Lenovo accelerates turnaround with back-to-back, double digit quarterly revenue growth

Strong earnings indicate Lenovo’s transformation is on track

PUBLISHED : Thursday, 16 August, 2018, 10:05am
UPDATED : Thursday, 16 August, 2018, 10:05am

For the second straight quarter, Lenovo Group achieved strong double-digit growth in revenue year-on-year. Group revenue reached US$11.91 billion, up 19% year-on-year in the fiscal first-quarter ended June 30. The company also reported strong pre-tax income during the quarter of US$113 million, an improvement of US$182 million year-on-year, as profitability improved across all businesses.

In the first fiscal quarter, Lenovo’s profit attributable to equity holders grew to US$77 million, up US$149 million year-over-year. Basic earnings per share in the first fiscal quarter were 0.65 US cents, or 5.10 HK cents.

“As we persistently execute our 3-wave strategy, all our businesses made solid improvements in both revenue and profitability. Lenovo has passed the turning point and entered a phase of ‘acceleration’ – accelerating the execution of our transformation strategy and accelerating the rising momentum in business performance,” said Yang Yuanqing, Lenovo Chairman and CEO.

“In the future, we will maintain industry leading profitability and premium to market growth in PCs; return the smartphone business to health; build the data centre business into a sustainable growth and profit engine, and continue to invest in ‘Smart IoT + Cloud’ and ‘Infrastructure + Cloud’ to drive long term sustainable return,” said Yang.

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With this earnings report, Lenovo looks to have turned a corner in its transformation and enters a new phase of growth, thanks to meaningful progress on its strategy and focus on “Intelligent Transformation”. Lenovo’s decisive steps to consolidate key businesses into a streamlined, integrated enterprise, along with an emphasis on dynamic revenue generators, are quickly yielding significant returns.

Last quarter, Lenovo announced the creation of its new Intelligent Devices Group (IDG), combining its Personal Computer and Smart Devices Group with its Mobile Business Group. Rethinking the ways these units and their devices interact and impact customers led to IDG’s double-digit, quarterly revenue growth year-over-year, and PC unit market share gains in every geography. At the same time, Lenovo is not only driving, but capitalising on, global growth trends in both software and services.

Lenovo’s key business units each tallied significant growth and market strength during the quarter. The Intelligent Devices Group delivered strong revenue growth of 14% year-on-year, amounting to US$9.95 billion. Building on a strong Q4, Lenovo’s Data Center Group (DCG) further accelerated its momentum, reporting another record revenue quarter of US$1.6 billion, the third consecutive quarter of double-digit revenue growth, and up 67.8% compared to the same quarter a year earlier. The record high revenue was driven by growth in Software Defined Infrastructure, High Performance Computing & AI businesses and Hyperscale.

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Lenovo’s software-defined products, led by the new ThinkAgile brand, once again drove strong growth year-on-year. The Hyperscale business also grew by triple-digits year-on-year while improving gross profit and diversifying the customer base.

Traditional infrastructure continued on a positive trend and flash-based storage solutions showed strong momentum at 42% year-on-year growth.