Lenovo's growth accelerates in Q4 FY 23/24 – seizing hybrid AI opportunities

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May 23, 2024Lenovo Group (HKSE: 992) (ADR: LNVGY) today announced Q4 and full year results for the financial year 2023/24. After resuming growth in Q3, the group reported year-on-year revenue growth across all business groups in Q4, with group revenue up nearly 10% year-on-year to US$13.8 billion, net income year-on-year. The year is doubling. $248 million, and the non-PC revenue mix reached an all-time high of 45%. Q4 of the group and 2 overalln.d Half the performance shows how Lenovo navigated the industry downturn of the past year, seized the tremendous growth opportunities presented by AI, and accelerated momentum across the business. Revenue for the full fiscal year was US$56.9 billion, and net income was US$1 billion. From the second half of the fiscal year, Lenovo achieved annual revenue growth of 6% and net margin was flat in the second half from a year-over-year decline in the first half.

The group is leading the way in an era of unprecedented AI opportunities with its pocket cloud portfolio, strong ecosystems and partnerships, and full-stack AI capabilities. Since announcing its AI strategy at its annual Tech World event in October 2023, Lenovo has announced its first wave of AI PCs, as well as AI capabilities covering other smart devices, smart infrastructure, and smart solutions and services. What is the beginning? The group expects the AI ​​PC – defined as a personal AI agent equipped with natural interactions, heterogeneous computing, a personal knowledge base, connected to an open AI application ecosystem, and with privacy and security protections. – will increase from its existing premium. Positioned to become mainstream over the next three years, driving a new refresh cycle for the industry. Hybrid AI is also driving higher demand for AI infrastructure and customers are increasingly asking for customized AI solutions and services, particularly consulting, design, deployment and maintenance of AI.

Lenovo's continued commitment and investment in innovation, focused on its anchor technologies of AI and computing, is helping it realize its vision of 'Smarter AI for All' and move further into the AI ​​era. In the last financial year, the group achieved a record high percentage for both R&D headcount at 26.2%, as well as R&D expenditure to revenue ratio of 3.6%.

Looking ahead, Group 2 is encouraged by its performance and pace.n.d Halfway through the fiscal year and optimistic about the outlook for next year where it will continue to advance in AI, invest in innovation, and take advantage of the unprecedented opportunities presented by hybrid AI as It accelerates growth and increases sustainable profitability across its business. .

Lenovo's board of directors announced a final dividend of 3.8 US cents or 30.0 HK cents per share for the fiscal year ending March 31, 2024.

Chairman and CEO Quote – Yuan Qingyang:

“Lenovo's fourth quarter results clearly show that we have not only resumed growth across all of our businesses, but that our business is accelerating, driven by hybrid AI. The example is because of our smart transformation strategy and years of investment in innovation, we've built a full stack of AI capabilities and are at the forefront of driving the revolutionary AI PC market Our vision is Smart AI for All. With our strong execution, continuous innovation, operational excellence, and ecosystem partnerships, we are confident we can deliver sustainable growth and profitability improvements in the coming year. are.”

Financial Highlights:

Solutions and Services Group (SSG): Strong growth and profitability, driving AI solutions

Performance for Q4 and full year FY23/24:

  • Strengthened SSG's position as an engine of growth and contributor to profitability by increasing revenue by over 10% year-on-year to US$1.8 billion, and delivering high profitability with an operating margin of over 21% – Double-digit revenue growth and operating margin for 12 consecutive years. Quarterly revenue for the full fiscal year was US$7.5 billion, growing 12% year-over-year and an operating margin of approximately 21%.
  • Managed Services and Project & Solutions Services revenue grew five points year over year, now accounting for 55% of SSG's total revenue for the quarter.
  • Digital workplace solutions for hybrid cloud and Hero offerings like TrueScale have grown rapidly.

Opportunities and Sustainable Development:

  • Looking ahead, SSG will continue to meet growing customer demand by moving rapidly to build AI-native and AI-embedded solutions and services.
  • Care of One platform, cyber resilience as a service and decision-making tool Lenovo Intelligent Sustainability Solutions Advisor (LISSA) harnesses the power of AI to deliver hyper-personalized employee experiences, increased productivity, better security and sustainable IT choices. Is.

