Lenovo’s growth accelerates in Q4 FY 23/24 -
capturing hybrid AI opportunities
Lenovo Group (HKSE: 992) (ADR: LNVGY) today announced Q4
and full-year results for fiscal 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 increasing nearly 10%
year-on-year to US$13.8 billion, net income doubling year-on-year
to US$248 million, and non-PC revenue mix reaching a historic high
of 45%. The Group’s Q4 and overall 2nd half performance
demonstrates how Lenovo has navigated the past year’s industry
downturn, captured 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
year-on-year revenue growth of 6% and net margin recovered from a
first half year-on-year decline to flat in the second half.
The Group is leading in an era of unprecedented AI opportunities
with its pocket-to-cloud portfolio, strong ecosystem and
partnerships, and full-stack AI capabilities. Since announcing its
AI strategy in October 2023 at its annual Tech World event, Lenovo
has launched its first wave of AI PCs as well as AI capabilities
covering other smart devices, smart infrastructure, and smart
solutions and services. The Group expects the AI PC – which is
defined as equipped with a personal AI agent based on natural
interactions, heterogeneous computing, personal knowledge base,
connected to an open AI application ecosystem, and with privacy and
security protection – to grow from its current premium position to
mainstream over the next three years, driving a new refresh cycle
for the industry. Hybrid AI is also driving greater 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 further lead in
the AI era. In the past fiscal year, the Group achieved a record
high percentage for both R&D headcount at 26.2%, as well as a
R&D expense to revenue ratio of 3.6%.
Looking ahead, the Group is encouraged by its performance and
momentum in the 2nd half of the fiscal year and is optimistic about
the outlook for the year ahead where it will continue to lead in
AI, invest in innovation, and seize on the unprecedented
opportunities presented by hybrid AI as it accelerates growth and
sustainable profitability increases across its entire business.
Lenovo’s Board of Directors declared a final dividend of 3.8 US
cents or 30.0 HK cents per share for the fiscal year ended March
31, 2024.
Chairman and CEO quote – Yuanqing Yang:
“Lenovo’s fourth quarter results clearly demonstrate that we
have not only resumed growth across all our businesses but that our
business momentum is accelerating, driven by the unprecedented
opportunities brought by Hybrid AI. Fueled by our intelligent
transformation strategy and years of investment in innovation,
we’ve built a full stack of AI capabilities and are at the
forefront of pioneering the revolutionary AI PC market. Our vision
in the AI era is Smarter AI for All. Supported by our strong
execution, persistent innovation, operational excellence, and
ecosystem partnerships, we are confident we can deliver sustainable
growth and profitability improvement in the coming year.”
Financial Highlights:
Q4 23/24
US$ millions
Q4 22/23
US$ millions
Change
FY 23/24
US$ millions
FY 22/23
US$ millions
Change
Group Revenue
13,833
12,635
9%
56,864
61,947
(8%)
Pre-tax income
309
130
137%
1,365
2,136
(36%)
Net Income
(profit attributable to equity
holders)
248
114
118%
1,011
1,608
(37%)
Net Income
(profit attributable to equity holders –
non-HKFRS) [1]
218
284
(23%)
1,038
1,878
(45%)
Basic earnings per share (US
cents)
2.02
0.95
1.07
8.41
13.50
(5.09)
Solutions and Services Group (SSG): Strong growth and
profitability, driving AI solutions
Q4 and full year FY23/24 performance:
- Strengthened SSG’s position as a growth engine and profit
contributor by delivering more than 10 percent year-on-year revenue
growth to US$1.8 billion, and high profitability with an operating
margin exceeding 21% - double-digit revenue growth and operating
margin for 12 consecutive quarters. Revenue for the full fiscal
year was US$7.5 billion, growing at 12% year-on-year and an
operating margin of nearly 21%.
- Managed Services and Project and Solutions Services revenue mix
grew five points year-on-year, now accounting for 55% of SSG’s
total business for the quarter.
- Hero offerings such as Digital Workplace Solutions and TruScale
for Hybrid Cloud have both delivered rapid growth.
Opportunities and Sustainable Growth:
- Looking ahead, SSG will continue to meet the increasing
customer demand by moving fast to build AI-native and AI-embedded
solutions and services.
- The Care of One platform, Cyber Resiliency as a Service and the
decisioning tool Lenovo Intelligent Sustainability Solutions
Advisor (LISSA) use the power of AI to deliver hyper-personalized
employee experiences, increased productivity, enhanced security and
sustainable IT choices.
Infrastructure Solutions Group (ISG): Regained
momentum
Q4 and full year FY23/24 performance:
- Q4 revenue resumed growth, with double-digit year-on-year
growth of 15%, taking ISG’s revenue for the quarter to US$2.5
billion – a new record high for a fourth quarter.
- Storage, software and services businesses all achieved
hypergrowth, with the combined revenue increasing more than 50%
year-on-year. High Performance Computing revenue hit a record
high.
- For the full year ISG achieved quarter-on-quarter revenue
growth for three consecutive quarters and achieved its second
highest ever fiscal year revenue.
Opportunities and Sustainable Growth:
- AI servers are expected to grow nearly twice as fast as the
broad server market as the market shifts to AI infrastructure.
- ISG will broaden its portfolio and convert its pipeline to
capture new opportunities, as well as leveraging its strengths in
traditional servers, edge, storage, software and services to
capture growth and resume profitability.
