Good morning, good afternoon, and good evening. Welcome to Lenovo's Earnings Investor Webcast. This is Jenny Lai, Vice President of Investor Relations at Lenovo. Thanks everyone for joining us. Before we start, let me introduce our management team joining the call today. Mr. Yang Yuanqing, Lenovo's Chairman and CEO. Mr. Wong Wai Ming, Group CFO. Mr. Luca Rossi, President of Intelligent Devices Group. Mr. Kirk Skaugen, President of Infrastructure Solutions Group. Mr. Ken Wong, President of Solutions and Services Group. And Mr. Sergio Buniac, President of Latin America and Mobile Business Group, and President of Motorola. We will begin with an earnings presentation, and shortly 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. Once again, despite of the challenges of the pandemic and the supply shortage, Lenovo has delivered another record-breaking quarter. Our clear focus on profitability and innovation, supported by strong execution, has driven historical results across our businesses. We are also pleased that last week, Lenovo has been added to the Hang Seng Index, providing a mark of recognition of our continued strong results. The accelerated digital and intelligent transformations in the new normal continues to generate significant opportunities. Investments in digital transformation are expected to increase over 16% annually over the next three years. Lenovo's new IT technology architecture of client, edge, cloud, network, intelligence prepares us well to capture these opportunities. Last quarter, Lenovo delivered another quarter of record profit and revenue.
Our net income reached an all-time record of $640 million, up 62% year-on-year. This is the sixth consecutive quarters of over 50% year-on-year net income growth. Net margin also increased by almost one point year-on-year. We are on track to double within three years. With 17% year-on-year growth, our quarterly revenue achieved $20 billion for the first time, thanks to double-digit growth in all key businesses and balanced growth across all geographies. Going forward, we will continue to double our R&D investments along the new IT architecture, enhance our digital foundation to support the business growth, compete as one Lenovo with pocket-to-cloud offerings, global footprint, and organizational efficiency, and continue to deliver our ESG commitments. Now, I will talk about each of our businesses. Let's start with the Solutions and Services Group.
The trillion-dollar global IT services market through 2025 presents big opportunities for growth. Almost half of global workers are currently working remotely, driving demand for premier support and customized fulfillment. As-a-service penetration in PC and the data center is only 2%, providing substantial room for growth. Enterprise spending is expected to grow faster in cloud and digital services. Last quarter, Lenovo SSG continued to deliver high growth with higher profitability. Its operating margin exceeded 22%, a nearly three-point increase year-on-year. Revenue continued strong growth of over 25% year-on-year. Support services, 21%. Managed service, 15%, driven by our TruScale as-a-service offerings. Project services and solutions, 23%, with a breakthrough in smart retail. Looking forward, SSG will capture the remote work trend and leverage our global service footprint to provide accessibility and flexibility to our customers.
SSG will also invest in TruScale offerings, hybrid cloud solution, and other software and services with our own IP, and expand sustainability offerings. Our Infrastructure Solutions Group, ISG continues to benefit from the ICT infrastructure upgrade. A $250 billion market globally through 2025. By 2025, the edge infrastructure market alone is expected to grow quickly to $41 billion. Last quarter marked important milestone. Our ISG become profitable for the first time since the IBM x86 acquisition in 2014. Meanwhile, our revenue grow at a double-digit premium to market for the fourth consecutive quarter. Our cloud service provider and the enterprise SMB revenue grew by 38% and 7% respectively year-on-year. Over the years, ISG has invested in building full stack of data center portfolio, as well as the in-house design and manufacturing capabilities.
We can now cover customers of all scales from tier one CSP to tier two, enterprise and SMB. In the long term, this customer coverage will give us unique advantages to balance the scale and the profitability, as well as customers' demand for security, reliability, and agility, flexibility. We will meet all kinds of customer requirements from on-prem infrastructure as a service, all the way to private, public, hybrid cloud. For the Intelligent Devices Group, IDG, smart device markets continued to benefit from the new normal of a hybrid working model. The PC market is forecasted to remain strong and stable, shifting to commercial and the premium segments. In smartphone, the market reshuffling will bring more growth opportunity to Lenovo.
