infrastructure, R&D and sales capabilities are crucial for ISG to capture this rapidly growing opportunities as global demand for AI server surges.

We have seen our enterprise segment under the high velocity programs where channel enhancement is delivering double-digit revenue growth. We are confident about the upcoming launch of our next-generation LLM-based AI training servers in the second half of the calendar year of 2025, which will further strengthen our competitiveness in this high-growth market.

ISG continued to broaden its customer base across both the CSP and E/SMB segments in the first quarter with wins in cloud computing, security, content delivery high-performance computing and AI server offerings applied across a range of leading educational institutions, financial companies and AI infrastructure providers.

Our Solutions and Services Group continues its consistent growth trajectory in Q1 and achieved a record high quarterly revenue of $2.3 billion. This marks the 17th consecutive quarter of year-on-year revenue growth.

Operating profit climbed 26% year-on-year to USD 501 million, with our operating margin expanding by 1.2 percentage points to 22%.

Strong growth momentum in high-demand sectors, namely hybrid cloud, AI and digital workplace solutions fuel SSG's revenue growth, more than doubling IT services industry growth rate. Our as-a-service offerings gained significant traction with managed services and project and solutions services contributing 58% to SSG revenue, up 3 percentage points year-on-year. Notably, bookings in TruScale Infrastructure-as-a-Service surged with triple-digit year-on-year growth. We also saw a deferred revenue on our balance sheet a key indicator of future revenues for SSG support services reached USD 3.5 billion.

Looking forward, SSG's hybrid AI framework sets us apart by delivering a comprehensive suite of AI-driven solutions across the entire hardware life cycle extending into value-added services.

In Q1, SSG secured significant customer wins across key verticals, including financial services, technology, logistics, construction and other sectors. For example, we deployed comprehensive AI solutions, including our LLM in a box to enhance AI capabilities in the financial sector. In construction and logistics we delivered advanced multi-cloud platform management services infused with AI technology. Additionally, our end-to-end DWS enriched with AI features have been enthusiastically adopted by global technology leaders, further solidifying our ability to deliver impactful industry-specific outcomes.

Amidst the world's current evolving macroeconomic challenges and shifting policy landscapes, the group remains focus on executing our strategy to expand market share and profit. Our globally recognized supply chain and our manufacturing footprint continue to support sustainable growth, strengthen our competitive position and enhance the group's resilience in adapting to changing market conditions.

Thank you, and we will now answer any questions you may have.

Thank you, Winston. Now we will open the floor for questions, and this session will be English only. [Operator Instructions]

While we are waiting for the questions, allow me to introduce the management team again. Other than our Chairman, Yuanqing Yang and CFO, Winston Cheng, will also have the following business leaders with us today for Q&A. Luca Rossi, President of Intelligence Devices Group; Ashley Gorakhpurwalla, President of our Infrastructure Solutions Group; and Sergio Buniac, Senior VP of Mobile Business Group and President of Motorola.

Our first question is from Howard Kao from Morgan Stanley. On PC, can you talk about the trends you're seeing for third quarter and fourth quarter in 2025 calendar year? Are you expecting a sub-seasonal 4Q because of the pull forward demand due to tariffs? How do you think about your ability to gain share going forward? And any thoughts on commercial refresh in terms of where we are in this cycle?

So for this question, I think I would like to invite Luca Rossi, our Head of IDG, to answer this question. Luca, please.

Thank you. Thank you, everyone, and thanks, Howard. So as we mentioned in our prepared remarks, our PC performance last quarter was very strong with significant premium to market for Lenovo. And not only on the shipment front, but also on the consumption like the activations, we recorded positive premium to market in all geographies.

I will say that our view remains optimistic for the financial year. We have good order visibility. We see growing PC and demand, accelerating activation data. And of course, this positive momentum of the market is augmented by the Lenovo share gain, which adds on top of that. And we see this as a sustainable item going forward, positive premium to market, while at the same time, we are investing for the AI PC leadership going forward and at the same time delivering and continue to deliver industry-leading profitability.

So when I look at the market performance, definitely -- and this is also combining your ask on the commercial part, the Windows 10 to Windows 11 transition, I would say, at the moment, is in full speed in most of the geographies and most of the country. It's not -- does really not finished yet. We think this tail will continue for a couple of quarters. So at the present time, I will say we are confident for the remainder of the year for the shipments to continue to grow at mid- or maybe even high 1-digit rate.

Maybe to conclude on AI PC, I want to reaffirm that we have been leading the market. We have more than 30% share of the Windows AI PC, and we are working with our innovation, R&D to build not only devices but also the One AI, Multiple Devices ecosystem that we think will be a competitive advantage going forward in the second half of 2025 and particularly in 2026 and 2027. Thank you.

