Lenovo Delivers Record First Quarter, Doubling Net Income
Lenovo posted record fiscal first quarter results for the Group. Its performance delivered significant year-on-year profitability improvements, with pre-tax income almost doubling to US$650 million (up 96%), and net income also more than doubled (up 119%), as net income margin reached 2.8%, the highest in many years. First quarter Group revenue continued hypergrowth to US$16.9 billion, up 27% year-on-year.
Looking ahead, the company sees continued opportunities for sustainable growth and profitability improvements across its business, in areas such as vertical solutions, infrastructure solutions, premium PCs, and adjacent non-PC devices such as tablets, smartphones, embedded computing, and other smart devices. Additionally, innovation will continue to help drive profitable, sustainable growth. Having increased R&D expense in the first quarter by 40% year-on-year, Lenovo will further invest in innovation and double its R&D investments over the next three years.
This quarter is the first time the company is reporting under the new business group structure of Solutions and Services Group (SSG), Infrastructure Solutions Group (ISG), and Intelligent Devices Group (IDG) that was announced earlier this year. Significant Q1 revenue growth (38% year-on-year to US$1.18 billion) was recorded across three key segments of SSG (support services, managed services/as-a-Service, vertical solutions) with an operating margin of 22%, much higher than the traditional hardware businesses. ISG delivered record revenue of US$1.8 billion, and has outperformed the market for six straight quarters, while achieving the best results in five years. IDG posted record first quarter for both profit and revenue. Profit of US$1.1 billion, up 43% year-on-year and revenue of US$14.7 billion, up 28% year-on-year – driven by a combination of strong performance in PCs and growing performance of non-PC segments, which now account for 18% of IDG’s total revenue.
“The accelerated digital and intelligent transformation has created significant market opportunities globally. Lenovo is successfully seizing these as we transform from a device company to a services and solutions provider. The proof is in our performance. This quarter alone we’ve doubled profitability year-on-year while net income margin reached the highest in many years,” said Yuanqing Yang, Lenovo Chairman and CEO. “Going forward, we will continue to increase R&D investment, aiming to double it over the next three years; we will further improve our operational excellence; and we remain committed to green innovation and corporate citizenship to achieve long-term sustainable profitability increases.”