Lenovo delivers 10^th straight quarter of improved profitability year-on-year, as operational resilience and diversified growth engines continue to drive performance

HONG KONG — (BUSINESS WIRE) — November 2, 2022 — Lenovo Group (HKSE: 992) (ADR: LNVGY) today announced second quarter results for the Group, with profitability improving year-on-year for the 10^th consecutive quarter. Second quarter net income grew 6% year-on-year to US$541 million and Group revenue grew to US$17.1 billion, up 3% year-on-year in constant currency.

All main businesses contributed positive operating profit, demonstrating further progress towards the Group’s goal of doubling profitability in the medium-term. Additionally, the diversified growth engines continued to drive strong performance with both the solutions and services business, as well as the infrastructure business, seeing high double-digit year-on-year growth. Non-PC businesses now make up more than 37% of total group revenue. The Group’s healthy cash balance means it remains committed to doubling investments in Research and Development (R&D) in the medium-term, having grown R&D spending 15% year-on-year in the quarter.

While current external challenges persist, Lenovo remains agile and focused on pursuing its strategy and ensuring ongoing profitability by rebalancing resources towards its diversified growth engines and driving efficiencies and expense reduction through the business. It sees long-term opportunities built on its foundation of New IT – client, edge, cloud, network, and intelligence - as the global trends of digitalization and intelligent transformation accelerate. Last quarter’s results, as well as the past three years, have demonstrated that the combination of Lenovo’s strategy, strong execution, and resilient operations are enabling it to transcend the industry cycle. This, combined with its high-quality and innovative portfolio, unique hybrid manufacturing and supply chain, global/local principle and capability, as well as healthy liquidity will help drive further opportunities to deliver sustainable growth, and improve profitability.

Financial Highlights:

Lenovo’s Board of Directors declared an interim dividend of 8.0 HK cents per share.

Chairman and CEO quote – Yuanqing Yang:

“Lenovo once again delivered solid results, even in a challenging global market, achieving year-on-year profitability improvement for the tenth straight quarter and increasing revenue by nearly 3% (in constant currency) year on year. Our non-PC businesses are gaining momentum and now represent more than 37% of our revenue. Both solutions and services business and infrastructure business saw high double-digit revenue growth year on year,” says Yuanqing Yang, Chairman and CEO of Lenovo. “For Lenovo, these results prove that our strategic foresight, operational resilience, and consistent investment in diversified growth engines, have prepared us well for challenging times. Whether our traditional markets are booming or contracting, Lenovo consistently delivers on its commitments and outperforms market expectations.”

Solutions and Services Group (SSG): continued momentum, delivering strong growth and higher profitability for the Group

Opportunity:

The trillion-dollar IT services market continues to grow steadily, with faster growth to be expected in DaaS (Device as a Service), Managed Services for data center, as well as Cloud and Edge Environment through 2025. While at the same time the market for vertical solutions and services spending is expected to remain strong, including smart education, smart retail, smart city, and smart manufacturing.

Q2 FY22/23 performance:

• In the last quarter, SSG revenue grew by 26% year-on-year, further improving its operating margin to 21.4%.
• All segments again delivered high profitability and strong growth.
• For the first time, revenue from non-hardware-tied solutions and services accounts for more than half of SSG’s business.

Sustainable Growth:

• SSG continues to build comprehensive horizontal solutions for vertical industries, for example, SSG’s Digital Store solution embedded with Lenovo AI Edge Server is now powering one of the world’s largest food retailers to reduce over 75% of its self-checkout errors without the need for employee intervention.
• Development of SSG’s portfolio of sustainability offerings continues, with the CO₂ offset services extended to more products.
• The newly formed Lenovo PCCW Solutions, launched in August 2022, has achieved initial success with business synergies as it looks ahead to future opportunities.