HONG KONG / MILAN, February 23, 2022– Lenovo Group (HKSE: 992) (ADR: LNVGY) today announced record quarterly results for the Group, with record highs in both profits and revenues and the Group’s first quarter of $ 20 billion. The company’s focus on innovation and profitability, supported by its operational excellence, has helped overcome industry challenges in the supply chain and has generated rapid growth and profitability across all major business groups and geographies.
Lenovo has seen significantly improved year-over-year performance. Net income grew at a rate of more than 50% for the sixth consecutive quarter, with the third quarter growing 62% year-on-year to a record $ 640 million. Net profit margin improved by nearly one point, well on its way to the Group’s goal of doubling in three years. Pre-tax profit reached a record $ 855 million, up 45% year-on-year, and the Group’s revenue continued on its growth trajectory reaching a record $ 20.1 billion, up 45% year-on-year. 17% on an annual basis.
Lenovo continues to focus heavily on innovation, with R&D investments up 38% year-on-year in the quarter as part of the company’s broader commitment to double its R&D investment in three years. The investments are aimed at driving Lenovo’s ongoing transformation into a solutions and services company by developing technologies centered on the “New IT” full stack architecture of “Client-Edge-Cloud-Network-Intelligence”. Looking ahead, the company continues its 3S strategy (smart devices / IoT, smart infrastructure, smart verticals) by seeing continued sustainable growth opportunities and profitability improvements across all areas of the business, keeping it on track to double the margin. net by the end of the 2023/2024 financial year.
L’Hang Seng Indexes Company Limited announced last week that starting March 7, 2022, Lenovo will be included as a stock in the Hang Seng Index, Hong Kong’s benchmark stock indicator.
Statement by the President and CEO – Yuanqing Yang:
“Lenovo continues to seize the opportunities generated by accelerating the digital and intelligent transformation process, we are very well positioned thanks to our new IT architecture and ‘Client-Edge-Cloud-Network-Intelligence’ capabilities. With another record quarter, We achieved Q6 with over 50% year-over-year net income growth and Q1 with $ 20 billion in revenue in our history. We remain on track to double both our net margin and investments in research and development in three years from FY20 / 21 levels, “said Yuanqing Yang, President and CEO of Lenovo. “Once again, we have demonstrated that Lenovo’s innovation, transformation strategy and solid execution can consistently drive sustainable profitability increases for the future.”
Solutions and Services Group (SSG): strong growth and high margins, and a consequent higher overall profitability for the Group
The Solutions and Services Group continues to experience strong profitability and growth in a rapidly expanding market. As the technology architecture becomes more complex, customers demand more sophisticated IT services and the market is projected to be worth over $ 1 trillion by 2025. This includes an increased demand for premium support and personalized management by customers. knowledge workers, nearly half of whom now work remotely.
Significant third quarter revenue growth (25% yoy to $ 1.5 billion), accounting for 7.1% of the Group’s overall revenue and with an operating margin of over 22%, an increase of nearly three points year over year.
Support services recorded revenue growth of 21% year-on-year.
Managed services saw revenue growth of 50 percent year-on-year thanks to Lenovo’s TruScale as-a-Service offerings announced last quarter. Innovations in Smart Retail have helped Project Services and Solutions achieve 23% year-on-year revenue growth.
Lenovo will continue to seize market opportunities to drive both revenue growth and higher profitability. As remote working grows, Lenovo will leverage its global presence to help transform new ways of working through premium support, as-a-service and digital workplace solutions.
In managed services, Lenovo will continue to invest in the Lenovo TruScale model, hybrid cloud solutions and additional software and services based on the company’s IP.
Infrastructure Solutions Group (ISG): profitability achieved, growing with a strong premium to market
Opportunities continue to grow for ISG as the ICT infrastructure modernization process expands around the world. The ICT infrastructure market is projected to reach $ 250 billion by 2025 By the same period, the peripheral infrastructure market alone is expected to exceed $ 41 billion.
ISG posted record performance, reaching the profitability milestone for the first time since the acquisition of IBM x86 in 2014. Revenues grew 19% year-on-year to $ 1.9 billion. This was the fourth consecutive quarter that revenue grew double-digit premium on the market.
The business outperformed the market in nearly all segments. Cloud service provider revenue grew 38% year-over-year; the revenues of enterprises / SMEs improved by 7% on an annual basis.
Lenovo will leverage its presence across all customer segments (CSPs of different scales, Enterprise, SMB) as a unique advantage to balance scalability and profitability, as well as customer demands for security / reliability and agility / flexibility.
Investments in fast-growing and expanding segments such as Edge Computing will continue.
Intelligent Devices Group (IDG): Strong revenue growth and higher profitability, increased contribution from non-PC businesses
The smart device market continues to benefit from the new hybrid way of working and the PC market is expected to remain strong and stable, moving into the commercial and premium segments. In smartphones, market reshuffling will bring more growth opportunities to Lenovo, and 5G penetration and development of new edge-cloud-network-intelligence IT will provide greater growth potential for emerging smart devices such as embedded. computing / IoT, metaverse-driven AR / VR, as well as smart home and intelligent collaboration solutions.
Excellent results with 16% year-over-year revenue growth to $ 17.6 billion, with even stronger profitability growth – up to 21% year-over-year to $ 1.4 billion, on an already high basis .
The premium PC segments experienced strong growth with workstation and gaming revenue growing 40% and 27% year-on-year, respectively.
Smartphones maintained a strong profit for the seventh consecutive quarter, with revenues growing strong 46% year-over-year and becoming the fastest growing major vendor. Earnings hit an all-time high last quarter of $ 89 million. Rapid growth was seen in key key markets, with revenue in Latin America up 25% year-on-year and revenue in North America more than doubled year-on-year (133%).
Among the emerging categories in smart devices, revenues in smart collaboration solutions have almost doubled year-over-year.
Lenovo will further invest in innovation, premium segments and core components to increase profitability and average selling price. In the mobile space, we will further strengthen our portfolio and invest in expanding into new markets in Europe and Asia Pacific. We will also continue to invest in non-PC products such as IoT, metaverse, smart home and intelligent collaboration to seize emerging opportunities and further increase the non-PC business mix.
Operational highlights and investments for the future
Lenovo continues to significantly focus on ESG policies throughout its operations, from the use of innovative recycled materials in products such as the series ThinkPad Z launched in January 2022, to the use of zero emission flights for cargo shipments.
Additionally, Lenovo recently received major awards for its ESG actions and commitments, including: