Lenovo claims Q2 results have put it on track to double net margin in three years

Lenovo has posted a 59% uplift in after-tax profit from $350 million to $557 million for the second quarter of the 2022 financial year.

The Chinese PC maker also reported net income increased by 65% to $512 million and group revenue growth reached just shy of $17.9 billion, following a 23% uplift on the same period last year. 

The company attributed the “record” quarter to the company’s continued focus on its service-led transformation strategy, despite wider industry supply chain challenges.

“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,” said Yuanqing Yang, Lenovo chairman and CEO.

Breaking the results down, the company’s solutions and services group (SSG) was the underpinning business unit for the group’s overall profitability. During Q2, its revenue grew 30% year-on-year to $1.36 billion, which accounted for 7.3% of overall group revenue.  

Meanwhile, the company’s bread-and-butter product business, intelligent devices group (IDG), continued to see demand for PCs and other smart devices remain strong, which Lenovo said was driven by commercial demand recovering. This resulted in revenue jumping 21% year-on-year to $15.3 billion for Q2.

“Market reports [are] 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 company stated.

“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.”

During the period, Lenovo announced a refresh to its Yoga laptop and expanded its edge computing lineups, along with the world’s first detachable OLED Chromebook.  

As for Lenovo’s infrastructure solutions group (ISG), it pitched in nearly $2 billion to the total revenue for the quarter. The company boasted its ISG outperformed the market in “nearly every segment”, including cloud service provider, enterprise/SMB, storage, and high performance computing.

During the three months, R&D expenses for Lenovo increased by almost 60% year-on-year to $482 million, as Lenovo continued to increase investment in innovation. Off the back of this, Yang said the goal moving forward would be to “double R&D spending over three years, and further drive our service-led intelligent transformation”.

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