Lenovo Group has announced historic highs for both profit and revenue, reporting its first $20-billion quarter.
Lenovo’s performance delivered significant year-on-year improvements. Net income grew at a rate of over 50% for the sixth consecutive quarter, with Q3 growing 62% year-on-year to a record $640 million. Net income margin improved by nearly one point, on track towards the group’s goal of doubling in three years. Pre-tax income was a record $855 million, up 45% year-on-year, and Group revenue continued its strong growth trajectory hitting a record $20.1 billion, up 17% year-on-year.
Lenovo continues to invest significantly in innovation, with R&D expenses for the quarter up 38% year-on-year, as part of the company’s wider commitment to double R&D investment over three years. Investments are aligned to driving Lenovo’s ongoing transformation to a solutions and services company, by developing technologies focused on the “New IT” full stack architecture of “Client-Edge-Cloud-Network-Intelligence”.
Looking ahead, the company remains focused on its 3S strategy (Smart devices/IoT, Smart Infrastructure, Smart Verticals) seeing continued opportunities for sustainable growth and profitability improvements across all areas of the business, keeping it on track to double net margin by the end of FY 2023/2024.
Chairman and CEO Yuanqing Yang comments: “Lenovo continued to embrace the opportunities driven by accelerated digital and intelligent transformation, and our New IT architecture prepared us well with ‘client-edge-cloud-network-intelligence’ capabilities. With another record quarter, we delivered the sixth quarter of more than 50% net income year-on-year growth, and the first $20 billion revenue quarter in our history. We remain on track to double both our net margin and R&D investment in three years from FY20/21 levels.
“Once again, we have shown that Lenovo’s innovation, transformation strategy, and strong execution can consistently deliver sustainable profitability increases for the future.”
The Solutions and Services Group continues to drive strong profitability and growth in a rapidly expanding market. As technology architecture becomes more complex, customers demand more sophisticated IT services, and the market is predicted to be worth over one trillion US dollars through 2025. This includes higher demand for premier support and customized fulfillment from knowledge workers, nearly half of whom now work remotely.
Q3 performance highlights include:
* Significant Q3 revenue growth (25% year-on-year to $1.5 billion), delivering 7.1% of overall Group revenue and with an operating margin of over 22%, a nearly three-point increase year-on-year.
* Support services saw revenue growth of 21% year-on-year.
* Managed Services saw revenue improve 50% year-on-year, driven by Lenovo TruScale as-a-Service offerings announced last quarter.
* Breakthroughs in Smart Retail helped Project Services and Solutions achieve revenue growth of 23% year-on-year.
Opportunities continue to grow for Infrastructure Solutions Group (ISG) as ICT infrastructure modernization expands around the world. The ICT infrastructure market is expected to become a $250 billion market through 2025. By that same time, the edge infrastructure market alone is expected to exceed $41 billion.
Q3 performance highlights are:
* ISG delivered record performance, reaching the milestone of achieving profitability for the first time since the IBM x86 acquisition in 2014. Revenue grew 19% year-on-year to reach $1.9 billion. This was the fourth straight quarter that revenue grew at a double-digit premium to the market.
* The business outgrew the market in nearly every segment. Cloud Service Provider revenue grew 38% growth year-on-year; Enterprise/SMB revenue improved 7% year-on-year.
The market for smart devices continues to benefit from the new normal of hybrid working and the PC market is forecasted to remain strong and stable, shifting to commercial and premium segments.
In smartphones, the market reshuffling will bring more growth opportunities to Lenovo, and the penetration of 5G and development of the New IT of “edge-cloud-network-intelligence” will provide more growth potential for emerging smart devices such as embedded computing/IoT, AR/VR driven by the metaverse, as well as smart home and smart collaboration solutions.
Q3 performance in the Intelligent Devices Group (IDG):
* Excellent results with revenue growth of 16% year-on-year to $17.6 billion, with even stronger profitability growth – up 21% year-on-year to $1.4 billion, on an already high base.
* Premium PC segments delivered high growth with workstation and gaming revenue growing 40% and 27% year-on-year, respectively.
* Smartphones maintained a healthy profit for the seventh consecutive quarter, with revenue growing strongly at 46% year-on-year and becoming the fastest growing major vendor. Profit equaled the historic high of last quarter at US$89 million. Rapid growth was seen in key strongholds, with revenue in Latin America up 25% year-on-year and revenue in North America more than doubling year-on-year (133%).
* Among the emerging smart devices categories, revenue from smart collaboration solutions nearly doubled year-on-year.