Lenovo delivers strong FY Q1 performance -
improves profitability across all businesses, significant progress
in capturing hybrid AI opportunities
Lenovo Group Limited (HKSE: 992) (ADR: LNVGY),
together with its subsidiaries (‘the Group’), today announced Q1
results for fiscal year 2024/25, reporting profitability
improvements across all areas of the business and making
significant progress in capturing hybrid AI opportunities. Group
revenue increased 20% year-on-year to US$15.4 billion, net income
was up 65% year-on-year to US$315 million on a non-Hong Kong
Financial Reporting Standards (non-HKFRS)[1] basis, and non-PC
revenue mix was up five points year-to-year reaching a historic
high of 47%. The Group’s results reflect its clear strategy and
strong execution, persistent focus on innovation and operational
excellence, as well as the advantages it reaps from being a
globalized business.
The Group is both uniquely positioned and well-prepared to lead
in an era of hybrid AI with its full-stack portfolio featuring AI
devices like AI PCs, AI servers that support all major
architectures, as well as rich AI native and AI embedded solutions
and services. User feedback from Lenovo’s AI PCs, defined by five
key characteristics, have been encouraging, with the first AI PCs
having launched in May and many more to come during IFA and Tech
World later this year. The Group is confident that it will lead the
industry in market share for next-generation AI PCs, which overall
are expected to be more than 50% of the PC landscape by 2027, as
well as lead in seizing the enormous growth opportunities across
the IT market. The Group continued its commitment to innovation,
with R&D spending up 6% year-to-year to US$476 million.
Looking ahead to growth, in May 2024 Lenovo announced a
strategic collaboration with Alat, a subsidiary of PIF, an
investment in the form of convertible bonds from Alat, and a
warrants issuance. These transactions will greatly benefit the
Group’s efforts to accelerate its transformation through greater
financial flexibility, seize the enormous business growth momentum
in the Middle East, and further diversify and strengthen its supply
chain footprint with a new manufacturing hub in the Middle East.
The transactions are subject to shareholder and regulatory
approvals.
Chairman and CEO quote – Yuanqing Yang:
“The great start to our fiscal year has been driven by our clear
strategy and strong execution, our persistent innovation and
operational excellence, as well as our globalization advantages.
Looking ahead, we are both well-prepared and uniquely positioned in
the market with our full-stack AI portfolio to lead in the era of
hybrid AI and seize the enormous growth opportunities across our
entire business. I’m confident that, with a recovering ICT market,
the combination of our solid performance and continued progress in
hybrid AI will keep enabling us to achieve sustainable growth and
profitability increases.”
Financial Highlights:
Q1 FY 24/25
US$ millions
Q1 FY 23/24
US$ millions
Change
Group Revenue
15,447
12,900
20%
Pre-tax income
313
228
37%
Net Income (profit attributable to
equity holders)
243
177
38%
Net Income (profit attributable to
equity holders – non-HKFRS) [1]
315
191
65%
Basic earnings per share (US
cents)
1.99
1.48
0.51
Intelligent Devices Group (IDG): Double-digit revenue growth
with leading profitability, winning in personal AI
Q1 FY24/25 performance:
- IDG delivered a strong quarter of double-digit year-on-year
revenue growth with revenue of US$11.4 billion and almost 1 point
improvement in operating margin year-on-year.
- The PC business retained in market leadership in both shipments
and device activations, with 23% global market share and a premium
to the market in growth.
- Both the smartphone and tablet businesses delivered strong
year-on-year revenue growth of around 30%, with hypergrowth in
premium smartphones.
Opportunities and Sustainable Growth:
- IDG is encouraged by positive feedback from the initial launch
of its AI PCs for the China market, with further global launches at
IFA and Tech World later this year.
- The PC market is entering a new refresh cycle driven by AI PCs,
with this category expected to grow to represent over 50% of the
total PC market by 2027. The Group is confident it will lead the
industry in market share for next-generation AI PCs.
- IDG will continue to deliver ground-breaking innovations across
its portfolio to achieve the full potential of a personal AI agent,
while at the same time leveraging and deepening its strategic
partnerships to build a more diversified portfolio and richer
ecosystem.
Infrastructure Solutions Group (ISG): Hypergrowth with
improved profitability, driving hybrid infrastructure
Q1 FY24/25 performance:
- Driven by strong growth in its Cloud Service Provider business,
ISG delivered a record quarterly revenue of US$3.2 billion, up 65%
year-on-year, and narrowed operating losses both quarter-on-quarter
and year-on-year.
- Combined revenue from storage, software and services achieved
significant growth of 59% year-on-year, setting a new record.
- Revenue from ISG’s Neptune TM liquid cooled servers grew more
than 50%, driven by its unique sustainability benefits amidst the
industry’s growing AI workload needs.