At the same time, the penetration of 5G and the development of edge cloud network intelligence will provide more growth potential for the emerging smart devices like embedded computing, IoT, AR/VR, driven by Metaverse, as well as smart home and smart collaboration solutions. Last quarter, IDG delivered another record quarter in profit and revenue. Its revenue grow 16% year-on-year, and the profit grow even faster, up 21%. In PCs, premier segments delivered a high growth. In non-PCs, smartphone business has been healthy profit for seven consecutive quarters. Last quarter, its revenue grew strongly at 46% year-on-year and was the fastest-growing major vendor. Meanwhile, we saw some emerging smart devices like smart collaboration solutions. Revenue nearly doubled year-on-year. Going forward, in PCs, we will continue investing in innovation, premier segments, and core components.
In mobile, we will strengthen our smartphone portfolio and invest in expanding new markets in Europe and Asia-Pacific. We will also continue to invest in IoT, Metaverse-driven AR/VR, smart home, and smarter collaboration solutions to capture the emerging opportunities. In summary, our market coverage is expanding. Potential is growing. Our capabilities are developing, and our performance is stronger than ever. We are on track to doubling both R&D investment and the net margin by the end of fiscal year 2023, 2024. We are confident in delivering strong, sustainable, profitable growth while also meeting our ESG commitments. Thank you. Now, let me turn it over to our CFO, Wong Wai Ming. Wong Wai Ming, please.
Thank you, Yang Yuanqing. I will take you through Lenovo's financial and operational performance in Q3 fiscal year 2022. We delivered more than $20 billion in revenue this quarter with multiple financial records. Our net profit grew 62% year-on-year to an all-time high of $640 million, with 17% revenue growth year-on-year. We are excited to see balanced growth across different markets. Our group net margin advanced 89 basis points year-on-year to near record level. All three of our business groups contributed to profit expansion. ISG, in particular, turned profitable for the first time since its acquisition in 2014. IDG and SSG continued their strong double-digit growth trajectory. With profit expansions, we are on pace to achieve our medium-term target of doubling our net margin.
The basic earnings per share came in at $0.055, representing 66% growth year-over-year. In line with the digital transformation and new IT opportunities, we leverage our client-edge-cloud-network-intelligence architecture to create devices, services, and infrastructure to enhance our digital foundations to support business growth. As part of our commitment to double our R&D investment, during the quarter, our R&D expenses grew 38% year-over-year. This includes investing in talent acquisition and development. Our R&D headcount was up 40%. We also invested in broadening services and intellectual property, driving innovation with a focus on ESG and designing for premium segment and edge computing.
Every aspect of our R&D investments, ranging from devices, services, infrastructure to AI and operational efficiency that help contribute to the 56 basis points increase in both our record operating margin as well as our long-term competitiveness. For fiscal Q3, our operating cash flow remains strong at $606 million. This is in spite of the higher working capital requirement due to our buy-ahead action of strategic component in response to supply challenges. Q3 sales were also unusually back-end loaded because of late arrival of components and longer logistics lead time, leading to higher balances in both accounts receivable and payables. Our receivable credit conditions remain healthy. Although Q4 will also see similar sales skew toward the end of the quarter. Nearly 80% of accounts receivable are within 30 days, and the overdue ratio is at record low.
We expect to mitigate the impact from the above factors gradually and continue to accelerate our cash flow. The group financial position continued to be strong. In Q3, finance costs were down by 17% year-over-year, and we finished the quarter with net cash position. This was achieved by reducing our net debt and perpetual securities by $3.2 billion over the past 10 quarters. Going forward, we are confident in our ability to stay in a net cash position. SSG reported another strong quarter with strong revenue and profit growth. Structural catalysts, including opportunities arising from the new IT trend, hybrid work model, commercial recovery, and increasing ESG awareness are powerful drivers to our services expansion. Its revenue increased by 25% year-over-year to $1.5 billion.
