Total net loss for the company’s fiscal second quarter was $714 million. The loss comes despite a 16% increase in year-over-year revenue, at $12.2 billion.

Restructuring costs from $599 million, combined with another $324 million from clearing out unused smartphone inventory are to blame.

In August Lenovo announced Motorola Mobility would take control of the PC maker’s smartphone business, bring experience and expertise to the company’s overall smartphone strategy. Lenovo purchased Motorola Mobility from Google in 2014 for $2.9 billion.

The strategic shift has yet to have a positive impact on the balance sheet, but the company remains confident its Mobile Business Group (which includes Motorola) is on track to break even in two quarters.

Lenovo’s mobile unit contributed $2.7 billion in revenue, up 104% compared to the same time last year. It’s a number that’s misleading, as it now includes Motorola’s revenue, which was $1.4 billion in the quarter.

MORE: Can Motorola Save Lenovo from Itself?

Motorola announced its second generation Moto 360, an Android Wear smartwatch and extended its partnership with Verizon Wireless with the launch of two new smartphones under the DROID brand during the second quarter.

In an interview with The Wall Street Journal, Lenovo Group CEO Yang Yuanqing said his company would focus on growing its smartphone business in emerging markets such as India and Indonesia.

Smartphone sales totaled 18.8 million units, an 11% increase compared to the same time last year. Lenovo regained the title of the fourth largest smartphone vendor, after dropping down a spot last quarter. But Xiaomi isn’t far behind, having sold 18.3 million smartphones during the same period according to the IDC.

PC sales continued to struggle with a 17% decline in year-over-year sales of $8.1 billion. However, the company claims it retained its lead in market share at 21.2%.

Sign up for Data Sheet, Fortune’s daily newsletter about the business of technology.

For more Fortune coverage of Lenovo, watch this video: