HONG KONG - Thursday, 15. August 2024 AETOSWire
Lenovo
delivers strong FY Q1 performance - improves profitability across all
businesses, significant progress in capturing hybrid AI opportunities
(BUSINESS
WIRE)--Lenovo Group Limited (HKSE: 992) (ADR: LNVGY), together with its
subsidiaries (‘the Group’), today announced Q1 results for fiscal year
2024/25, reporting profitability improvements across all areas of the
business and making significant progress in capturing hybrid AI
opportunities. Group revenue increased 20% year-on-year to US$15.4
billion, net income was up 65% year-on-year to US$315 million on a
non-Hong Kong Financial Reporting Standards (non-HKFRS)[1] basis, and
non-PC revenue mix was up five points year-to-year reaching a historic
high of 47%. The Group’s results reflect its clear strategy and strong
execution, persistent focus on innovation and operational excellence, as
well as the advantages it reaps from being a globalized business.
The
Group is both uniquely positioned and well-prepared to lead in an era
of hybrid AI with its full-stack portfolio featuring AI devices like AI
PCs, AI servers that support all major architectures, as well as rich AI
native and AI embedded solutions and services. User feedback from
Lenovo’s AI PCs, defined by five key characteristics, have been
encouraging, with the first AI PCs having launched in May and many more
to come during IFA and Tech World later this year. The Group is
confident that it will lead the industry in market share for
next-generation AI PCs, which overall are expected to be more than 50%
of the PC landscape by 2027, as well as lead in seizing the enormous
growth opportunities across the IT market. The Group continued its
commitment to innovation, with R&D spending up 6% year-to-year to
US$476 million.
Looking ahead to growth, in May 2024 Lenovo
announced a strategic collaboration with Alat, a subsidiary of PIF, an
investment in the form of convertible bonds from Alat, and a warrants
issuance. These transactions will greatly benefit the Group’s efforts to
accelerate its transformation through greater financial flexibility,
seize the enormous business growth momentum in the Middle East, and
further diversify and strengthen its supply chain footprint with a new
manufacturing hub in the Middle East. The transactions are subject to
shareholder and regulatory approvals.
Chairman and CEO quote – Yuanqing Yang:
“The
great start to our fiscal year has been driven by our clear strategy
and strong execution, our persistent innovation and operational
excellence, as well as our globalization advantages. Looking ahead, we
are both well-prepared and uniquely positioned in the market with our
full-stack AI portfolio to lead in the era of hybrid AI and seize the
enormous growth opportunities across our entire business. I’m confident
that, with a recovering ICT market, the combination of our solid
performance and continued progress in hybrid AI will keep enabling us to
achieve sustainable growth and profitability increases.”
Financial Highlights:
Q1 FY 24/25
US$ millions
Q1 FY 23/24
US$ millions
Change
Group Revenue
15,447
12,900
20%
Pre-tax income
313
228
37%
Net Income (profit attributable to equity holders)
243
177
38%
Net Income (profit attributable to equity holders – non-HKFRS) [1]
315
191
65%
Basic earnings per share (US cents)
1.99
1.48
0.51
Intelligent Devices Group (IDG): Double-digit revenue growth with leading profitability, winning in personal AI
Q1 FY24/25 performance:
IDG delivered a strong quarter of double-digit year-on-year revenue
growth with revenue of US$11.4 billion and almost 1 point improvement in
operating margin year-on-year.
The PC business retained in
market leadership in both shipments and device activations, with 23%
global market share and a premium to the market in growth.
Both
the smartphone and tablet businesses delivered strong year-on-year
revenue growth of around 30%, with hypergrowth in premium smartphones.
Opportunities and Sustainable Growth:
IDG is encouraged by positive feedback from the initial launch of its
AI PCs for the China market, with further global launches at IFA and
Tech World later this year.
The PC market is entering a new
refresh cycle driven by AI PCs, with this category expected to grow to
represent over 50% of the total PC market by 2027. The Group is
confident it will lead the industry in market share for next-generation
AI PCs.
IDG will continue to deliver ground-breaking innovations
across its portfolio to achieve the full potential of a personal AI
agent, while at the same time leveraging and deepening its strategic
partnerships to build a more diversified portfolio and richer ecosystem.
Infrastructure Solutions Group (ISG): Hypergrowth with improved profitability, driving hybrid infrastructure
Q1 FY24/25 performance:
Driven by strong growth in its Cloud Service Provider business, ISG
delivered a record quarterly revenue of US$3.2 billion, up 65%
year-on-year, and narrowed operating losses both quarter-on-quarter and
year-on-year.
Combined revenue from storage, software and services achieved significant growth of 59% year-on-year, setting a new record.
