Lenovo Group's Q2 revenue was 127.9 billion yuan

Recently, Lenovo Group (HKSE: 992) (ADR: LNVGY), a global leader in the digital economy, announced its Q2 fiscal year 2024/25 results as of September 30, 2024: revenue of RMB 127.9 billion, a year-on-year increase of nearly 24%, with all main business revenues achieving strong double-digit growth; According to non Hong Kong financial reporting standards, the net profit was nearly RMB 2.9 billion, a year-on-year increase of 48%; The revenue from non PC businesses accounts for nearly 46%. The core business of the group, personal computer business, continues to outperform the market: revenue increased by 12.1% year-on-year, further widening the gap with the second ranked global market share by more than 4 percentage points. The sales of AI PC, a groundbreaking product, have also exceeded expectations: AI PCs with five characteristics currently account for double digits of laptop shipments in China.
The surging growth momentum of the group's smartphone business has been further strengthened in this fiscal quarter: revenue increased by 43% year-on-year, setting a record high quarterly sales volume and achieving the highest market share in a decade. According to the latest IDC statistics, Lenovo's mobile phone business has entered the top 5 in terms of total revenue in other global markets, except for the Chinese market. In the second quarter, the market share of vertical folding screens ranked first in the world. After the personal computer business, the successful turnaround of the mobile phone business once again fully confirms the group's ability to "turn stones into gold" in restructuring and rebuilding declining businesses. In the fiscal year 2023/24, the group formulated a "three-year growth plan", which aims to reach the top three positions in global markets outside of China within three years, and is now steadily moving towards the expected goals.
The global investment boom in the field of artificial intelligence has strongly boosted the performance of the Infrastructure Business Group (ISG). In this fiscal quarter, ISG's overall revenue was 23.7 billion yuan, a year-on-year increase of 65%, setting a new historical high for the second consecutive quarter. The total revenue of storage, software, and services business increased by 35% year-on-year, and the revenue of Sea God liquid cooled servers increased by more than 48% year-on-year, both reaching historical highs. While ISG's business is steadily moving towards the breakeven point, the group is confident in replicating the successful path in the PC and mobile business.
The new opportunities in the era of hybrid AI have consolidated the position of Solution Services Group (SSG) as the new engine of growth for the group. In the second fiscal quarter, SSG's overall revenue was RMB 15.5 billion, a year-on-year increase of nearly 13%, with an operating profit margin of over 20%. This is SSG's 14th consecutive quarter of strong double-digit revenue growth. Among them, the revenue from operation and maintenance services, project and solution services increased by 3 percentage points compared to the same period last year, accounting for nearly 60% of SSG's overall revenue.
With the beginning of the era of hybrid artificial intelligence, the AI ecosystem is accelerating its evolution. As a manufacturer with the richest access to AI terminals and the largest user base in the world, Lenovo has demonstrated its leading position in hybrid artificial intelligence through relentless innovation and the creation of differentiated competitive advantages. It is committed to helping more and more enterprises and individual users bridge the "last mile" of AI accessibility.
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Last quarter, Lenovo's overall revenue achieved strong and sustainable accelerated growth, with all main businesses experiencing comprehensive growth once again. This is due to the strong execution of clear strategies, continuous investment in innovation, excellent operations and global layout, as well as the differentiated competitive advantage created by seizing the opportunities of hybrid artificial intelligence, which has established a leading position.
Looking ahead, Lenovo will continue to promote technological innovation in hybrid artificial intelligence. We are confident in achieving accelerated growth and improved profitability in the second half of the fiscal year.
——Yang Yuanqing
Chairman and CEO of Lenovo Group
Performance Highlights
In the second fiscal quarter, the revenue was 127.9 billion yuan, a year-on-year increase of nearly 24%; Net profit was nearly 2.9 billion RMB, a year-on-year increase of 48%.
Revenue from businesses outside of 2PC accounts for nearly 46%.
The revenue of 3IDG Intelligent Equipment Business Group was RMB 96.8 billion, a year-on-year increase of 17.4%.
4ISG Infrastructure Business Group's revenue was 23.7 billion RMB, a year-on-year increase of 65%.
The revenue of the 5SSG solution service business group was RMB 15.5 billion, a year-on-year increase of nearly 13%.
