Lenovo Q1 Revenue Dips 24%, Says Cautiously Optimistic On Business Recovery In Coming Quarters

Lenovo Group Ltd LNVGY reported a Q1 FY24 revenue dip of 24% Y/Y to $12.9 billion.

Quarterly revenue came below the consensus of $13.84 billion, as per Reuters. 

The Solutions and Services Group (SSG) posted revenue growth of 18% Y/Y to $1.7 billion, while Infrastructure Solutions Group (ISG) fell 8% Y/Y to $1.9 billion, and Intelligent Devices Group (IDG) declined 28% Y/Y to $10.3 billion. 

ISG business was impacted by weak cloud demand and slower than expected transition to the next generation platform. IDG business was affected by inventory clearance initiatives amid sector-wide challenges.

The non-PC revenue mix during the quarter stood at 41%. 

Gross margin reached 17.5% versus 16.9% a year ago, led by increasing contributions from SSG's high-margin business.

The company delivered an 11% Y/Y savings on its operating expense in Q1 and is on track to achieve run-rate savings of $850 million.

The expenses-to-revenue ratio was 14.4% vs. 12.3% the prior year. 

EPS decreased to $1.43 from $4.01 a year ago.

Net cash balance as of June 30, 2023, stood at $454 million. 

Over the next three years, Lenovo plans to invest a further $1 billion in the acceleration of AI deployment for businesses globally.

"Last quarter, the macro environment presented challenges, and our hardware business remained in a phase of adjustment, but we persisted in executing our strategy. Our service-led business achieved strong growth and sustained profitability. Our non-PC revenue mix of the group revenue further increased year on year – demonstrating the effectiveness of our diversified growth engines and I remain cautiously optimistic about our business recovery over the next several quarters," said Yuanqing Yang, Chairman and CEO.

Price Action: LNVGY shares closed higher by 1.31% at $19.95 on Wednesday.