Booking and deferred revenue grew a strong double-digit, indicating a larger recurring revenue base. SSG boosted operating profit by 44% year-on-year to $332 million, and operating margin revised 2.9 points to 22.2%. By segment, support services revenue rose 21% year-on-year, posting the highest profitability in the group. Working alongside with other business groups, SSG is broadening service penetration in PC. We made significant progress in premier and customer fulfillment services, while customer interest continues to grow for sustainability services such as asset recovery. We are actively developing six more sustainability service solutions. Managed services posted a strong 50% revenue growth with improved profitability. On the back of the increasing popularity of as-a-service model branded under TruScale, we won a number of deals while also expanding its geographic presence and customer base.
Project services and solutions also reported solid revenue growth of 23% year-on-year. Despite the pandemic creating challenges in project delivery, the total contract value more than tripled with important deals signed for smart retail amid increasing adoption of our in-house IP solutions. ISG staged a successful turnaround leveraging its enriched architecture and technology solution, as well as successful project wins and industry partnerships. As a result, its operating profit increased $28 million year-on-year. ISG outgrew the market with new projects and acquisition of new next wave customers looking to build their cloud platform. In response to increased emphasis on a streamlined, fully integrated supply chain, our unique ODM+ business model provides a holistic solution encompassing a vertically integrated operation. ESMB revenue reached a five-year high led by high-margin storage servers and software sales.
The group-maintained number two in global enterprise storage market as well as continued as the largest provider of supercomputers globally. IDG achieved another record quarter, with revenue and operating profit up 16% and 21% year-on-year respectively. The shift towards commercial and premium segments continued to accelerate. Commercial demand benefited from digital transformation and transition to a hybrid work model on a global scale, growing at the third-highest rate since 1998. This commercial strength, together with the strong growth in premium segments, bodes well for increasing our average selling price and profitability. Our PC business saw a 19% increase in ASP and improved margins, marking the 17th consecutive quarter of year-on-year profit margin expansion for IDG. Non-PC products contributed to 19% of IDG's revenue in the quarter.
Smartphone revenue grew 46% year-over-year and its operating profits stay at record level of $89 million. Our portfolio expansion strategy to increase product differentiation was well executed. IDG smartphone shipments increased 53% year-over-year, according to IDC, substantially ahead of the market, with share gains across key markets. In North America, we posted triple-digit growth in revenue while strengthening our number two position in our stronghold markets in Latin America. Speaking of our ESG initiative, in December 2021, Lenovo was rated at the leadership level for the first time in both the CDP Water and Climate Surveys, respectively receiving an A and A - in these widely recognized surveys. We broadened our sustainability services and TruScale portfolio, added ESG-related features such as CO2 offset options to our products, and increased our adoption of green materials.
On the group level, we are exploring the path to net zero emissions by 2050, completing the road test of Science Based Targets initiative methodology and becoming a founding member of the China Net Zero Network. On governance, Lenovo has received recognition from Corporate Knights, Bloomberg, and the Hong Kong Institute of CPA. Other impactful sustainable initiatives include Lenovo 360 Circle and the EcoVadis rating, too. Strategic opportunities in digital and service-led transformation continue to accelerate. We are investing to build Lenovo's service-led transformation, take advantage of infrastructure demand proliferation, drive sales in high value-added products, and ultimately achieve the group medium-term financial target of doubling our net margin. Looking forward, SSG is building a broader service portfolio to take full advantage of remote working environment.
New business model of as-a-service is growing fast, and the resulting rapid penetration into PC and infrastructure sectors will support its future hypergrowth.
SSG will play a key role in driving recurring revenue and increasing Lenovo's profitability. For ISG, the infrastructure upgrade opportunity remains strong, and Lenovo is one of the fastest-growing infrastructure providers globally. We are committed to building full stack offerings and to servicing both CSP and ESMB segments. We will continue to develop offerings to meet regional demand and capture growth opportunities, including as-a-service portfolio to address the proliferation of data and AI acceleration at the edge. In CSP, we are migrating to our ODM+ model for improved profitability and greater supply chain and procurement agility. In ESMB, we will continue to expand our product portfolio from servers into storage, software-defined infrastructure, software and services to pursue higher profitability. In doing so, we will create new business opportunities and expand our customer base. IDG will continue to lead and grow at a premium to the markets.
The global PC sector should remain strong and stable, thanks to the hybrid work model and digital transformation, driving demand in commercial and premium segments. PC business will further invest in the premium segment to drive profitability through innovations in the area of ESG features and green materials. The smartphone business will focus on portfolio enhancement and differentiation to take advantage of accelerated 5G adoption and the changing competitive landscape. The group will address the expanding Internet of Things opportunities to grow its non-PC business. The Hang Seng Indexes Company Limited announced last week that effective from March 7th, 2022, Lenovo Group will be included as a constituent stock of the Hang Seng Index, which is a reflective of our stellar operational performance in recent years. Our strong financial position provides a solid foundation on which Lenovo can proactively pursue growth opportunities ahead.
Finally, as always, we remain committed to driving sustainable profitability growth for our shareholders. Thank you. Now we can take your questions.
Thank you, Wong Wai Ming. Now we will open the line for questions, and this section will be in English only. Please be reminded to limit yourself to two questions at a time. Operator, I will now turn it over to you. Please give us your instructions.
To ask a question, you will need to press star one on the telephone. To withdraw your question, please press star or hash key. Please stand by while we compile the Q&A roster. The first question comes from the line of Grace Chen from UBS. Please go ahead.
Thank you. Thank you very much for taking my call, and congratulations on your strong results. First question is about the guidance. Can you give us the guidance by different segments for the new fiscal year? The second question is, actually, I was surprised to see Lenovo's share price fell in the afternoon session, today after reporting such good numbers. I think this actually happened a few times in recent quarters. Could you help us understand what drives this connection here? Thank you.
Thank you, Grace. Definitely we delivered a very good result last quarter. All our businesses grow at a double-digit level. Our profits increased by more than 50% for six consecutive quarters. That's the last quarter. Definitely we are very confident. This growth can continue. Not only IDG will drive the hypergrowth. SSG will drive the high growth with the high profitability. Even for IDG, we are confident we can continue to drive the growth.
Although the PC market may not grow as fast as last year, but it will keep at current shipment level. That means 350 million units every year. We see the segment shift. The shifting from low-end to the premium segment. The shifting from consumer to the commercial. All these trends will help improve the average selling price. That means even though the unit shipment will be flat or little growth, but the revenue part will keep growing. We are confident on that.
Meanwhile, our IDG is not just relying on PC part. It will more rely on non-PC business growth. For example, mobile. We see a strong 46% year-on-year growth last quarter. We definitely think this trend will continue because we were expanding to the new market in Europe and Asia Pacific. We will double down on some markets so to drive the growth. Also, with 5G development and with the new IDG, the Client-Edge-Cloud-Network-Intelligence architecture development, we think there are more emerging devices growing fast. For example, embedded computing, IoT, for example.
AR/VR are driven by Metaverse, smart home and smart collaboration solutions. Those are definitely fast growing area. We will take that opportunity to further grow. We are confident from all the company point of view. We will continue to drive the growth. In short term, we will still be able to drive the double-digit growth. I don't know whether I answer your question. Our share price going down, so probably we may tell you're the better to answer the question, right?
Okay. All right. Will I. [crosstalk]
Well, thanks for the question, I think, Grace. I believe that it probably is the market may not fully understand immediately, I think our very strong result because of the very volatile environment. I think, Grace, if you recall, I think Lenovo is probably the first company, maybe even a few quarters, that began after the COVID-19, that we actually have the sign of the continuing growth of the IT business. The market obviously was a little bit suspicious. As you noted, we have actually been consistently delivering, I think, for a few quarters. That's really number one.
The second one that I would probably want to, I think, draw your attention is, our share price, unfortunately did not immediately reflect the very strong growth.
With the experienced investor, I think such as yourself, after one or two days when you actually have an opportunity to study, I think the underlying strength of our business, if I recall, most of the analyst report, in fact, actually have a recommendation of buy, as well as uplifting our target price. Very slowly, the share price actually returned, I think, to another high level. I think thirdly, I would say that clearly there was some sort of short-term trading. As you recall, last Friday, Lenovo was, I think it was announced that Lenovo was actually included in the Hang Seng Index. On Monday and Tuesday, there was a tremendous amount of buying, and the share price actually went up by nearly 5% for the last two days.
Maybe there are some short-term, I think, trading mentality, especially in view of, I think, the latest, unfortunate, I think Ukraine-Russia events, that trigger, I think some short-term investors, taking profit. I would expect that, I think with the analysts, having more time and more experience and more expert, understanding of the business, I'm sort of patiently waiting for your research report and your recommendation. I actually am very confident that, I think the institutional investor, in particular, I think they will study very carefully of your analysis, and we will see the return of the share price to another high level. Thank you.
Next question.
Thank you, Wong Wai Ming. Now, yeah, operator, we are now ready for the next question, please.
The next question comes from the line of Howard Kao from Morgan Stanley. Please go ahead.
Thanks for taking my question, and congratulations on the good quarter. Before I ask my question, though, can I just clarify something? In terms of your comment on outlook for the PC business, did you say that you guys are expecting shipments to be flat or down, but revenues will keep growing because of the shift from consumer to commercial?
Luca, It will be
Yes, Yang Yuanqing. Thank you for the question. Good morning and good afternoon to everyone. I think you are asking whether our view in the market, the PC market, will be stable, kind of flat in the next fiscal. The answer is our view and also supported by most of the analysts and also our industry partners. We all see the market to be stable, but with a higher AUR due to improved mix, premium, more commercial, and also compared with the previous year, there is certainly a slowdown of Chrome. The total volume, perhaps the same, but the value increasing significantly, as demonstrated by our AUR recently.
I see. Thank you. Two questions from me. One is, can you talk a little bit about your channel inventory situation in the PC market? I think earlier this year you guys had seen channel inventory creeping up a little bit to around four-five weeks, which is still below your healthy level. Just wanted to see how that has changed over the past couple of weeks. In terms of the server business, I just wanted to ask two-part question. One is, in terms of your third quarter numbers, it seems like revenue were down a little bit on a sequential basis, whereas I think a lot of other companies within the server supply chain reported pretty strong calendar year fourth quarter numbers.
I just wanted to see, you know, ask what was the reason for that? It seems like cloud revenues were down on a quarter-over-quarter basis. Can you guys provide you know outlook and commentary about your ISG business in the next coming quarters? Thank you.
Okay.
Thank you, Yang Yuanqing. Yeah, yeah. Look, the inventory profile is materially below the pre-COVID situation. Particularly in the commercial segment for the so-called transactional part of the commercial segment is significantly below the pre-COVID levels. You also need to think that we are now in a market with a bigger total available market. Additionally, just maybe to give you a little bit more color on our business model, not all of our business holds inventory by design. We have several segment relationship government global account that in most of the cases have no inventory at all. This is a kind of an end-to-end direct kind of concept.
The consumer inventory on the other side is growing a little bit, still below pre-COVID, but I would say that it's normalizing to a reasonable level because during the peak of pandemic it was just too low, or to the point that we lost or the industry lost opportunities to sell. I would not consider this a worrying situation. On the contrary, I would conclude saying that we are not concerned about our inventory levels. Hopefully, I answered your question.
Yeah.
Thank you.