Revenue from ISG’s Neptune TM liquid cooled servers grew more than 50%,
driven by its unique sustainability benefits amidst the industry’s
growing AI workload needs.
Opportunities and Sustainable Growth:
ISG is focused on driving the recovery of profitability by optimizing
the business model for its enterprise and SMB business, in particular
simplifying portfolios and improving operations.
It will continue
to leverage the industry-leading liquid cooling technology to meet
growing AI workload demands, as well as the new growth opportunities in
the market for AI servers and storage.
In addition, ISG will
continue to grow key strategic partnerships and build infrastructure
platforms that support hybrid AI solutions.
Solutions and Services Group (SSG): High margin with double-digit growth, building enterprise AI
Q1 FY24/25 performance:
SSG delivered its 13th consecutive quarter of double-digit year-on-year revenue growth, with revenue of US$1.9 billion.
Operating margin in Q1 was over 20% – strengthening its position as the Group’s growth engine and profit contributor.
Managed services and project and solutions services revenue mix grew
three points year-on-year to account for 55% of SSG’s revenue.
Opportunities and Sustainable Growth:
AI services are expected to grow almost twice as fast as the market in
general to become the primary driver of the IT services market over the
next few years.
Lenovo will continue to embed AI in its key
offerings, such as Digital Workplace Solutions, Hybrid Cloud and
Sustainability solutions.
SSG will develop more AI native
services to drive adoption and measurable ROI of AI for customers and
accelerate their transformation.
ESG and corporate highlights
Achievements, announcements, and notable commitments over the past quarter include:
Lenovo has been ranked as one of the world’s best supply chains,
ranking tenth in the list of global companies across all industries with
the most exceptional supply chains in the world in the Gartner Supply
Chain Top 25 for 2024. The renowned annual ranking evaluates across
multiple criteria including financial and corporate social
responsibility data and community opinion.
Lenovo has appointed
Doug Fisher as Chief Security and AI officer, expanding his existing
remit of security to include overall AI governance including championing
the Group’s corporate AI policy and working with its Responsible AI
Committee.
In July, Lenovo announced the appointment of Dr. Tolga
Kurtoglu as the group’s new Chief Technology Officer, succeeding Dr.
Yong Rui in further accelerating the Group’s technology vision and AI
leadership. At the same time, it also announced the formation of a new
Emerging Technology Group that is charged with incubating and
commercializing new technologies. The Emerging Technology Group is being
led by Dr. Yong Rui.
[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,
gain on deemed disposal of a subsidiary, impairment and write-off of
intangible assets; and the corresponding income tax effects, if any.
About Lenovo
Lenovo
is a US$57 billion revenue global technology powerhouse, ranked #248 in
the Fortune Global 500, and serving millions of customers every day in
180 markets. Focused on a bold vision to deliver Smarter Technology for
All, Lenovo has built on its success as the world’s largest PC company
with a full-stack portfolio of AI-enabled, AI-ready, and AI-optimized
devices (PCs, workstations, smartphones, tablets), infrastructure (data
center, storage, edge, high performance computing and software defined
infrastructure), software, solutions, and services. Lenovo’s continued
investment in world-changing innovation is building a more equitable,
trustworthy, and smarter future for everyone, everywhere. Lenovo is
listed on the Hong Kong stock exchange under Lenovo Group Limited (HKSE:
992) (ADR: LNVGY). To find out more visit https://www.lenovo.com, and
read about the latest news via our StoryHub.
LENOVO GROUP
FINANCIAL SUMMARY
For the quarter ended June 30, 2024
(in US$ millions, except per share data)
Q1 24/25
Q1 23/24
Y/Y CHG
Revenue
15,447
12,900
20%
Gross profit
2,560
2,252
14%
Gross profit margin
16.6%
17.5%
(0.9) pts
Operating expenses
(2,066)
(1,862)
11%
R&D expenses
(included in operating expenses)
(476)
(451)
6%
Expenses-to-revenue ratio
13.4%
14.4%
(1.0) pts
Operating profit
494
390
27%
Other non-operating income/(expenses) - net
(181)
(162)
12%
Pre-tax income
313
228
37%
Taxation
(60)
(45)
33%
Profit for the period
253
183
38%
Non-controlling interests
(10)
(6)
47%
Profit attributable to equity holders
243
177
38%
Profit attributable to equity holders- non-HKFRS [1]
315
191
65%
EPS (US cents)
Basic
Diluted
1.99
1.92
1.48
1.43
0.51
0.49
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Contacts
Hong Kong – Angela Lee, angelalee@lenovo.com, +852 2516 4810
London – Charlotte West, cwest@lenovo.com, +44 7825 605720
Zeno Group - LenovoWWcorp@zenogroup.com
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