Lenovo reports outstanding Q1 performance

Today Lenovo announced outstanding results for the first quarter of our fiscal year 2020 / 2021, results we delivered despite the COVID-19 pandemic and geopolitical uncertainty.

In this challenging environment, our group revenue and profit both delivered strong growth. Revenue reached 13.3 billion US dollars, growing almost 7% year-on-year, and achieved double-digit growth without currency exchange impact. Profit showed even stronger growth, as pre-tax income was up 38% year-on-year reaching 332 million US dollars and net income grew 31% year-on-year reaching 213 million US dollars.

In our Intelligent Devices Group, PC and Smart Devices delivered another fantastic quarter. Revenue grew by double-digits year-on-year to 10.6 billion US dollars. Pre-tax income reached 670 million US dollars, also up almost 28% year-on-year. We improved industry leading profitability by almost 1 point to a new record of 6.3%.

As I predicted last quarter, the PC market grew by double digits due to increased demand driven by work-from-home and e-learning, much more than the previous industry forecast of a market decline. Although supply shortage in Chromebook temporarily impacted our volume, we remained the leading company in PC and Tablets.

 Particularly, in the Consumer PC segment, our revenue saw strong growth of over 45% year-on-year; volume also grew almost 32% year-on-year. Likewise, quickly adapting to consumer’s new purchasing habits in lockdown, our worldwide e-Commerce revenue also delivered strong growth of over 50% year-on-year. Driven by these successes, our PC and Smart Devices revenue in EMEA and China grew 30%, and 18%, respectively.

Our focus on high-growth and premium segments continues to drive results. We maintained strong double-digit volume growth in Chromebook, Visuals, Thin & Light and Gaming.

Looking forward, we expect this strong PC, tablet, and display demand will be a long-term trend. We will develop more innovative products to adapt to the new requirements of work-from-home and e-learning, and further strengthen our global supply chain to meet the fast-growing demand. Meanwhile, we will continue to develop our e-Commerce platform and focus on high-growth segments to drive premium-to-market growth with leading profitability.

Although our Mobile business is still hit hard by COVID-19 and foreign exchange rates, and our revenue declined 27% year-on-year, the momentum has greatly improved. The quarter-to-quarter revenue increased 33%. Volume outgrew the market year-on-year in key markets like Latin America, North America, and Europe. Particularly, we achieved historic high market share in Latin America and North America.

Looking forward, in Mobile, we will continue to leverage our strong product portfolio, innovative technology, particularly in 5G, and expand carrier ranging to resume profitable growth.

Our Data Center Business revenue resumed hypergrowth of almost 20%, and profitability also improved year-on-year. Our Cloud Service Provider segment – what we have called hyperscale in the past – grew more than 30% year-on-year, setting a new revenue record by capturing growing digital consumption due to the lockdown. Our customer base is also growing thanks to our enhanced in-house design and manufacturing capabilities. Our Enterprise and SMB segment – formerly called non-hyperscale – delivered year-on-year revenue growth of more than 9%, led by double-digit revenue growth in high-growth segments such as Software Defined Infrastructure, Services, as well as High-Performance Computing.

Looking forward, we will drive long-term growth in our Cloud Service Provider segment as we add new customers and expand share with existing customers by leveraging our unique strengths in supply chain and global footprint. For Enterprise and SMB, we will grow high-margin storage, service and software attach rates. We will also leverage our existing strength in public and private cloud to expand our Edge computing business. While we further drive premium to market growth of this business, we will continue to focus on expense and cost management to improve profitability.

And our Service-led Intelligent Transformation continued to show strong progress thanks to our determined execution of 3S strategy. Our Smart IoT revenue grew 39% year-on-year. Smart Infrastructure was up 16%. And Smart Verticals delivered strong growth of 65% year-on-year driven by Smart City solutions in China and Smart Healthcare solutions in North America.

In terms of Services, our Attached Service, Managed Service including fast growing Device as a Service, and Solutions all realized strong year-on-year growth of 30% or more, driving our overall Software and Services revenue to over 1 billion US dollars, growing 38% year-on-year, now accounting for around 7.6% of our total group revenue.

Our solid performance last quarter proves that Lenovo has quickly regained momentum from the impact of the pandemic and captured the digitalization opportunities accelerated by the “new normal” of remote working, e-learning and more.

In one aspect, this is thanks to our core competencies of operational excellence and global sourcing, local delivering approach. In another aspect, this is the result of our persistent execution of transformation strategy guided by precise understanding of the technology and industry trend.

Through driving the service-led Intelligent Transformation, we will build services and solutions into our next core competence and extend our growth well into the future.