Probably, Luca can help you to explain this situation. Our inventory level, channel inventory level, probably is higher than last year. It's lower than before pandemic. The reasonable channel inventory is necessary that will help us to drive the sales because in the last year and the past period, if we have 10 model offerings, probably we only have five in stock, another five is in shortage. For those customers, they want to buy the other five, they cannot buy. That's the issue. That's why we think the reasonable channel inventory will help the sales. That's our current channel inventory situation.
Our past inventory probably is higher than before the pandemic. The other reason you could understand. That's because of the shortage, we have to buy ahead for some components. That's why the past inventory higher. Okay. Kirk, would you like to talk about the ISVs now?
Sure. I think we're very excited about the growth in server and storage. Since your question was regarding server, I think some of the calendar fourth quarter analyst data is now just coming in preliminary, and we're expecting the formal revenue share numbers to be out in the next several weeks. I think we're confident, given our increasing average unit pricing based on an improved mix, that we'll see a premium to market when that happens. We're in a unique position because we are participating both in cloud and in enterprise SMB. In cloud, we had a significant premium to market, double-digit premium to market.
We have not only acquired some new billion-dollar class customers in the tier one space, but we've grown our NextWave account base more than 100% year-on-year in a supply constrained environment. As that supply continues to free up, we're confident that that growth will just accelerate further, and we have the design wins in place to make that happen. In enterprise SMB, this was our highest revenue in five years for a Q3, and we're seeing strength and records across all of our profit engines. Records in our Microsoft software, our VMware software, our Nutanix software, in Edge, in communication service providers, all of those hit new records. I think our product innovation speaks for itself.
We were just awarded this quarter the AI Product of the Year by HPCwire, CRN Storage Product of the Year, and now we have the new ThinkEdge product that is the most GPU-rich edge server. All of that shows servers are strong. In storage, I think we're confident that in the price bands one through four will grow from previously not even being on the radar to being the number one entry storage provider in price bands one through four, which make up about 60% of the units in the storage market. I think hopefully that gives you some optimism for the future. The supply point, you know, is that I think things will get better from there. We did have an exceptionally strong Q2, which was a 30% year-to-year growth.
In this cloud business, when you've got very, very large customers, it can be a little cyclical. From my perspective, there's no concern I have. We see exceptionally strong growth for the future and continued profitability. Thank you.
Actually, Kirk, our ISG business is still constrained by the supply. We can have better supply, so definitely. Even last quarter we could deliver even stronger performance. We definitely are optimistic on the current quarter and the future on the ISG business. Also, as I said at the beginning, Lenovo is a very unique company in the ISG area. We can cover all kind of the customers all the way from tier one cloud service provider to tier two the enterprise SMB. This coverage will give us a unique advantage to balance the scale and profitability.
We can meet our customers' requirement. We can manage our customers' requirement on security and reliability and flexibility, agility. We have laid out the strategy really solidly. We are confident that we will continue to drive the growth in that business. Next question please.
Thank you. The next question comes from Albert Hung from J.P. Morgan Securities. Just go ahead.
Hi, Wong Wai Ming. Thank you for taking my question, and congrats on great result. My first question is on the service business, which has gained a lot of good traction. Did you consider any M&A point to accelerate the service business development? If yes, what's the consideration when doing M&A for service? My second question is on mobile. You mentioned that you're going to enter Europe and Asia again. I remember a couple years ago, Lenovo changed their mobile strategy to become more focused and turn profits. I wonder, what's the competition level in Europe and Asia versus that in couple years ago? What's the difference in the strategy based on, and is there any impact on the new strategy, profitability side? Thank you.
Thank you, Albert. Those are two questions for Ken and Sergio Buniac respectively. Ken, please.
Okay, thank you, YY. Hey, thank you, Albert. I think this is a great question regarding services. First of all, I think we are very happy to see the strong growth in Solutions and Services Group, SSG. I think this is the third consecutive quarter where we see our revenue growth is faster than the group and also maintaining at a high level of profitability. I think this, once again, you know, giving us confidence that our service-led transformation strategy is actually executing well, right? Just like YY said at the opening, I think we definitely see, you know, our customer is asking for more help because of new IT. It's powerful, at the same time also feel like very complex, right?
