Lenovo delivers strong FY Q1 performance - improves profitability across all businesses, significant progress in capturing hybrid AI opportunities

HONG KONG — (BUSINESS WIRE) — August 14, 2024 — 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:

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.