Lenovo reports all-time record results for Q2 2020/2021 results

Today we announced our earnings results for the second quarter of fiscal year 2020/21. Despite a challenging environment, last quarter we delivered record quarterly performance in both revenue and profit. Revenue reached a new height of 14.5 billion US dollars, growing over 7% year-on-year, as all of our core businesses delivered year-on-year growth for the first time in 6 quarters. Profit showed even stronger growth, with pre-tax income and net income both up over 50% year-on-year. Pre-tax income reached 470 million US dollars, and net income reached 310 million US dollars. In addition, the top three credit rating agencies granted Lenovo Strong investment-grade rating, further strengthening our ability to finance our growth.

In our Intelligent Devices Group, PC and Smart Devices delivered another historic quarter. Revenue, up 8%, and pre-tax income improved 18% year-on-year, both set new records. Although the market is shifting to consumer, we still maintained our industry leading and record profitability of 6.3% through excellent, highly efficient operations. And we returned to #1 in PC with almost 24% market share. Our focus in high growth and premium segments continued to drive strong growth.

Despite the currency volatility in Latin America, our Mobile business revenue grew 39% quarter-to-quarter and returned to year-on-year growth, as we continued our strong recovery from the impact of COVID-19. Besides further solidifying our presence in our stronghold markets like Latin America and North America, we have accelerated our development in Europe and Asia Pacific and saw clear results. In addition to our strong product portfolio, we launched razr 5G foldable smartphone and Lenovo Legion Gaming phone and both have been well received by the market.

In Data Center, we again saw double-digit revenue growth with improved profitability year-on-year. Our Cloud Service Provider segment continued to grow over 30% year-on-year, with strong growth across all geographies. Particularly, thanks to years of investment in in-house design and manufacturing, we displaced major ODMs to become the motherboard and system design partner to a top cloud service provider. We also have expanded the capacity of our factory in Monterrey, Mexico, to serve datacenter customers across the Americas.

In our Enterprise and SMB segment, our revenue stayed close to flat year-on-year, but we did outperform the market. Our focus continued to drive double-digit growth year-on-year across Software Defined Infrastructure, Storage, Software and Services segments. Even more, we recently announced an exciting partnership with SAP. Our TruScale Infrastructure-as-a-Service combined with SAP’s HANA Enterprise Cloud enables customers to keep their sensitive data on-premises and secure, while enjoying the flexibility of pay-as-you-go consumption model. We already see strong customer response to this offering.

Our Service-led Intelligent Transformation continued to make solid progress, with Smart IoT, Smart Infrastructure and Smart Verticals revenue each growing by strong double-digits year-on-year. In terms of service, our Attached Service, Managed Service and Solutions Service also continued fast growth. Particularly, Device-as-a-Service tripled its total contract value year-on-year. Overall, Software and Services revenue grew to a new record of over 1.2 billion US dollars, up 39% year-on-year, and now accounts for 8.5% of our total group revenue even as total revenue increases. Our E-commerce revenue also grew by over 40% year-on-year.

Looking Forward

I have talked about the long-term growth of the total technology market in the “new normal” for two quarters. PCs and Tablets are now one device per person, and the Cloud Infrastructure demand is growing rapidly because of the work-, learn- and play-from-home economy. We believe the total PC market will grow by around 25 million units and reach very close to 300 million units in the current calendar year. And both device and cloud infrastructure market growth will continue for the long-term. To meet the increasing demand of our valued customers, we are committed to further improving our supply going forward. 

As the pandemic changes customer behavior, Lenovo continues to innovate and lead in this period of rapid change. Last week, we demonstrated our results and vision in innovation at our annual flagship event - Lenovo Tech World. At the “Client” device level, we are expanding the idea of a “computer” to “computing everywhere”, with new form factors. In “Edge”, we offer both hardware and our own A.I. enabled edge computing platform. In “Cloud”, we can design, build and install Public and Private Cloud, as well as provide multi-cloud management solutions. And we’re extending our Infrastructure-as-a-Service to attach Platform-as-a-Service and Software-as-a-Service. In “Network,” we now have filed more than 1,000 5G essential patent applications, and implement 5G networks and applications with network-cloud convergence, virtualization and network slicing technologies. Finally, with all these technologies combined with “Intelligence” like machine learning and Artificial Intelligence, we generate insights and provide solutions to customers of various industries and drive intelligent transformation.

I believe that technology has never been so essential to humanity as it is today. Customers have new requirements to meet in this new normal, and our success in meeting those needs is demonstrated not only by our strong results this quarter, but also by how our service-led transformation propels our growth well into the future.