Lenovo 2Q 2020 Release Shows High Risk Resistance: Income Up 38% YoY
Amid the on-going geopolitical uncertainties and the long-lasting COVID-19 impact, the world's largest PC provider, Lenovo, shows reslience by presenting a nearly 7 times revenue growth compared with the last quarter.
Taking 18% of the world’s PC and tablets market, Lenovo (00992:HK) published an encouraging quarterly earnings release on August 13, 2020. Having gone through flat (less than 1%) and even downward revenue curves for the past four quarters, the firm in the second quarter of 2020 witnessed a year-on-year revenue growth at 7%, reaching USD 13.30 billion. The net income also increased by 31% year-on-year to US$213 million. Basic earnings per share for the second quarter were USD 1.80 or HKD 13.95.
Behind the revenue and income growth is Lenovo’s all-sector business growth. As the global leader in the PC market, the company’s PC segment not surprisingly leads the strong performance.
The PC and smart devices group grew the pre-tax income reached US 670 million, up nearly 28% year-on-year, while its profitability improved by almost 1 point to a new record of 6.3%. Notably, Lenovo’s ‘Thin &Light’ and ‘Gaming’ PC segments realized stunning 70.8% and 77.8% year-on-year revenue growth levels, signaling its competitiveness in the premium PC segment. Though the company's management forecasts the PC volume growth is based on the long-term demand, it is in fact hard to maintain the high growth as the 2Q PC growth is the highest since 2009.
Having long performed as a net loss providing segment, the mobile business group in the second quarter also presents a revenue growth at 33% quarter-to-quarter to USD 1.09 billion, resuming a hopefully profitable growth. With new releases of gaming phones Legend in the American and European markets, the mobile volume growth outran the markets by 21.4% and 44.3% in North America and Europe, respectively.
The data center business, enterprise service business and software services all registered healthy growth rates. Notably, the cloud service business, which grew more than 30% year-on-year, set a new revenue record by capturing strong public cloud infrastructure demand driven by increased digital consumption due to COVID-19 lockdowns. Meanwhile, the customer base continues to grow due to customized in-house design and manufacturing capabilities. The management expects to manage expenses and costs to improve the profitability in these segments.