Lenovo Group Reports Strong Q1 FY24/25 Financial Performance
Lenovo delivers impressive first-quarter financial results, increasing profitability across the board and making great strides in seizing hybrid AI prospects.
Lenovo Group Limited (HKSE: 992) (ADR: LNVGY), along with its subsidiaries, announced its Q1 results for the fiscal year 2024/25. The Group reported profitability improvements across all business areas and significant progress in capturing hybrid AI opportunities. Revenue increased by 20% year-on-year, reaching US$15.4 billion, while net income surged by 65% to US$315 million on a non-Hong Kong Financial Reporting Standards (non-HKFRS) basis. The non-PC revenue mix rose five points year-on-year to a historic high of 47%. These results reflect Lenovo's clear strategy, strong execution, focus on innovation, operational excellence, and the advantages of being a globalized business.
Leading in Hybrid AI with a Full-Stack Portfolio
Lenovo is uniquely positioned to lead in the era of hybrid AI, supported by its full-stack portfolio that includes AI devices such as AI PCs and AI servers. These devices support all major architectures and offer rich AI-native and AI-embedded solutions and services. Feedback on Lenovo’s AI PCs, characterized by five key features, has been positive since their launch in May. With additional launches planned at IFA and Tech World later this year, Lenovo is confident in leading the market share for next-generation AI PCs, which are expected to comprise more than 50% of the PC market by 2027. The Group remains committed to innovation, increasing R&D spending by 6% year-on-year to US$476 million.
Strategic Collaboration and Growth in the Middle East
In May 2024, Lenovo announced a strategic collaboration with Alat, a subsidiary of PIF, involving an investment through convertible bonds and warrants issuance. This collaboration will enhance Lenovo's financial flexibility, allowing it to accelerate its transformation, capitalize on business growth momentum in the Middle East, and diversify its supply chain with a new manufacturing hub in the region. These transactions are pending 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.”
Intelligent Devices Group (IDG): Driving Revenue Growth and Market Leadership
Q1 FY24/25 Performance: The Intelligent Devices Group (IDG) delivered double-digit year-on-year revenue growth, achieving US$11.4 billion in revenue and nearly a one-point improvement in operating margin. Lenovo maintained its leadership in the PC market, with a 23% global market share and outpaced the market in growth. The smartphone and tablet businesses also showed strong performance, with around 30% year-on-year revenue growth, particularly in premium smartphones.
Opportunities and Sustainable Growth: IDG is encouraged by the positive feedback from its AI PCs launched in China, with further global launches expected at IFA and Tech World. The PC market is entering a new refresh cycle driven by AI PCs, which are projected to represent over 50% of the total market by 2027. Lenovo is confident in leading the market share for next-generation AI PCs and will continue to innovate across its portfolio to unlock the full potential of personal AI agents. The Group also plans to deepen its strategic partnerships, building a more diversified portfolio and a richer ecosystem.
Infrastructure Solutions Group (ISG): Hypergrowth and Improved Profitability
Q1 FY24/25 Performance: The Infrastructure Solutions Group (ISG) achieved record quarterly revenue of US$3.2 billion, a 65% increase year-on-year, driven by strong growth in its Cloud Service Provider business. Operating losses were reduced both quarter-on-quarter and year-on-year. Revenue from storage, software, and services grew by 59% year-on-year, setting a new record. The revenue from ISG’s Neptune™ liquid-cooled servers grew by over 50%, driven by its sustainability benefits amidst the industry's growing AI workload needs.
Opportunities and Sustainable Growth: ISG is focused on improving profitability by optimizing its business model, particularly for enterprise and SMB sectors, simplifying portfolios, and improving operations. The Group will continue to leverage its industry-leading liquid cooling technology to meet growing AI workload demands and explore new growth opportunities in the AI server and storage market. Additionally, ISG will strengthen strategic partnerships and build infrastructure platforms that support hybrid AI solutions.
Solutions and Services Group (SSG): Sustaining High Margin Growth with Enterprise AI
Q1 FY24/25 Performance: The Solutions and Services Group (SSG) delivered its 13th consecutive quarter of double-digit year-on-year revenue growth, achieving US$1.9 billion in revenue. The operating margin in Q1 exceeded 20%, reinforcing SSG’s role as Lenovo’s growth engine and profit contributor. Managed services and project solutions services accounted for 55% of SSG’s revenue, growing three points year-on-year.
Opportunities and Sustainable Growth: AI services are expected to grow nearly twice as fast as the general market, becoming a primary driver of the IT services market in the coming years. Lenovo plans to continue embedding AI into key offerings such as Digital Workplace Solutions, Hybrid Cloud, and Sustainability solutions. SSG will also develop more AI-native services to drive AI adoption and measurable ROI for customers, accelerating their transformation.
ESG and Corporate Highlights
Recent Achievements and Appointments: Lenovo has been recognized as one of the world’s best supply chains, ranking tenth in Gartner’s Supply Chain Top 25 for 2024. This annual ranking evaluates companies based on multiple criteria, including financial performance, corporate social responsibility, and community opinion.
The Group has also made key leadership appointments to strengthen its focus on security and AI. Doug Fisher has been appointed as Chief Security and AI Officer, expanding his responsibilities to include overall AI governance and championing Lenovo’s corporate AI policy. Additionally, Dr. Tolga Kurtoglu has been named the new Chief Technology Officer, succeeding Dr. Yong Rui, to further accelerate Lenovo’s technology vision and AI leadership. The formation of a new Emerging Technology Group, led by Dr. Yong Rui, aims to incubate and commercialize new technologies.
Comments