Lenovo Delivers Ninth Consecutive Quarter of Revenue and Profitability Improvements as Diversified New Growth Drivers Drive Strong and Sustained Performance

HONG-KONG, August 10, 2022Lenovo Group (HKSE: 992) (ADR: LNVGY) today announced strong results for the Group in the first quarter, improving both revenue and profitability for the ninth consecutive quarter. First-quarter net profit increased 11% year-on-year to $516 million and 35% year-on-year to $556 million on a non-HKFRS [1] base. Revenue reached $17 billion, up 5% year-over-year in constant currency.

The Group saw its revenue from non-PC activities reach 37%, demonstrating that its service-oriented transformation strategy and its persistent investments in business diversification have paid off and are generating future growth opportunities . These new growth engines in solutions and services, infrastructure solutions and mobile businesses all grew double-digit revenue year-over-year, contributing to both revenue growth and Lenovo’s broader commitment to doubling profitability over the medium term. The Group remains committed to doubling its investments in Research and Development (R&D) and has increased its R&D expenditure by 10% year-on-year and increased its R&D workforce by 29% year-on-year.

Lenovo continues to seize the opportunities generated by accelerated digital/intelligent transformation and hybrid working, while successfully addressing a series of industry-wide challenges. Overall, the Group remains optimistic about the sector’s long-term growth potential and the opportunities offered by its investments in new growth drivers. She believes that by leveraging her strategy and execution along with her core competencies in innovation, operational excellence and global/local operating model, she has the agility and resilience to successfully address all macro or micro challenges.

Financial Highlights:

Quote from Chairman and CEO – Yuanqing Yang:

“We managed to grow our business and improve our profitability for the ninth consecutive quarter, while our revenue mix from non-PC businesses reached 37%. These are the results of our strategic foresight and strong execution, as well as our operational resilience,” said Yuanqing Yang, President and CEO of Lenovo. “While external challenges may persist in the short term, the trend towards digitalization continues to accelerate and the hybrid working model is here to stay. We are confident that we can seize these opportunities and will continue to invest, innovate and to deliver sustainable growth and profitability improvements.

Solutions and Services Group (SSG): strong growth and high margins, leading to higher overall profitability for the Group

Opportunity:

The trillion-dollar IT services market continues to experience strong growth, and the growth of hybrid working is driving increased demand for top-notch services and customer satisfaction. Likewise, the expansion of digital workplace solutions has driven the demand for services as a service for workplace devices, infrastructure and management. While at the same time, the market for vertical solutions including smart city, smart manufacturing, smart education and smart retail is expected to grow at a double-digit CAGR through 2025.

Performance for the first quarter of fiscal year 22/23:

  • Last quarter, SSG achieved strong profitability and growth, with revenue growing 23% year-on-year. The operating margin remains high at nearly 23%.
  • There was strong double-digit revenue growth across all segments, with non-hardware-dependent managed services and project and solution services revenue now accounting for nearly half of SSG’s business.

Sustainable growth:

  • SSG continues to invest in repeatable software tools, platforms and vertical solutions with Lenovo’s own IP, including the continued expansion of the TruScale-as-a-Service portfolio into the broader digital work solutions market.
  • SSG has launched hybrid/multi-cloud solutions and continues to grow its portfolio of sustainability offerings.
  • The strategic partnership with PCCW Solutions, announced in June 2022, will further expand SSG’s footprint and opportunities to build a technology solutions business across Asia Pacific.

Infrastructure Solutions Group (ISG): record revenue for fiscal year 21/22 and continued profitable growth in the new fiscal year

Opportunity:

ISG continued to benefit from strong growth in the ICT infrastructure market. The server market alone is expected to grow at a double-digit CAGR through 2025. The edge infrastructure market will exceed US$41 billion by 2025, and the storage market will reach US$36 billion in the same time limit.

Performance for the first quarter of fiscal year 22/23:

  • ISG’s revenue exceeded $2 billion for the first time, up 14% year-on-year and is now profitable for three consecutive quarters.
  • The cloud service provider segment, along with servers and storage, reached all-time revenue records and all significantly outpaced the market.
  • Edge Computing revenue nearly doubled year-over-year, and in high-performance computing, the ISG business maintained its leadership position on the Top500 list by adding more Lenovo systems using its unique cooling technology liquid Neptune.

