Lenovo resumes year-on-year income progress – efficiency pushed by resilience of core companies and effectiveness of transformation

22 February, 2024 – Lenovo Group Restricted (HKSE: 992) (ADR: LNVGY), along with its subsidiaries (‘the Group’), right this moment introduced third quarter outcomes reporting Group income growing 3% year-on-year to US$15.7 billion, and Group profitability enhancing quarter-to-quarter for the second time in a row. Web earnings was US$357 million on a non-Hong Kong Monetary Reporting Requirements (non-HKFRS)^[1] foundation, with internet earnings margin up 0.4% quarter-to-quarter to 2.3%. The Group’s diversified progress engines continued to ship robust efficiency, with income from non-PC companies accounting for 42% of Group income, up 1.3 factors year-on-year.

The constant quarter-to-quarter enhancements over previous quarters have been pushed by the resilience of the Group’s core companies and the broader effectiveness of its ongoing transformation. The SSG enterprise hit an essential milestone of passing the US$2 billion income threshold, achieved a file excessive working revenue with working margin of over 20% and grew income from managed companies and undertaking and answer companies year-on-year for 11 straight quarters. The ISG enterprise delivered quarter-to-quarter income progress and reached a file excessive US$1 billion income for its storage, software program, and companies companies. Total, the IDG enterprise resumed income progress, outperformed the market and achieved year-on-year cargo progress for PCs, and maintained its industry-leading profitability. 

Monetary Highlights:

Chairman and CEO quote – Yuanqing Yang:

“Final quarter, we delivered on our promise and resumed year-on-year income progress, pushed by each the resilience of our core companies and the effectiveness of the service-led transformation. Trying forward, our dedication to AI innovation, our pocket-to-cloud computing capabilities, full stack portfolio of good gadgets, good infrastructure, good options and companies, mixed with our partnerships with different key leaders in AI, will be sure that we’re well-positioned to seize the great alternatives in AI.”

Accelerating AI management

The Group is capitalizing on the numerous progress alternatives afforded by the AI-era. Specifically, the rising development of hybrid AI is instantly driving the demand for AI PCs, a development that may stimulate one other {industry} refresh cycle as customers require gadgets designed for extra creativity and productiveness. Alongside gadgets, hybrid AI is driving elevated demand for hybrid infrastructure and buyer demand for AI-native functions, options and companies reminiscent of advisory, design, improvement and upkeep – fueling progress throughout a number of buyer verticals.

To additional construct its distinctive place within the AI-era, Lenovo is continuous its funding commitments in innovation. R&D headcount is up year-to-year at greater than 25% of Group headcount, with R&D expenses-to-revenue ratio for the complete fiscal yr on monitor to hit an all-time excessive. This ongoing funding, along with a full portfolio of AI-enabled, AI-ready, and AI-optimized gadgets, infrastructure, options and companies, is the inspiration of Lenovo’s imaginative and prescient of ‘AI for All’ – altering the best way people and enterprises stay and work and can gasoline future sustainable progress for the Group.

Latest AI bulletins from the Group embody a partnership with Anaconda to speed up AI improvement and deployment of Lenovo’s high-performance information science workstations, a suite of AI-powered gadgets and options introduced on the annual CES present, an growth of its hybrid cloud platform for AI with new ThinkAgile hyperconverged options and ThinkSystem servers, and a newly launched cyber-resiliency as a service (CRaaS) providing.

Options and Providers Group (SSG): Document income, file working revenue, driving AI options

Q3 FY23/24 efficiency:

• Document income of US$2.0 billion, with double digit year-on-year progress. Document excessive working revenue with working margin of over 20%.
• Protected help companies and software program because the core revenue engines for SSG.
• Additional expanded managed companies and undertaking and options companies, collectively now making up 55% of SSG’s income, up 1.5 factors year-on-year and rising consecutively year-on-year for 11 straight quarters.

Alternatives and Sustainable Progress:

• SSG has robust momentum for its hero choices, together with Digital Office Options (DWS), Hybrid Cloud, and sustainability options and companies.
• SSG centered its hero choices to help particular vertical industries with good options, profitable main buyer offers.
• Rising buyer demand of AI know-how utilized in {industry} use circumstances – with accompanying companies reminiscent of advisory, design, and deployment – fueling AI companies progress throughout completely different verticals.

Infrastructure Options Group (ISG): Capturing alternatives in AI infrastructure

Q3 FY23/24 efficiency:

• ISG delivered quarter-to-quarter income progress for the second consecutive quarter.
• Mixed income from storage, software program, and companies reached a file excessive of US$1 billion.
• ISG expects to stay a stable #3 globally for each storage and AI infrastructure.

Alternatives and Sustainable Progress:

• AI server is predicted to develop practically twice as quick as the overall server market.
• ISG is rising key strategic partnerships to strengthen its portfolio competitiveness.
• The rise of AI is driving increased demand for good infrastructure (higher efficiency, smarter administration, and decrease vitality consumption). Lenovo is exclusive with its complete Edge to Cloud portfolio, AI Innovators program, and AI Innovation Facilities delivering vertical and horizontal pre-validated options to the {industry}.

Clever Units Group (IDG): Resumed progress and solidified management

Q3 FY23/24 efficiency:

• IDG delivered a powerful quarter with income resuming progress because of a transparent technique, constant funding in innovation, and operational excellence.
• Continued PC market restoration noticed IDG outperforming the market and returning to year-on-year cargo progress with the best market share since Covid at practically 24%. North America excelled with year-on-year PC income progress of 20%.
• The non-PC gadgets enterprise made encouraging progress. The smartphone and pill companies returned to excessive double-digit year-on-year cargo progress with a big premium to the market of greater than 20 factors. Smartphone shipments had been up 32% year-to-year – with hypergrowth in Asia Pacific, EMEA and North America.

Alternatives and Sustainable Progress:

• The development of hybrid AI will drive the demand for shopper gadgets and one other refreshment cycle, creating progress potential and margin enhancements.
• Lenovo has a novel alternative to develop a totally unified AI expertise that spans users’ digital ecosystems, together with PC, tablets, and smartphones.

ESG highlights

Lenovo has been acknowledged for a number of ESG achievements over the previous quarter, together with:

[1] non-HKFRS measure was adjusted by excluding internet truthful worth adjustments on monetary property at truthful worth by revenue or loss, amortization of intangible property ensuing from mergers and acquisitions, mergers and acquisitions associated expenses; and the corresponding earnings tax results, if any.