Solutions and Services Group (SSG): high margin, strong growth

Opportunity:

Over the next three years, the trend of digital and intelligent transformation will continue to drive strong growth of global IT spending, especially in IT services. At the same time, overall demand for vertical solutions, including smart city, smart manufacturing, smart education, and smart retail is expecting strong growth through 2026.

Q1 FY23/24 performance:

• SSG is delivering strong growth and high profitability, with revenue of US$1.7 billion, up 18% year-on-year with a high operating margin of more than 21%.
• The support services business was protected as the core profit engine, while at the same time significant progress was made in expanding Managed Services, and Projects and Solutions services, which together now make up more than half of SSG’s revenue (up 4 points year-on-year).
• SSG continues to build a strong pipeline of business for Digital Workplace Solutions.

Sustainable Growth:

• SSG is embracing the trend in aaS (as-a-Service), digital workplace, sustainability services, and hybrid cloud, scaling its hero offerings and incubating these horizontal building blocks into vertical solutions to help customers improve employee experience and productivity.

Infrastructure Solutions Group (ISG): delivering growth in key areas

Opportunity:

Driven by strong AI demand, the ICT infrastructure upgrade is accelerating even further. There is also strong growth expected in services, edge, and enterprise software.

Q1 FY23/24 performance:

• Revenue declined year-on-year (US$1.9 billion, down 8% year-on-year) due to the overall Cloud Service Provider (CSP) server compute demand softness, GPU constraints impacting full AI demand and the industry’s slower than expected transition to the next-generation platform.
• ISG achieved hyper-growth in Storage, Software, Services, and High-Performance Computing (HPC) – with storage achieving triple-digit year-on-year growth, making Lenovo the 4^th largest storage provider in the world.
• ISG continues to excel in AI, with triple-digit growth in the second half of 2022 with industry research ranking the business as number three in the world for AI hardware infrastructure.

Sustainable Growth:

• Lenovo will continue to invest in developing AI-ready and AI-optimized infrastructure, such as AI Edge, AI Hybrid Cloud, and server and storage that support AI-centric workloads.
• ISG remains focused on extending its vision as the most trusted infrastructure partner for customers in their digital and intelligent transformation.

Intelligent Devices Group (IDG): maintaining leadership

Opportunity:

While the smart devices market remains under pressure, there are new opportunities in the smart spaces market and next generation of AI devices.

Q1 FY23/24 performance:

• Revenue declined year-to-year to US$10.3 billion (down 28% year-on-year) due to market challenges, but Lenovo maintained its global No.1 market share position in PCs (23.2%).
• The smartphone business achieved a 10-year record for Q1 activations and further strengthened its premium and 5G offerings with the launch of the new motorola razr family.
• Demonstrated great growth potential in smart collaboration and smart home areas.

Sustainable Growth:

• Committed to investing in innovation to build long-term competitiveness, including building the next generation of AI devices.
• The smartphone three-year growth plan is helping to achieve premium growth in strongholds of North America and Latin America, as well as hypergrowth across Asia Pacific and EMEA.
• IDG continues to expand to a more diversified smart devices portfolio, including enriched software and services to further build the IDG ecosystem.

[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; 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 #217 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.