Thank you, Luca. The second question we've got is from Leping Huang from Huatai Securities. Could you please provide an update on Lenovo's business progress in the Middle East since signing the cooperation agreement with Alat this year? What is the current revenue contribution from the Middle East region? And this Lenovo has a specific target for its future revenue share from this market? I would like to invite our CFO, Winston, to answer this question.

Thank you, Lixi, and thank you, Leping, for your question. Clearly, we are the only company that's producing locally and building a manufacturer. We're well ahead of schedule in terms of build out this manufacturing facility for PCs, servers and other devices, including potentially smartphones. So on that basis, we're the only one who are strategically partner as you're aware, with a lot to align the Vision 2030 initiatives of KSA with the full capabilities of Lenovo.

In terms of PCs, we are #1 in the market. We benchmark ourselves against where in other markets such as China, where we have been able to achieve great market share with our strategic alliance and in markets where we have built local strategic partnerships, such as in Japan, where we have partnerships with NEC and Fujitsu where we have an outsized market share as a result of this type of partnership.

So in terms of KSA, with the -- and you will probably have seen in terms of the announcement, the appointment of mid- to our Board. So with this titan partnership, we expect to capture additional share in the local market, particularly as we manufacture locally in the KSA for the KSA and also for the EMEA region. And I think you all have also seen that the great initiatives in terms of data center spend and build out locally as well as other companies such as Human and others in the local market, I think there's great opportunity for us in terms of ISG business and other businesses as well, including other services business. So hopefully, that's helpful to respond to your question. Thank you.

Thank you, Winston. Our third question is from Cherry Ma from Macquarie. The question is on SSG. So we saw very robust revenue growth in Device as a Service and Infrastructure as a Service. Can you share with us what are the drivers behind the strong growth? Was there a stronger geographical region driving this growth than others? And with this, underlying trends sustain the growth momentum in the coming quarters? Given that our head of SSG can -- is unable to join the call, I would like to invite Winston on behalf of Ken to address this question. Thank you.

Well, in terms of this trend of spending the CapEx to an OpEx model, this is something that is a trend around the world. And I think from the perspective of Lenovo having this flexibility, we are agnostic in terms of customer demand. From a CapEx perspective or OpEx, we have the capability to provide both, and I think we're seeing very strong both growth in terms of our Device as a Service and our Infrastructure as a Service namely called TruScale. So from that perspective, we have seen strong growth across all our geographies in terms of this trend, and the SSG team led Ken has been built down out the full capabilities we have also seen significant customer wins on this part of the business as well, especially customers in particular, with a global presence where Lenovo has a global capability to match up as a Global 500 company in terms of the footprint that's required by other Global 500 companies.

Great. Thank you, Winston. The next question is from Himani Muka from Canalys. How have the tariff uncertainties impacted your supply chain diversification strategy? Any quantitative insight on what percentage of our supply has been moved to our overseas production plans from China? And any insight on your future strategic direction, that would be great. So I would like to invite our Chairman and CEO, Yuanqing, to answer this question. Yuanqing, please.

Thank you. So I don't think big impact on our performance as well as to our global manufacturing or supply chain footprint regarding of the tariff uncertainty. So you can see from our last quarter's performance. So I don't think any substantial meaningful impact.

So I think that's mainly because of Lenovo, we have built a very unique, very competitive business model. We call the ODM+ and the global ODM+ means we combine the in-house manufacturing with ODM together so that not only give us the cost competitiveness, a quick response to the customer requirement as well as we can benchmark with the best practice in the industry.

Global -- local means we leverage global the best resources and deliver locally. So actually, we think the China manufacturing probably is the best manufacturing resources in the world. So it's hard to find another country to match its competitiveness. So it's not just a low-cost level by aggregation of the supply chain and components. It's a manufacturing culture. So you know, Lenovo, we have the global, we have manufacturing facility everywhere in the world. Regarding of the manufacturing costs for each of the PC, so at least $15 higher. So if you manufacture outside of China compared to manufacturing in China.

So we will continue to leverage China manufacturing as a global competitive resource. But meanwhile, we have built more than 30 factories in more than 10 countries to help us to keep the flexibility and resilience to effectively avoid the high tariff.

So actually, the tariff is not new to Lenovo. So we -- so some countries like Brazil, like India, they have the high tariff as well. We have dealt very well with our unique business model. So I think the most important thing is how much tariff you pay. The most important thing is whether you can keep the competitiveness in the market. No matter it's a high tariff country or it's the lower tariff country. But I'm confident with Lenovo's unique business model, we can deal with the situation better than our competition.

So I think this is a kind of China plus model has been working very well for us to keep the competitiveness in the U.S. and other markets. Thank you.