Sustainable growth:

  • ISG continues to invest in a comprehensive portfolio and in innovation, particularly in Edge, Cloud and Services.
  • ISG will continue to balance scale and profitability while focusing on being one of the fastest growing end-to-end infrastructure providers.

Intelligent Devices Group (IDG): market leader, driver of innovation and diversification

Opportunity:

While the PC market is currently experiencing near-term challenges, PCs are still recognized as a necessity and a key productivity tool. The total market available for PCs is expected to remain above pre-pandemic levels over the long term. Along with PCs, the market for scenario-based solutions is growing rapidly, with the smart collaboration market expected to surpass $80 billion by 2025.

Performance for the first quarter of fiscal year 22/23:

  • IDG maintained industry-leading profitability, with operating income of more than US$1 billion, outpacing the market to not only retain, but strengthen its global position as a leading PC company. °1 in the world. This success was driven by strong growth in high-end segments such as gaming and workstations.
  • Smartphone revenue grew more than 20% year-over-year, with growth coming not only from traditional markets in Latin America and North America, but also from expansion markets. Europe and Asia-Pacific.
  • Expansion beyond PCs continues, with 22% of IDG revenue coming from non-PC smart devices, embedded computing/IoT and scenario-based solutions such as smart home and smart collaboration.

Sustainable growth:

  • Lenovo continues to focus on innovation across its entire portfolio, from smart devices to smart collaboration, and ultimately smart spaces.
  • Smart devices focus on innovative form factors, extreme performance, adaptive intelligence and security. For digital workspaces, the focus is on seamless connection and integration, enabling the best possible mix of physical and virtual collaboration.

Operational highlights and investments for the future

Business investment – Lenovo recently completed an inaugural greenback offering in a $1.25 billion US Rule 144A/Regulation S dual-trance bond offering. The offering is the largest first environmental, social and governance (“ESG”) of the technology sector to date in 2022[2]and marks an important milestone in Lenovo’s ESG journey and supports its vision to achieve Net-Zero by 2050. This is a key development as the company continues to drive its integrated climate and sustainability goals and ambitions, enabling the company to finance projects and initiatives that support its ESG commitments, and to build a smarter and more sustainable society. future for all. More information can be found in the Green financing framework.

Global supply chain – In June 2022, Lenovo officially opened the doors of its first in-house manufacturing facility in Europe. Based in Ullo, Hungary, the factory is primarily focused on building high-end server infrastructure, storage systems and PC workstations used by customers throughout the Europe, Middle East and Africa region. , and further expands Lenovo’s global manufacturing footprint.

The directory Gartner Global Supply Chain Top 25 The list for 2022 saw Lenovo achieve its highest ranking ever, up seven places from 2021 to rank No. 9. Gartner’s Supply Chain Top 25 identifies, celebrates and profiles companies who demonstrate excellence in supply chain management in a high-risk supply chain disruption environment.

[1] the non-HKFRS measure has been adjusted by adding net changes in fair value of financial assets at fair value through profit or loss, amortization of intangible assets resulting from mergers and acquisitions, merger-related expenses and acquisitions; and the corresponding tax effects, if any. [2] Source: Dealogic, Asia excluding Japan, jumbo deals over US$1 billion (equivalent).

About Lenovo

Lenovo (HKSE: 992) (ADR: LNVGY) is a US$70 billion global technology powerhouse, ranked #171 on the Fortune Global 500, employing 75,000 people worldwide and serving millions of customers every day in 180 markets. Focused on a bold vision to deliver smarter technology for everyone, Lenovo has built on its success as a global PC leader by expanding into new growth areas of infrastructure, mobile, solutions and services. This transformation, coupled with Lenovo’s breakthrough innovation, is building a more inclusive, trusted, and sustainable digital society for everyone, everywhere. To find out more visit https://www.lenovo.comand discover the latest news via our StoryHub.

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