Lenovo sees signs of recovery across technology sector - delivers quarter-on-quarter performance improvements and further accelerates AI leadership

HONG KONG — (BUSINESS WIRE) — November 15, 2023 — Lenovo Group Limited (HKSE: 992) (ADR: LNVGY), together with its subsidiaries (‘the Group”), today announced second quarter results reporting Group revenue of US$14.4 billion and net income of US$273 million on a non-Hong Kong Financial Reporting Standards (HKFRS)^[1] basis. Gross profit margin improved year-on-year to 17.5%, a record high for a second quarter. The Group’s diversified growth engines continued to deliver strong performance, with revenue from the non-PC businesses accounted for 40% of Group revenue, up three points year-on-year.

The Group is seeing clear signs of recovery across the technology sector, noting the strong execution of its strategy, operational excellence, and continuous investment in innovation as key contributors to its quarter-on-quarter performance improvements. Looking ahead, Lenovo will further leverage the opportunities created by AI, where it is uniquely positioned to succeed given its hybrid AI model, pocket- to-cloud portfolio, strong ecosystem and partnerships, and growing portfolio of AI technologies and capabilities. Its ongoing investment in innovation and in particular AI, will further bolster Lenovo’s ability to capture the exponential growth from AI and drive sustainable growth and profitability for the business. The Group is confident in its ability to resume year-on-year growth very soon.

Financial Highlights:

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

Chairman and CEO quote – Yuanqing Yang:

“Last quarter, despite macro challenges, we saw clear signs of recovery across the technology sector. Thanks to our strong execution, operational excellence, and continuous investment in innovation, we delivered consecutive quarter-on-quarter performance improvements, indicating an encouraging trajectory to recovery. With continuous execution of our intelligent transformation strategy, and with our AI ecosystem and partnership further strengthened, we will leverage our full-stack AI capabilities from pocket to cloud to enable hybrid AI applications for every enterprise and every individual, ultimately driving sustainable growth for our business.”

Accelerating AI leadership

AI is not new for Lenovo and has long been a focus of its digital and intelligent transformation strategy. The company outlined its vision of ‘AI for All’ at its annual Tech World innovation event in October, focusing in particular on its model for hybrid AI where public, private, and personal foundation models co-exist in order to enable AI for All, while respecting security and privacy. Lenovo’s vision included a rich smart device portfolio including AI-enabled PCs, smartphones, and tablets, as well as AI-ready and AI-optimized infrastructure, solutions, and services. Lenovo is uniquely positioned to capture the exponential growth from AI given its pocket-to-cloud portfolio, strong eco-system and partnerships (including an expansion of the company’s partnership with NVIDIA), and growing portfolio of AI technologies and capabilities.

Lenovo Chairman and CEO Yuanqing Yang was joined on stage at Tech World by leaders from Lenovo’s global partners, including NVIDIA Founder, President and CEO, Jensen Huang; AMD Chair and CEO, Dr. Lisa Su, and Formula 1® President and CEO, Stefano Domenicali. Microsoft Chairman and CEO, Satya Nadella, Qualcomm CEO and President, Cristiano Amon, and Intel CEO, Pat Gelsinger joined Tech World via video link.

As announced last quarter, Lenovo is committing a further US$1 billion in investment for AI-driven innovation that will not only ensure it can realize its vision for ‘AI for All’, but that it can drive sustainable growth for the entire business.

Solutions and Services Group (SSG): Record revenue and operating profit, accumulating AI solutions and services

Q2 FY23/24 performance:

• SSG broke records in the second quarter for both revenue and profit, with revenue of US$1.9 billion and an operating margin of 20%.
• Support services and software were the core profit engine for the SSG group.
• Managed services and project and solutions services further expanded in the second quarter, together now making up 56% of SSG’s revenue, up three points year-on-year.

Opportunities and Sustainable Growth:

• SSG has strong momentum for its hero offerings, including Digital Workplaces Solutions (DWS), Hybrid Cloud, and sustainability solutions and services.
• SSG focused its hero offerings to support specific vertical industries with smart solutions and services, winning breakthrough customer deals in multiple markets.
• Lenovo’s new hybrid AI Professional Services Practice is also enabling enterprises to use Hybrid infrastructure and AI to transform their business.