Thank you, Yuanqing. The next question is on margins from Albert Hung from JPMorgan. So how to reconcile the meaningful quarter-on-quarter GP margin decline versus decent segment operating profit. What has dragged down the gross margin in the first quarter? And what's the margin outlook in the coming quarters?

I'd like to invite our CFO, Winston, to answer this question, Winston, please.

Thank you, Albert, for your question. You probably will have noticed that the ISG business for us have been growing quite fast. And in particular, we have come and disclose that our AI server revenues more than doubled year-on-year. As you are very familiar with the dynamics of the current AI server industry that the margins in this segment, the deals are large, but can be slightly lower in terms of to gross margin as it relates to other segments of the server business, such as the SMB space or in terms of our IDG business. So overall, our GP margin actually would have been much higher to north of 17% if we take out the CSP business. So I think that's what I would really emphasize for you.

So as a result of business mix, we're seeing actually healthy margins in terms of PC despite the fact that we are gaining significant share in the market, as you would have seen, the 24.6% share at a probably historical high in our PC business and continue to be growing double digits 7 quarters in a row in our smartphone business. So I think overall, the margins is strong, considering that we're growing significantly above market in all our businesses. Thank you, Albert.

Thank you, Winston. Next question is on R&D investment growth. It's from Cherry Ma from Macquarie. So R&D investment growth had decelerated over the last 2 quarters to 10% growth. How should we think about R&D spending growth over the next few quarters? I think this question is also for Winston, please, Winston.

In terms of R&D, this is absolutely a priority for us as we drive towards our hybrid AI strategy. And as you have seen from the results in the PC industry, we are leading in terms of energy saving efficiencies with concept devices such as the solar PC. We have a rollable which have really been talked about and 1 awards which we're going to production. And of course, we have an industry-leading liquid cooling solutions. And in terms of our services and solutions growing very fast here in terms of other AI initiatives. So R&D absolute imperative, especially as we drive our 1 AI to multiple devices strategy as well.

In terms of the management of expenses, I think absolutely, we track relative to the dynamics in terms of the market, especially as Yuanqing said earlier in terms of the environment and volatility due to the tariffs, but so we take a slightly more cautious stand from that perspective. But overall, this is a strategic priority spend for us, and we'll continue to spend on R&D to drive our business forward and also drive our transformation across our business, which you will have seen 47% of our business today is non-PC, and we continue to experience very strong growth across not only our non-PC business, but also PC but strong growth across all our businesses due to our investment in R&D. So absolutely important area for us.

Thank you, Winston. Next question is from HK Au from DBS. Lenovo delivered strong market share gains in both PCs and smartphones despite consumer sentiment being hampered by tariff concerns. Was there any boost from the front-loading shipments to avoid tariffs? Can the company's competitive edge in devices, which we supported these share gains be sustained in the coming years?

I would like to invite Luca Rossi from Head of our IDG and also Sergio Buniac from and BG to answer this question. Over to you, Luca, please.

Sure. And thanks for the question. I start with the PC and then probably Sergio can help on the smartphone side. So for the PC business, as I said, we are performing extremely well in all geographies we operate. Hence, the tariff topic, which might have driven some of the pull-in or order anticipation, that is happening or maybe happening in the States, in the U.S., but obviously, we operate in the other 4 geographies where this topic is not on the table, and we have good performance and also good order visibility going forward for all the geographies. So I don't think we could or we should attribute the tariff order pull-in to a large explanation -- to a large part of the performance of the market or the performance of Lenovo.

To the second part of your question on whether our devices share gain is sustainable or not, obviously, this is -- I would say, this is our job to continue to make us competitive with innovation, differentiation, our global local capabilities, our operational excellence. So in a simple answer, my answer is yes. We think we are able to continue to share gain moderately. We always balance growth, profitability, channel inventory adjustment so that we have always a healthy operation. We have done this now for many, many quarters, and I'm confident we will be able to continue to do that going forward. Thank you. Sergio?

Sergio. Yes.

Yes. To complement, I think a very similar on the mobile side. I think with 7 quarters of double-digit year-over-year growth, 8 quarters of premium to market. So making it very sustainable.

Our growth in North America was around 16%. That's in line with our overall growth, but there is growth coming from multiple markets. India at 43%, Japan, 40%, KSA at 33%, Italy 17%. So we are seeing the growth across the globe coming from broader markets than the markets affected by tariffs.

Also, we are seeing our premium segment Razr and Edge franchises growing faster than we are seeing revenue growing faster than now represent close to 40% of our sales, that's almost a tenfold from 2 years ago. And we see that trend continues for the full year. We're still forecasting a premium to market and close to double-digit growth.

Thank you, Luca. Thank you, Sergio. The next question is from Cherry Ma from Macquarie. Can you explain a bit more on the hiring investment we did to scale our ISG AI capabilities and the channel partnership programs during the quarter? We'll be keen to understand how that product road map is going to pan out to capture the revenue opportunities.

I would like to invite Ashley Head of our ISG to answer this question, Ashley, please.

Thank you for the question, Cherry. I think we all recognize the enormous impact AI is having on the infrastructure market, and Lenovo remains focused on becoming the best AI technology partner to our customers now and as this exciting market evolves. And so we're investing. We're investing to be differentiated in this AI marketplace.

For example, we're growing Lenovo's global customer sales coverage, and we're aggressively acquiring new logos, new customers who need our technology, our servers to adopt AI into their infrastructure and their businesses. We are investing in our AI product portfolio with the road map today that stands the range from mainstream enterprise AI systems for inference and for example, token serving to rescale systems for large language model training. And we plan to offer many of these systems, including the NVIDIA G300 systems this calendar year.

Our momentum is strong here, as we talked about earlier with revenue from AI servers more than doubling year-over-year. We plan even more research and development investment to further advance our world-class 45-degree C water cooled systems using proprietary Lenovo Neptune technology, and this really helps our customers optimize their power and cooling requirements, which leads to a better, more advantaged total cost of ownership for them. As an indicator of the adoption we're seeing Neptune-related revenue grew 30% year-over-year in Q1.

Further, we're investing in our AI innovator ecosystem and AI hybrid Advantage with partners such as IBM, Cisco, NVIDIA to deliver AI solutions that already be tailored to customer outcomes. This will include, as Winston mentioned before, continued investment in the services portfolio for specialized vertical AI solutions and to continue to build capacity TruScale for AI, Infrastructure as a Service. We are investing for growth in China as well as rest of world. And in China to accelerate the hyper growth we're seeing, we're building a localized full-stack AI infrastructure portfolio. that really meets the needs of the local marketplace.

And then finally, I'd note that we're remaining committed to building AI infrastructure manufacturing capacity and Lenovo's very unique ODM+ model. And here, we get to leverage a I mentioned earlier, the local capacity and capability that Lenovo has built. Thank you.

Thank you, Ashley. The next question is from Robert Cheng from Bank of America. Lenovo AI server sales doubled this quarter. What are the key growth drivers? Is the demand coming from China or global markets? Or any color on the segments such as CSP or enterprise? What's the merging of your AI server business?

I would like to invite Ashley again, our Head of ISG to answer this question.

Sure. Thank you, Robert, for the question. As I mentioned, as we invest forward in portfolio and services and capability and sales coverage, we're seeing quite a bit of momentum in AI systems, and they range -- the driver's range, as I said before, from the beginnings of enterprises adopting AI for simple agent and agentic workloads to up through large language model training at the frontier level. And the products, the capabilities and services that we offer are different across that spectrum in that range of drivers. In some cases, with ready-made solutions off-the-shelf in a sense, ready-to-go AI solutions for inference and enterprise all the way up to highly customized and highly engineered scale systems for our -- in our cloud service provider capability that leverages, as I said before, our ODM+ model. So I think we see growth across the spectrum. Today, if you measured it in units, it would be quite balanced if you measure it in revenue, it would tend to -- the growth is driven largely by rack scale systems and the growth in training applications. We believe that will balance out over time, as AI is adopted in a more meaningful way within the enterprises that we serve.

In addition, you asked about China and Rest of World, I will say that we're seeing growth across all segments and all geographies. And in China, I think we're seeing what we would term as hyper growth, especially related to AI, and again, across both the CSP and the E/SMB segments. We don't break out margins specifically within our road map or our portfolios. So I'll defer that question.

Thank you, Ashley. Due to time constraint, the next question will be our last question for this, we've got Rob Chen from KGI Securities asking what is the strategy to gain share in America, Europe, AI PC market? So I'd like to invite Luca Rossi, our Head of IDG, to answer this question. Please, Luca.

Sure. So thanks for this question. So I would say, in general, our reside for success and share gain will not change. R&D to drive innovation and to drive design to cost, operational excellence, global local capabilities.

Now for ITC, as I mentioned, we are growing rapidly in every geography, probably, I will say, with a high note in China where our super agent is leading the market, and we believe it will further help market share gains and margin expansion.

Going forward, in America, Europe, but what I say is also valid for every other geography, we think that Lenovo has a unique opportunity for share gain and margin expansion by realizing our vision of One AI, Multiple Devices. And if you think about that, we are one of the few, if not the only, OEM that have the full offering from the pocket to the cloud, phone, PC, tablet, all the way to the infrastructure in the cloud and even whereabouts. And that ecosystem will play a role for differentiation in the AI PC industry going forward. Thank you.

Thank you very much, Luca. So this was our last question. If you still have further questions, please contact our IR team directly. In the next few hours, the replay of this investor webcast will be uploaded to our IR website. Thank you again, everyone, for joining. Goodbye.