Intelligent Devices Group (IDG): Solid growth, strengthened
leadership
Q4 and full year FY23/24 performance:
- IDG continued to deliver a solid quarter, strengthening its
global market leadership for PCs with a market share of 22.9%, a
significant premium to the market, and industry leading
profitability. Revenue for the quarter was US$10.5 billion, and for
the full year was US$44.6 billion.
- The PC business was no. 1 in four out of five geographies,
achieving record high market share in North America.
- The smartphone business delivered remarkable growth, growing
double digits in both shipments and revenue year-on-year, with
substantial premium to the market.
- IDG’s profitability for the full year was resilient, in spite
of a weaker than expected market in the first half of the fiscal
year. PCs, tablets, and smartphones all resumed growth in the
second half of the fiscal year.
Opportunities and Sustainable Growth:
- Looking ahead, the volume of PC market is expected to recover
to pre-Covid levels, with smartphone already having returned to
double-digit year-on-year hypergrowth.
- AI PCs will gradually grow from premium to mainstream over the
next three years as Lenovo has shipped its first wave of AI PCs and
more will ship in the coming quarters, driving a new refresh cycle
in the PC market.
- Expanding AI from PCs to phones and tablets, building seamless
collaboration between devices with Smart Connect software
solution.
ESG and corporate highlights
Achievements, announcements, and notable commitments over the
past quarter include:
- Lenovo has been recognized for its leadership in climate change
and supplier engagement by the global environment non-profit CDP.
This leadership ranking recognized Lenovo for its efforts in
implementing current best practices against climate change and
proactively working with its suppliers toward a more sustainable
future.
- The Group was also awarded ‘Best Value Chain Initiative’, ‘Best
Green Product’, and received a recognition of ‘highly commended’ in
the category of ‘Circular Economy Company of the Year’ at the
global CRN Sustainability Tech Summit.
- In February, Lenovo joined UNESCO’s commitment for responsible
AI, which asks companies to apply timely measures to ‘prevent,
mitigate, or remedy’ potential adverse effect of AI. This
commitment is in addition to Lenovo’s own internal responsible AI
committee, a governance framework that covers ethical, legal,
safety, privacy and accountability for any AI products, services,
and solutions.
[1] non-HKFRS measure 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, mergers and acquisitions related charges,
restructuring and other charges, gain on remeasurement of a written
put option liability; and the corresponding income tax effects, if
any.
About Lenovo
Lenovo is a US$57 billion revenue global technology powerhouse,
ranked #217 in the Fortune Global 500, and serving millions of
customers every day in 180 markets. Focused on a bold vision to
deliver Smarter Technology for All, Lenovo has built on its success
as the world’s largest PC company with a pocket-to cloud portfolio
of AI-enabled, AI-ready, and AI-optimized devices (PCs,
workstations, smartphones, tablets), infrastructure (data center,
storage, edge, high performance computing and software defined
infrastructure), software, solutions, and services. Lenovo’s
continued investment in world-changing innovation is building a
more equitable, trustworthy, and smarter future for everyone,
everywhere. Lenovo is listed on the Hong Kong stock exchange under
Lenovo Group Limited (HKSE: 992) (ADR: LNVGY). To find out more
visit https://www.lenovo.com, and read about the latest news via
our StoryHub
LENOVO GROUP
FINANCIAL SUMMARY
For the quarter and year ended
March 31, 2024
(in US$ millions, except per
share data)
Q4 FY23/24
Q4 FY22/23
Y/Y CHG
FY23/24
FY22/23
Y/Y CHG
Revenue
13,833
12,635
9%
56,864
61,947
(8)%
Gross profit
2,428
2,143
13%
9,803
10,501
(7)%
Gross profit margin
17.6%
17.0%
0.6 pts
17.2%
17.0%
0.2 pts
Operating expenses
(1,939)
(1,852)
5%
(7,797)
(7,832)
(0)%
R&D expenses (included in operating
expenses)
(532)
(550)
(3)%
(2,028)
(2,195)
(8)%
Expenses-to-revenue ratio
14.0%
14.7%
(0.7) pts
13.7%
12.6%
1.1 pts
Operating profit
489
291
68%
2,006
2,669
(25)%
Other non-operating income/(expenses) –
net
(180)
(161)
12%
(641)
(533)
20%
Pre-tax income
309
130
137%
1,365
2,136
(36)%
Taxation
(56)
(24)
124%
(263)
(455)
(42)%
Profit for the period/year
253
106
140%
1,102
1,681
(34)%
Non-controlling interests
(5)
8
N/A
(91)
(73)
26%
Profit attributable to equity holders
248
114
118%
1,011
1,608
(37)%
Profit attributable to equity holders –
non-HKFRS[1]
218
284
(23)%
1,038
1,878
(45)%
Earnings per share (US cents) Basic
Diluted
2.02 1.95
0.95 0.93
1.07 1.02
8.41 8.05
13.50 12.74
(5.09) (4.69)
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version on businesswire.com: https://www.businesswire.com/news/home/20240522837613/en/
Hong Kong – Angela Lee, angelalee@lenovo.com, +852 2516
4810 London – Charlotte West, cwest@lenovo.com, +44 7825
605720 Zeno Group - LenovoWWcorp@zenogroup.com