A lot of customers actually looking for help like Lenovo, where we have the full portfolio of hardware from pocket to the cloud, software, and now services and solution, right, to help to unleash the full power of technology, and also to help them to bring in the desired services outcome. This is big trend for the overall services market. In terms of growth, I think we're looking at all strategy, including both organic and inorganic way to grow SSG, and we're very confident in our strategy. Also, I think Wong Wai Ming can cover. I think we are in terms of our balance sheet much healthier ever than before to support any kind of tactics in terms of growing SSG. Thank you.
Buniac.
Hi. Hello. Can you hear me? I think a few differences, right? I think our scale has improved globally. Our plan has always been protecting Latin America, North America, where we are growing fast and premium to market, and rebuilding our capabilities in different regions like Europe and Asia. Our approach is gonna be very focused. We are not going broadly those markets but starting to get relevant in key markets we have selected carefully. Our time to market in product development has gone down 30%-40% since three to four years ago. What allow us to play much better in those markets, our software platforms, and I think also we leverage a lot the Lenovo capabilities in markets like B2B and commercial.
I mean, we're gonna keep growing in North America and Latin America. We see growth coming from selected markets in Europe and Asia that will represent a strong percentage, and our approach is gonna be very careful. We are seeing very early positive indications that we can sustain profitable growth, both in selected markets in Europe and no different in Asia.
Yeah. Regarding mobile business, I think we have successfully realized our first stage objective to make this business healthy, profitable. Actually we have been in this position for six or seven consecutive quarters. Now we change the strategy to the profitable growth. Definitely we will make sure this business will continue to be profitable. Keep it at the current level. If we can make more money from this business, definitely we will reinvest the money into expansion of the market. But we will not expand the market everywhere.
We will only choose selective countries or markets to double down on that we can quickly get 5%-10% share. That will be our strategy for the future. We are pretty confident. Last year we shipped 50 million-60 million units of the smartphone. This year we will keep the hypergrowth as we delivered in the past two quarters. Next question.
Thank you. Again, if you wish to ask questions, please press star one on your telephone and wait for your name to be announced. Next, we have the questions from Jet Shu from President Securities. Please go ahead.
Thank you. Can you hear me?
Yes.
Thanks. Congratulations for the financial result. I have two questions. My first question is about the server. I'm interested what's our strategy for AI server in the future. Can we collaborate with more opportunities with the chip companies such as NVIDIA or other chip supplier in the future? This is my first question. My second question is about our mobile. Our mobile market, because it seems we have done a great job.
I'm still interested. What's our strategy in the Chinese market and in the Indian market, these two biggest markets, in the next two years? Thank you.
Okay. That's another IT, mobile combination. Kirk, your good friend. AI server.
Sure.
Collaboration with
Yeah.
Yes.
Yeah, definitely.
Go ahead.
We see AI everywhere as a growth opportunity for us. As I mentioned, and I think also Yang Yuanqing mentioned, we've maintained our position as number one in the global top 500 supercomputers. Have actually over the last year now installed the largest supercomputers we've ever done in more countries than anyone in the world or any OEM in the world. About 1/3 of the world's supercomputers, and many, if not all of those, are putting an AI element into their compute engines. The other large growth area is at the edge. We've created now an end-to-end portfolio with a new called ThinkEdge.
As I mentioned, we were just awarded by HPCwire, who gives out the awards, as having one of the best AI products or the best AI product. We now have a new portfolio with the SE450 product that's the world's most GPU-rich server. We can actually put four GPUs in an edge server. As a result, we just won one of the largest global retailers in fast food chains in the world using our edge servers with the GPUs there to help automate and make their drive-throughs more resilient. Definitely we're seeing AI as a significant growth engine. As Yang Yuanqing said earlier, over a $40 billion market coming up, and we now have a brand new ThinkEdge product line.
