Lenovo Delivers Record Quarter, as Strategy Continues to Drive Transformation and Sustainable Growth, with Profitability on Track to Double in Three Years

HONG KONG, November 4, 2021 – Lenovo Group (HKSE: 992) (ADR: LNVGY) today announced record quarterly results for the Group, with historic highs for both profit and revenue. The company’s operational excellence, innovation, and strong execution underpin the improvements across all key business groups, despite wider industry supply challenges. These, together with the opportunities created by accelerated digitalization, intelligent transformation, and IT upgrades in devices, infrastructure, and applications around the world continue to fuel the Group’s long-term and sustainable profitability increases.

Lenovo’s performance delivered significant year-on-year improvements, with net income growing 65% year-on-year to US$512 million and net income margin improving by 0.7 points, on track towards the Group’s goal of doubling in three years. Pre-tax income was US$742 million, up 58% year-on-year, and Group revenue continued its strong growth trajectory hitting US$17.9 billion, up 23% year-on-year. Operating cashflow doubled year-on-year to US$1.6 billion, and at the same time the Group’s R&D expenses for the quarter were up almost 60% owing to increased investments in innovation.

Looking ahead, the strategy to drive sustainable profit improvements and growth will continue to focus on high margin businesses and segments, at the same time doubling investments in R&D over three years as announced last quarter. This focus will support the Group’s continued transformation, developing technology focused on the New IT opportunities and the technology architecture of brought about by changing customer needs.

Lenovo’s Board of Directors declared an interim dividend of 8.0 HK cents per share.

“Lenovo’s New IT technology architecture of is gaining momentum and more accepted across the industry. Through the strong execution of our 3S strategy (Smart Devices/IoT, Smart Infrastructure, Smart Vertical), last quarter, both our net income and revenue achieved new records, and we are on track to double our net margin in three years. At the same time, our R&D investment greatly increased by almost 60%” said Yuanqing Yang, Lenovo Chairman and CEO. “Looking ahead, we will continue to drive to our goal to double R&D spending over three years, and further drive our service-led intelligent transformation.”

Solutions and Services Group (SSG): delivering strong growth and high margins – driving higher overall profitability for the Group

The Solutions and Services Group continues to drive strong profitability and growth in a rapidly expanding market. As the technology architecture becomes more complex, customers demand more sophisticated IT services, and the market is predicted to be worth over one trillion US dollars through 2025, with the fast growing and high-margin device-as-a-service market predicted to be US$67 billion by 2025.

Opportunities continue to expand for ISG as ICT infrastructure modernization continues around the world. The ICT infrastructure market is expected to become a US$250 billion market through 2025, making it as big globally as the PC market.

The demand for PCs and other smart devices remains strong. This is driven by commercial demand recovering, with market reports showing commercial PCs (excluding Chromebooks) growing 18% year-on-year last quarter, as well as increased demand expected from the launch of Windows 11. Lenovo expects PC demand to be in line with industry assessments of 340-355 million units a year for the next few years. The global smartphone market still presents tremendous opportunities to grow, as does the surging IoT market which is expecting to grow by 11% CAGR through 2025.

Operational highlights and investing for the future

Lenovo (HKSE: 992) (ADR: LNVGY) is a US$60 billion revenue Fortune Global 500 company serving customers in 180 markets around the world. Focused on a bold vision to deliver smarter technology for all, we are developing world-changing technologies that power (through devices and infrastructure) and empower (through solutions, services and software) millions of customers every day and together create a more inclusive, trustworthy and sustainable digital society for everyone, everywhere. To find out more visit www.lenovo.com and read about the latest news via our StoryHub.