• ISG continues to enhance its full stack capabilities that cover both the Cloud Service Provider and Enterprise and SMB segments.
• At the same time, ISG is investing in infrastructure innovations empowered by artificial intelligence (AI), such as AI-powered edge computing and hybrid cloud.
• Inhouse manufacturing and cost competitiveness has been bolstered with the addition of an inhouse facility in Budapest, Hungary.

Intelligent Devices Group (IDG): leading market position and profitability

Opportunity:

The business was impacted by several quarters of device market softness due to channel inventory digestion. With PCs the essential productivity tool in today’s digital era, Lenovo anticipates that the PC market will return to growth in the 2^nd half of calendar year 2023. The digitalization trend and hybrid work model continue to drive steady growth in smart spaces solutions.

FY22/23 performance:

• IDG revenue declined year-on-year to US$49.4 billion, but successfully maintained the #1 position in the PC market with 23.2% market share globally and maintained its industry-leading profitability of 7.3%.
• Revenue mix from premium products increased to nearly 30%.
• The smartphone business has been profitable for three consecutive years and achieved premium-to-market revenue growth in most markets.

Sustainable Growth:

• IDG will closely manage expense and further sharpen its operational excellence.
• It will continue to invest in technology innovations focusing on premium offerings and adjacent areas, while at the same time enhancing smart space solutions for hybrid work models.

Q4 Performance

Fiscal year Q4 was the most challenging quarter of the year given pressures from both the PC market and the global economy. Lenovo closed the quarter with revenue of US$12.6 billion, down 24% year-to-year. Revenue from IDG declined 33% year-to-year, while the strong momentum from the growth engines of SSG and ISG helped offset the device market softness. SSG revenue was up 18% YTY to US$1.6 billion, and ISG revenue was up 56% to US$2.2 billion. Non-PC revenue mix during the quarter reached a historic high of 43%, up 12 points year-to-year.

Q4 Operational highlights

Environmental, Social, Governance - Lenovo’s Environmental, Social and Governance Rating score was recently upgraded to AAA by MSCI, the international ratings agency. This upgrade represents the highest possible rating for corporations leading in ESG programs. In addition, EcoVadis recognized Lenovo for its excellence in sustainable procurement at its 7^th annual Sustainable Procurement Leadership Awards. The company was also recently recognized by Forbes as one of the Best Employers for Diversity in 2023, evaluated based on direct recommendations, indirect recommendations, and research on the key performance indicators.

[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; restructuring and other charges; and the corresponding income tax effects, if any.

About Lenovo

Lenovo (HKSE: 992) (ADR: LNVGY) is a US$62 billion revenue global technology powerhouse, ranked #171 in the Fortune Global 500, employing 77,000 people around the world, 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 by further expanding into growth areas that fuel the advancement of ‘New IT’ technologies (client, edge, cloud, network, and intelligence) including server, storage, mobile, software, solutions, and services. This transformation together with Lenovo’s world-changing innovation is building a more inclusive, trustworthy, and smarter future for everyone, everywhere. To find out more visit https://www.lenovo.com, and read about the latest news via our StoryHub.