Infrastructure Solutions Group (ISG): regains momentum.

Performance for Q4 and full year FY23/24:

  • With double-digit year-over-year growth of 15%, taking ISG's revenue to US$2.5 billion for the quarter, Q4 revenue resumed growth – a new record high for the fourth quarter.
  • The storage, software and services businesses all experienced hypergrowth, with combined revenue increasing by more than 50% year-over-year. High-performance computing revenue hits record high
  • For the full year, ISG achieved quarter-on-quarter revenue growth for three consecutive quarters and posted its second-highest revenue of the fiscal year.

Opportunities and Sustainable Development:

  • AI servers are expected to grow nearly twice as fast as the broader server market as the market shifts to AI infrastructure.
  • ISG will broaden its portfolio and transform its pipeline to capture new opportunities, as well as its strengths in traditional servers, edge, storage, software and services to drive growth and resume profitability. will take advantage of

Intelligent Devices Group (IDG): Solid growth, strong leadership

Performance for Q4 and full year FY23/24:

  • IDG continued to deliver a solid quarter, consolidating its global market leadership for PCs with a market share of 22.9%, a significant market premium, and industry-leading profitability. Revenue for the quarter was US$10.5 billion, and for the full year was US$44.6 billion.
  • There was no PC business. 1 in four out of five geographies, achieving a record high market share in North America.
  • The smartphone business delivered remarkable growth, with a substantial premium in the market, with double-digit growth in both shipments and revenue year-on-year.
  • IDG's profit for the full year was resilient despite a weaker-than-expected market in the first half of the fiscal year. PCs, tablets and smartphones resumed growth in the second half of the fiscal year.

Opportunities and Sustainable Development:

  • Looking ahead, the PC market volume is expected to recover to pre-Covid levels, with the smartphone already returning to double-digit hypergrowth year-on-year.
  • AI PCs will gradually move from premium to mainstream over the next three years as Lenovo ships its first wave of AI PCs and more will be shipped in the coming quarters, driving a new refresh cycle in the PC market.
  • Extending AI from PCs to phones and tablets, building seamless collaboration between devices with Smart Connect software solutions.

ESG and Corporate Highlights

Accomplishments, announcements, and notable commitments in the past quarter include:

  • Lenovo has been recognized for its leadership in environmental change and supplier engagement by global environmental non-profit CDP. This leadership ranking recognized Lenovo for its efforts to implement current best practices against climate change and actively work with its suppliers for a more sustainable future.
  • The group was also awarded 'Best Value Chain Initiative', 'Best Green Product', and 'Highly Commended' in the 'Circular Economy Company of the Year' category at the global CRN Sustainability Tech Summit.
  • In February, Lenovo joined UNESCO's commitment to responsible AI, which calls on companies to take timely measures to 'prevent, mitigate, or remedy' the potential negative effects of AI. This commitment is in addition to Lenovo's internal Responsible AI Committee, a governance framework that covers ethical, legal, security, privacy and accountability for any AI products, services and solutions.

[1] The non-HKFRS measurement was adjusted by excluding net fair value changes on financial assets at fair value through profit or loss, amortization of intangible assets resulting from mergers and acquisitions, charges related to mergers and acquisitions, restructuring and Other charges, the liability of the authority to obtain on the remeasurement of the written; and related income tax implications, if any.

About Lenovo

Lenovo is a US$57 billion revenue global technology powerhouse, ranked #217 on the Fortune Global 500, and serves millions of customers daily in 180 markets. Focused on a bold vision to deliver smart technology for all, Lenovo leverages its success as the world's largest PC company with AI-enabled, AI-ready, and AI-optimized devices in the pocket. Built with a cloud portfolio (PCs, workstations, smartphones, tablets), infrastructure (data center, storage, edge, high-performance computing and software-defined infrastructure), software, solutions, and services. Lenovo's continued investment in world-changing innovation is building a fairer, more reliable, and better future for everyone, everywhere. Lenovo is listed on the Hong Kong Stock Exchange under Lenovo Group Limited (HKSE: 992) (ADR: LNVGY). Visit https://www.lenovo.com to learn more, and read about the latest news through our StoryHub.

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