Lenovo has a record second quarter: here are the results

I risultati del secondo trimestre di Lenovo: numeri record per il Gruppo thumbnail

The second quarter results speak for themselves: Lenovo’s strategy continues to drive the Group’s transformation and sustainable growth.

Record second quarter for Lenovo Group: here are the results

Lenovo Group today announced record quarterly results for the Group, with all-time highs for both profit and turnover. Operational excellence, innovation, and the company’s strong execution capability underpin improvements across all major business groups. This despite the wider procurement challenges faced by the industry. The opportunities created by the acceleration of the digitization process contribute to fueling the Group’s long-term and sustainable profitability increase.

Lenovo’s performance has produced significant improvements from year to year, with net income up 65% year on year to $ 512 million. The improved net profit margin is 0.7 points, in line with the Group’s goal of doubling in three years. The pre-tax profit was 742 million dollars, up by 58% every year. Turnover continued its strong growth trajectory reaching i $ 17.9 billion, an increase of 23% year-on-year. Operating cash flow doubled year on year to $ 1.6 billion. At the same time, the Group’s investments in research and development for the quarter increased by almost 60%.

Looking ahead, the strategy to drive sustainable profit growth will continue to focus on high-margin businesses and segments, while doubling R&D investment in three years, as announced last quarter. This attention will support the continuous transformation of the Group, developing a technology focused on new IT opportunities and the technological architecture of “Client-Edge-Cloud-Network-Intelligence” determined by the changing needs of customers.

The CEO says he is satisfied and aims to do better

that’s how Yuanqing Yang, Lenovo’s Chairman & CEO, commented on the key financial results:

“The new IT technology architecture of“ Client-Edge-Cloud-Network-Intelligence ”is rapidly developing and increasingly recognized throughout the sector. Thanks to the strong execution of our 3S strategy (Smart Devices / IoT, Smart Infrastructure, Smart Vertical). In the last quarter, both our net profit and revenues hit new records and we are on track to double our net margin in three years. At the same time, our investment in research and development has significantly increased by almost 60%. Looking ahead, we will continue to pursue our goal of doubling our R&D investment in three years and further driving our intelligent service-driven transformation. ”

Lenovo’s second quarter results

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 US $ 1 trillion through 2025, with the rapidly growing device-as-a-service market and ad high margin projected to reach $ 67 billion by 2025.

Q2 Performance:

  • Significant second quarter revenue growth (30% yoy to US $ 1.36 billion), with 7.3% of the Group’s overall revenues and an operating margin of nearly 21%.
  • Support service penetration rates for PC customers and infrastructure customers have both improved. Managed Services have seen revenue growth of nearly 90% year-on-year and the Group has found Lenovo’s IP solutions to continue to grow, resulting in Project Services and Solutions revenue growth of nearly 22%. every year.
  • The Group announced an evolution of its consumption-based business model at Tech World, Lenovo’s annual event dedicated to innovation, with the launch of TruScale, a new portfolio that brings together all of Lenovo’s as-a-service offerings. Lenovo under one umbrella thus providing a true global solution that makes everything from pocket to cloud available through a single contractual framework.

Looking at the future:

  • Against this backdrop, Lenovo will continue to support revenue growth and profitability. By integrating the company’s internal IT function into SSG, it will further enhance the group’s research and development capabilities by transforming proven internal digital skills into solution offerings for customers.
  • In managed services, new go-to-market platforms, tools and features will be introduced to enhance the TruScale as-a-service offering.
  • In support services, the goal will be to increase penetration rates with the recovery of the commercial segment.

Lenovo’s Infrastructure Solutions Group (ISG)

Chance:

Opportunities continue to expand for ISG as ICT infrastructure modernization continues around the world. The ICT infrastructure market is expected to become a $ 250 billion market by 2025, globally as big as the PC market.

Q2 Performance:

  • ISG achieved record performance, driven by record revenue of nearly US $ 2 billion, up nearly 34% year-over-year. Profitability continued to improve by US $ 24 million year-on-year, approaching break even.
  • The business outperformed the market in almost all segments. The Cloud Service Provider has achieved a high historical turnover with a growth of over 50% year on year; revenues in the business / SME segment recorded strong growth of 20% on an annual basis.
  • In the higher-margin segments, storage revenues grew more than 50% year-on-year to a new record, and in High Performance Computing, the Group delivered China’s fastest high-performance university computer, powered by technology Lenovo Neptune water cooling.

Looking at the future:

  • The Group will continue to increase investments in fast-growing segments such as edge computing, hybrid cloud solutions and converged with the 5G network.
  • The Group will also continue to strengthen internal design and manufacturing capabilities to drive profitability improvements as the business moves towards breakeven and beyond.
  • The vision remains to become the largest and most trusted global provider of ICT infrastructure solutions.

Intelligent Devices Group (IDG): Strong revenue growth and higher profitability, contribution from non-PC businesses increases

Chance:

Demand for PCs and other smart devices remains strong. This scenario is driven by the recovery in commercial demand, market analyzes show that commercial PCs (excluding Chromebooks) grew 18% year-on-year in the last quarter, as well as an expected increase in demand since the launch of Windows 11. Lenovo expects PC demand to be in line with industry estimates of 340-355 million units per year for the next few years. The global smartphone market still presents tremendous growth opportunities, as does the growing IoT market which expects an 11% Compounded Average Growth Rate (CAGR) to grow through 2025.

Q2 Performance:

  • Excellent results with 21% year-over-year revenue growth to US $ 15.3 billion, with even stronger profitability growth – up 34% year-over-year to US $ 1.2 billion, on a already high base.
  • The premium PC segments have seen high growth with revenues from Yoga and premium workstations, each more than doubling year on year. Commercial PC revenues grew 29% yoy and SMB PCs grew 48% yoy.
  • Smartphones had their best quarter ever, with a profit hitting a new all-time high of $ 89 million. Revenue grew 27% year-on-year, peaking in 15 quarters. All geographies experienced high profitable growth. This is not only in the traditional strongholds of Latin America and North America, but also in the expanding markets of the EMEA and Asia Pacific. Tablet revenue grew 20% yoy and the accessories business grew 31% yoy.

Looking at the future:

  • Lenovo will further invest in the premium segments to increase profitability and average selling price. Non-PC products such as smartphones, tablets, smart meeting collaboration and embedded computing will further increase the non-PC business mix.

Operational highlights and investments for the future

  • The group continues to focus significantly on ESG factors (Environmental, Social and Governance) through all its operations; setting new climate change mitigation targets in August 2021 as part of the annual ESG report. The company has committed to removing one million tons of greenhouse gas emissions from its supply chain by fiscal year 2025/26. It also makes progress towards the 2030 emissions reduction targets approved by the Science-Based Targets Initiative. The company is committed to integrating post-consumer recycled materials into 100% of PC products by 2025. It has also redefined its social impact goals so that women account for 27% of global executive roles by 2025. compared to 21% in 2020.
  • The Lenovo Group was recently recognized for its ESG commitment and work. The Group received the highest score ever from theHang Seng Corporate Sustainability Index. In doing so, it achieved an AA + rating and the best overall score in the technology sector for the first time.