PC expands its leading advantage
Smartphones show strong momentum
According to IDC statistics, from July to September 2024, global PC shipments decreased by 1.5% year-on-year, and the market experienced a brief pullback. During this period, Lenovo's personal computer business continued to innovate with excellent operations and clear strategic guidance, demonstrating full resilience: shipments exceeded the market average by 4.6 percentage points, global market share was nearly 24%, leading the second largest manufacturer by more than 4 percentage points, and operating profit margins also maintained industry-leading levels. AI PCs with five characteristics currently account for double digits of laptop shipments in China, steadily advancing towards the goal of achieving a 10% share by the end of the fiscal year.
In the second fiscal quarter, Lenovo's mobile phone business achieved its best "performance" since acquiring Motorola's mobile phone business. Thanks to the accelerated implementation of the "three-year growth plan", Lenovo's smartphone business not only achieved the highest quarterly sales in history in the second fiscal quarter, but also achieved the highest market share in a decade. According to the latest data from market research firm IDC, Lenovo's mobile phone ranking has risen to 7th in the world, with a year-on-year growth rate of 26% in shipments. In China, North America, Europe Middle East Africa, and Asia Pacific markets, Lenovo's smartphone revenue grew at a year-on-year rate of 112%, 20%, 35%, and 282%, respectively.
Looking ahead, AI PCs will drive a steady recovery in the personal computer market and enter a new round of replacement cycles. By 2027, AI PCs are expected to account for nearly 80% of the personal computer market. Meanwhile, artificial intelligence technology will also stimulate the demand for smartphone replacement. Lenovo will fully utilize AI personalized computers with five characteristics and the new generation Copilot+series products to establish Lenovo's leadership position in the AI PC market and create a more diverse range of AI devices.
Continuous high-speed growth
Set multiple historical highs
Currently, artificial intelligence is driving sustained growth in the global infrastructure market. According to IDC's forecast, the global server and storage markets are expected to grow by 40% and 7% respectively by 2024. And the demand from artificial intelligence will also drive the demand for more efficient cooling solutions.
In the second fiscal quarter, driven by strong cloud infrastructure business, ISG's total revenue reached 23.7 billion yuan, achieving a year-on-year growth of up to 65%, setting a new historical high for the second consecutive quarter and steadily moving towards the breakeven point. Among them, the total revenue of storage, software, and services business increased by 35% year-on-year, and the revenue of Sea God liquid cooled servers increased by more than 48% year-on-year, both reaching historical highs.
Looking ahead, Lenovo will continue to build a more balanced portfolio of cloud infrastructure and enterprise infrastructure businesses, as well as AI and traditional server businesses, through excellent operations and continuous innovation, to build a product portfolio that spans across cloud, on premises, edge, and other fields. Meanwhile, we will continue to utilize industry-leading liquid cooling technology to meet the new demands of balancing performance and energy efficiency in the growth of artificial intelligence workloads. During the Lenovo Tech World in October, Lenovo released the sixth generation Neptune liquid cooling solution, which can reduce electricity consumption by up to 40%. In addition, Lenovo is continuously developing key strategic partnerships and collaborating to develop intelligent infrastructure solutions.
Consolidate the position of growth engine
Launch hybrid artificial intelligence advantage set
The trillion dollar service market is growing rapidly. According to Gartner's latest forecast, the global IT services market is expected to grow by 5.6% in 2024, indicating that the service model remains the trend. Lenovo is seizing growth opportunities through a hybrid artificial intelligence advantage set.
In the second fiscal quarter, SSG's position as the growth engine of the group was further consolidated, maintaining double-digit revenue growth for 14 consecutive quarters: total revenue of 15.5 billion RMB, a year-on-year increase of nearly 13%, and operating profit margin exceeding 20%. The total contract value of the fully developed digital office and hybrid cloud solutions has achieved strong growth, with year-on-year growth rates of up to 29% and 202% respectively. The revenue of sustainable development solutions has grown by up to 33% year-on-year.
In the next three years, the global IT services market is expected to maintain a stable growth rate of over 10%, with artificial intelligence services becoming one of the main driving forces with a growth rate more than twice that of the overall market. Lenovo will continue to embed artificial intelligence into key general solutions, while developing more AI native services to help customers more conveniently adopt AI technology to seize development opportunities.
*The amount in US dollars in this performance report is calculated as RMB based on the average exchange rate of the second quarter of the 2024/25 fiscal year, which is RMB 1 to USD 0.139570367. This exchange rate cannot be used for performance reports in any other period.