Lenovo delivers ninth straight quarter of improved revenue and profitability as diversified new growth engines drive sustained strong performance

HONG KONG — (BUSINESS WIRE) — August 9, 2022 — Lenovo Group (HKSE: 992) (ADR: LNVGY) today announced strong first quarter results for the Group, improving both revenue and profitability for the ninth consecutive quarter. First quarter net income grew 11% year-on-year to US$516 million and 35% year-on-year to $556 million on a non-HKFRS [1] basis. Revenue grew to US$17 billion, up 5% year-on-year in constant currency.

The Group saw revenue from non-PC businesses reach 37%, demonstrating its services-led transformation strategy and persistent investments in diversifying the business have paid off and are driving future growth opportunities. These new growth engines of solutions and services, infrastructure solutions, and mobile businesses all grew revenue by double digits year-on-year – contributing to both topline growth and Lenovo’s wider commitment to double profitability in the midterm. The Group remains committed to doubling investments in Research and Development (R&D) and grew R&D spending 10% year on year and increased R&D headcount by 29% year on year.

Lenovo continues to seize the opportunities driven by accelerated digital/intelligent transformation and hybrid working, while successfully navigating a range of industry-wide challenges. Overall, the Group remains optimistic about the long-term industry growth potential and the opportunities afforded by its investments in new growth engines. It is confident that by leveraging its strategy and execution together with its core competencies of innovation, operational excellence, and global/local operating model, it has the agility and resilience to navigate any macro or micro challenges successfully.

Financial Highlights:

Chairman and CEO quote – Yuanqing Yang:

“We successfully grew our business and improved profitability for the ninth consecutive quarter, while our revenue mix from non-PC businesses reached 37%. These are the results of our strategic foresight and strong execution, together with our operational resilience,” said Yuanqing Yang, Lenovo Chairman and CEO. “Although external challenges may persist in the short-term, the digitalization trend continues to accelerate, and the hybrid work model is here to stay. We have confidence in capturing these opportunities and will continue to invest, innovate, and deliver sustainable growth and profitability improvements.”

Solutions and Services Group (SSG): delivering strong growth and high margins - driving higher overall profitability for the Group

Opportunity:

The trillion-dollar IT services market continues to see strong growth, and the growth of hybrid working is driving higher demand for premier and customer fulfilment services. Equally the expansion of digital workplace solutions has driven demand for as-a-Service for devices, infrastructure, and workplace management. While at the same time the market for vertical solutions including smart city, smart manufacturing, smart education, and smart retail is expected to grow at double-digit CAGR through 2025.

Q1 FY22/23 performance:

• In the last quarter SSG delivered high profitability and high growth, with revenue growing 23% year on year. Operating margin remained high at almost 23%.
• There was strong double-digit revenue growth across all segments, with revenue from non-hardware dependent managed services and project and solutions services now accounting for almost half of SSG’s business.

Sustainable Growth:

• SSG continues to invest in software tools, platforms, and repeatable vertical solutions with Lenovo’s own IP, including the continued expansion of the TruScale as-a-Service portfolio to the broader digital workplace solutions market.
• SSG launched hybrid/multi cloud solutions and continues to develop its portfolio of sustainability offerings.
• The strategic partnership with PCCW Solutions, announced in June 2022, will further expand SSG’s footprint and opportunities to build a technology solutions business across Asia Pacific.

Infrastructure Solutions Group (ISG): FY21/22 record revenue and profitable growth continues in new fiscal year

Opportunity:

ISG continued to benefit from strong ICT infrastructure market growth. The server market alone is expected to grow at double-digit CAGR through 2025. The Edge infrastructure market will exceed US$41 billion by 2025, and storage market will reach US$36 billion within the same timeframe.

Q1 FY22/23 performance:

• ISG revenue exceeded US$2 billion for the first time, up 14% year on year and now profitable for three consecutive quarters.
• The Cloud Service Provider segment, as well as server and storage reached all-time revenue records and all significantly outgrew the market.
• Revenue from Edge Computing almost doubled year on year, and in High Performance Computing the ISG business maintained its #1 leadership position on the Top500 list by adding more Lenovo systems utilizing its unique Neptune liquid cooling technology.