Service-led business achieving strong growth; Group investing further US$1 billion in AI innovation

HONG KONG — (BUSINESS WIRE) — August 16, 2023 — Lenovo Group (HKSE: 992) (ADR: LNVGY) today announced first quarter results, reporting Group revenue of US$12.9 billion and net income of US$191 million on a non-Hong Kong Financial Reporting Standards (HKFRS)^[1] basis.

Revenue from the non-PC businesses accounted for 41% of Group revenue, with the service-led business achieving strong growth and sustained profitability – further demonstrating the effectiveness of Lenovo’s intelligent transformation strategy.

The Group continues to take proactive actions to keep its Expenses-to-Revenue (E/R) ratio resilient and drive sustainable profitability, whilst also investing for growth and transformation. It remains committed to doubling investment in innovation in the mid-term, including an additional US$1 billion investment over three years to accelerate artificial intelligence (AI) deployment for businesses around the world – specifically AI devices, AI infrastructure, and AI solutions.

Despite the past quarter’s challenging market and unfavorable macroeconomic conditions, Lenovo sees signs of market stabilization and improvement, component prices bottoming out, and believes the client device market can be expected to recover and resume growth in the second half of this fiscal year.

Financial Highlights:

Chairman and CEO quote – Yuanqing Yang:

“Last quarter, the macro environment presented challenges, and our hardware business remained in a phase of adjustment, but we persisted in executing our strategy. Our service-led business achieved strong growth and sustained profitability. Our non-PC revenue mix of the group revenue further increased year on year – demonstrating the effectiveness of our diversified growth engines and I remain cautiously optimistic about our business recovery over the next several quarters. As we continue to drive innovation and intelligent transformation, I am confident in the long-term position to deliver sustainable profitability and growth in the future.”

Further US$1 billion Investment in AI builds on existing leadership

Lenovo continues to embrace AI from all aspects, having built its advantages in computing power from client to edge to cloud and network. Breakthroughs in Large Language Models and AI generated content mark a major leap in AI development and application and serve as a catalyst and accelerator that are boosting the adoption of AI. Over the next three years, Lenovo is committing a further US$1 billion in investment for AI that will focus on providing AI devices, AI-ready and AI-optimized computing infrastructure, and embedded AI generated content into the intelligent solutions of vertical industries to help customers improve their productivity.

The Infrastructure Solutions Group (ISG) business’ comprehensive AI portfolio has seen it ranked number three in the world for AI hardware infrastructure. It is also leading the way in designing the next generation of AI systems powered by NVIDIA. The Lenovo ThinkSystem SR675 V3 server will soon include the newly announced NVIDIA L40S GPUs that will help professionals worldwide advance AI and bring generative AI applications like intelligent chatbots, search, and summarization tools to users across industries. ISG is investing US$100 million to further grow its AI innovators program which has already delivered >150 cutting edge AI solutions, over 70 AI-optimized platforms, with 45 ISV partners in its first year.

The Solutions and Services Group (SSG) is using AI extensively across its portfolio, including AI-powered device intelligence for predictive support, generative AI agents embedded in its services desk offering, and vertical solutions augmented by AI.

The Intelligent Devices Group (IDG) business has integrated AI across all aspects of its device lifecycle, from using AI to mine user insights to be used in product design and analysis; pre-production screening for code vulnerabilities; manufacturing, including parts planning, quality inspections, and optimization. Looking ahead, Lenovo is leading the transformative shift in personal computing – where, to meet the needs of new generative AI workloads, the PC will also need to transform itself into an AI PC. Lenovo sees the future of AI PCs as a disruptive, hybrid blend of client, edge, and cloud technologies, ushering in enhanced functionality, speed, creativity, and immersive realistic experiences.

At an operations level, Lenovo uses AI across the company’s smart manufacturing , supply chain, customer service, and more to drive efficiency, forecasting, and decision-making.