Lenovo delivers robust, sustainable, and accelerated growth - focus on hybrid AI driving market differentiation and industry leadership

HONG KONG — (BUSINESS WIRE) — November 14, 2024 — Lenovo Group Limited (HKSE: 992) (ADR: LNVGY), together with its subsidiaries (‘the Group’), today announced Q2 results for fiscal year 2024/25, reporting significant increases and growth in net income, year-on-year revenue growth for the 4th consecutive quarter, and strong double-digit year-on-year revenue increases from all its business groups. Group revenue increased 24% year-on-year to US$17.9 billion. Net income was up 48% year-on-year to US$404 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 to 46%. The Group’s results reflect its clear strategy, operational excellence, investment in R&D, innovations in hybrid AI, and global footprint.

The Group’s hybrid AI strategy and years of continuous investment in R&D and innovations are paying off, with its first phase of AI PCs, launched in China in May 2024, already reaching double digit share of its total notebook shipments in the China market. Recent launches of AI PCs for the global market with Lenovo AI Now have also been received positively. For enterprise AI, the Group is leveraging its full-stack hybrid infrastructure as well as Lenovo Hybrid AI Advantage to capture growth opportunities. This relentless focus on AI innovation as well as investment in R&D (up 10% year-on-year to US$548 million) is firmly establishing the Group’s market differentiation and industry leadership.

Looking ahead to growth, Lenovo will drive continued innovation in hybrid AI to further accelerate growth and profitability increases and is optimistic its current momentum will continue through the rest of the fiscal year.

Lenovo’s Board of Directors declared an interim dividend of 8.5 HK cents per share.

Chairman and CEO quote – Yuanqing Yang:

"Last quarter, we achieved strong, sustainable, and accelerated growth, marking another period of revenue expansion across all business groups. This significant momentum is driven by our clear strategy, innovation investment, operational excellence, and global presence, as well as our commitment to hybrid AI, where we are further strengthening our market differentiation and industry leadership. As we look ahead, we are confident that our ongoing innovation advancements in hybrid AI will continue to accelerate growth and profitability, propelling us forward for the rest of the fiscal year."

Financial Highlights:

Intelligent Devices Group (IDG): Significant growth and leading profitability, accelerating in personal AI

Q2 FY24/25 performance:

• IDG delivered a strong quarter of double-digit year-on-year revenue growth with revenue of US$13.5 billion, up 17% year-on-year.
• The PC business expanded its market leadership to almost 24% market share, widening the lead to the number two player to four points and with AI PCs reaching double digit share of total notebook shipments for the Group in the China market.
• Both the smartphone and tablet businesses delivered high double-digit revenue growth, up 43% and 19% year-on-year respectively, with hypergrowth for smartphones in North America, EMEA and Asia Pacific markets.

Opportunities and Sustainable Growth:

• The PC market is expected to steadily recover and enter a new refresh cycle driven by AI PCs, gradually growing to represent around 80% of the PC industry landscape by 2027.
• The new development of AI technologies is also expected to drive a refresh in the smartphone market.
• IDG will continue to leverage its five-feature AI PCs to establish leadership in the AI PC market, while at the same time building a richer AI device portfolio.

Infrastructure Solutions Group (ISG): Hypergrowth, building hybrid AI infrastructure

Q2 FY24/25 performance:

• Driven by strong cloud momentum and recovering enterprise business, ISG set a new quarterly record, increasing revenue 65% year-on-year to US$3.3 billion.
• Operating losses continued to narrow, with the business group on track to breakeven.
• Combined revenue from storage, software and services grew 35% year-on-year to a record high. Revenue from ISG’s Lenovo Neptune ^TM liquid-cooled servers grew 48% year-on-year.

Opportunities and Sustainable Growth:

• ISG will continue to strengthen the enterprise and SMB business model, including simplifying portfolios and improving operations, as well as diversifying Cloud Service Provider customers.
• It will continue to build differentiation with its industry-leading liquid cooling technology to meet the increasing performance and energy efficiency demands of AI workloads.
• In addition, ISG will continue to grow key strategic partnerships to develop hybrid AI infrastructure solutions.