Opportunities and Sustainable Growth:
- ISG is focused on driving the recovery of profitability by
optimizing the business model for its enterprise and SMB business,
in particular simplifying portfolios and improving operations.
- It will continue to leverage the industry-leading liquid
cooling technology to meet growing AI workload demands, as well as
the new growth opportunities in the market for AI servers and
storage.
- In addition, ISG will continue to grow key strategic
partnerships and build infrastructure platforms that support hybrid
AI solutions.
Solutions and Services Group (SSG): High margin with
double-digit growth, building enterprise AI
Q1 FY24/25 performance:
- SSG delivered its 13th consecutive quarter of double-digit
year-on-year revenue growth, with revenue of US$1.9 billion.
- Operating margin in Q1 was over 20% – strengthening its
position as the Group’s growth engine and profit contributor.
- Managed services and project and solutions services revenue mix
grew three points year-on-year to account for 55% of SSG’s
revenue.
Opportunities and Sustainable Growth:
- AI services are expected to grow almost twice as fast as the
market in general to become the primary driver of the IT services
market over the next few years.
- Lenovo will continue to embed AI in its key offerings, such as
Digital Workplace Solutions, Hybrid Cloud and Sustainability
solutions.
- SSG will develop more AI native services to drive adoption and
measurable ROI of AI for customers and accelerate their
transformation.
ESG and corporate highlights
Achievements, announcements, and notable commitments over the
past quarter include:
- Lenovo has been ranked as one of the world’s best supply
chains, ranking tenth in the list of global companies across all
industries with the most exceptional supply chains in the world in
the Gartner Supply Chain Top 25 for 2024. The renowned annual
ranking evaluates across multiple criteria including financial and
corporate social responsibility data and community opinion.
- Lenovo has appointed Doug Fisher as Chief Security and AI
officer, expanding his existing remit of security to include
overall AI governance including championing the Group’s corporate
AI policy and working with its Responsible AI Committee.
- In July, Lenovo announced the appointment of Dr. Tolga Kurtoglu
as the group’s new Chief Technology Officer, succeeding Dr. Yong
Rui in further accelerating the Group’s technology vision and AI
leadership. At the same time, it also announced the formation of a
new Emerging Technology Group that is charged with incubating and
commercializing new technologies. The Emerging Technology Group is
being led by Dr. Yong Rui.
[1] Non-HKFRS measure was adjusted by excluding net fair value
changes on financial assets at fair value through profit or loss,
amortization of intangible assets resulting from mergers and
acquisitions, mergers and acquisitions related charges, gain on
deemed disposal of a subsidiary, impairment and write-off of
intangible assets; and the corresponding income tax effects, if
any.
About Lenovo
Lenovo is a US$57 billion revenue global technology powerhouse,
ranked #248 in the Fortune Global 500, and serving millions of
customers every day in 180 markets. Focused on a bold vision to
deliver Smarter Technology for All, Lenovo has built on its success
as the world’s largest PC company with a full-stack portfolio of
AI-enabled, AI-ready, and AI-optimized devices (PCs, workstations,
smartphones, tablets), infrastructure (data center, storage, edge,
high performance computing and software defined infrastructure),
software, solutions, and services. Lenovo’s continued investment in
world-changing innovation is building a more equitable,
trustworthy, and smarter future for everyone, everywhere. Lenovo is
listed on the Hong Kong stock exchange under Lenovo Group Limited
(HKSE: 992) (ADR: LNVGY). To find out more visit
https://www.lenovo.com, and read about the latest news via our
StoryHub.
LENOVO GROUP
FINANCIAL SUMMARY
For the quarter ended June 30,
2024
(in US$ millions, except per
share data)
Q1 24/25
Q1 23/24
Y/Y CHG
Revenue
15,447
12,900
20%
Gross profit
2,560
2,252
14%
Gross profit margin
16.6%
17.5%
(0.9) pts
Operating expenses
(2,066)
(1,862)
11%
R&D expenses (included in operating
expenses)
(476)
(451)
6%
Expenses-to-revenue ratio
13.4%
14.4%
(1.0) pts
Operating profit
494
390
27%
Other non-operating income/(expenses) -
net
(181)
(162)
12%
Pre-tax income
313
228
37%
Taxation
(60)
(45)
33%
Profit for the period
253
183
38%
Non-controlling interests
(10)
(6)
47%
Profit attributable to equity holders
243
177
38%
Profit attributable to equity holders-
non-HKFRS [1]
315
191
65%
EPS (US cents) Basic Diluted
1.99 1.92
1.48 1.43
0.51 0.49
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240814460489/en/
Hong Kong – Angela Lee, angelalee@lenovo.com, +852 2516
4810 London – Charlotte West, cwest@lenovo.com, +44 7825
605720 Zeno Group - LenovoWWcorp@zenogroup.com