Internally, we just announced a new ThinkEdge division to do everything from the edge device to the edge gateway to the edge servers. This was a record quarter, by the way, for our edge business. We've put together several record quarters in a row now and are continuing to grow that portfolio. Thank you for the question.
Thank you, Kirk. Sergio Buniac, you continue. Mobile in China.
We reignited our business in India two-three years ago. We're seeing good progress, solid. We are seeing consumer ratings very positive, strong flash sales. We will continue growing in India. We are coming from a small base but growing very successfully in a sustainable way. We believe this is gonna hold, and probably our expectation is to gain share to grow three-four points of share in the next few months, years. We see the progress very healthy and sustainable and profitable in India with a special focus on online. In China, we reignited our business a year ago. We cleared the channel.
We launched our Razr family very successfully.
Now, the Edge family is still very small. We're gonna be very careful. It's a big market, but we are seeing small progress very slowly. India a little faster and going in a good direction, both brand and channel. Our stocking channels are very low in those markets. Our sellout keeps surpassing our selling in the last few months. Careful approach. We see steady growth, and I think we continue to sustain that over the next months and next year.
Yeah. Thank you, Buniac. Let me add something here. Actually, in the mobile world or industry, currently there are three different games. The first is the US and mature markets. It's driven by the premier product or premier brand. But meanwhile, consumers or customers don't want to pay premier price as well. You can see there are different players in that kind of market . Apple, Samsung, Motorola, possibly LG. That's the first game. The second game is like Latin American market.
It's mainly driven by the mainstream product, not a premium, but fair price. That's another market. Actually China, India probably are the certain market. That's the price performance driven market. People want to have the latest technology, but meanwhile they want to pay less to be more aggressive on the pricing. Those are three different games or battles. Definitely with Lenovo's strategy we want to win the first two first.
Meanwhile, we start to prepare the capability in the third market. That will be Lenovo's strategy. Okay, next question.
Thank you. Thank you, YY . Because due to limited time, we are going to entertain our last question. This is online submission by Mr. Bai Shuang from Pacific Securities Research. His question is, this year, the economy and geopolitical issues are resulting in a lot of market uncertainties. Will this impact your PC market outlook? Could you also elaborate and share more details regarding to your ASP trend for your PC products?
That's a question for Luca, right?
Yes.
Yes. Yes, Yuanqing . Thanks for the question. I think talking about 2022, a little bit as I said before, the view is that the market will stabilize with better AUR. I want to make two reflections. One is that when we say the market will stabilize, we also need to recognize that from the pre-COVID to the post-COVID PC market, this market will be adding $100 billion of revenue, which obviously is a very significant number and opens a lot of profit opportunities given the larger size. This is one. The other thing, the other reason why we are confident is that the digital transformation, work from home, all these things, are naturally driving more demand for the PC technology.
I just want to say the remote collaboration, which is probably the killer application. This is the one which runs the best on PC. I think there are many, many reasons to feel confident about a stable market with increasing average unit price and consequently a little bit of improving on the revenue versus already $900, which will be the 2021. Obviously, just to add some more color, this 2022 market, we believe will be stronger in commercial, which is very positive. Not only because our exposure in commercial is traditionally higher, approximately 65% of our last quarter revenue was in commercial, but also because this mix is more favorable in terms of service penetration rate, which obviously comes with good margins.
Additionally, you have the accessory attached, which also come with good margin. If you think about the work from home, many users want to have now two PC from a work perspective and want to have a rich portfolio of accessory and even services to use the product and to work with the product at home. I think there are many good reason on to have a good view on the market, plus our traditional ability to drive at premium to market. Even with the flat market, we'll continue to grow and better than the market. Thank you.
Yes. Thank you, Luca, and thank you, everyone online. This will conclude our webcast today. If you have any further questions, please feel free to contact the IR team of Lenovo directly. The replay of this webcast will be available in the next couple of hours on our investor relations website. Thank you again for joining us. Thank you. Bye-bye now.
Thank you. Bye-bye.
This concludes today's conference call. Thank you for participating. You may now disconnect.