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Lenovo Momentum Extends From PCs to Data Center Hardware, Software

Lenovo Group announced record revenue in Q2 2020. The surprising twist? Lenovo’s momentum now extends from PCs to data center hardware, associated software, and enterprise-class partnerships with the likes of SAP, the company says.

That’s good news for Lenovo partners, some of which have quietly worked with the PC giant to build data center hardware sales ever since Lenovo acquired IBM’s x86 server business way back in 2014. Fast forward to present day, and that data center persistence appears to be paying dividends.

Among the highlights from Lenovo’s Q2 2020:

  • Overall revenue of US$14.5 billion, up 7% year-on-year and with all businesses showing strong growth, the company says.
  • Record pre-tax income of US$470 million, up 52% compared to the same quarter a year earlier.
  • Net income increased 53% year-on-year to a record US$310 million.

Lenovo Business Segments: Key Revenue Areas

Lenovo’s Intelligent Devices Group (IDG) includes areas like PCs, smart devices and smartphones. Among the Q2 2020 disclosures:

  • IDG delivered “all-time record revenue” for the PC and Smart Devices Group (PCSD) of US$11.5 billion, up 8% year-on-year
  • Also within IDG, the Mobile Business Group (MBG) had revenue growth of 39% quarter-to-quarter and returned to year-on-year growth.
  • Key launches included the razr 5G foldable smartphone and the company’s first dedicated gaming phone under the Lenovo Legion brand, the company notes.

The Data Center Group (DCG) spans servers, storage, software and more.

  • The group’s revenue grew 11% year-on-year to $1.48 billion, with improved profitability.
  • The Cloud Service Provider segment grew revenue 34% year-on-year.
  • Revenue in the Enterprise and SMB dipped slightly year-on-year but outperformed the market forecast by 3 points.
  • Lenovo experienced double-digit growth across Software Defined Infrastructure (22%), Storage (15%), Software (47%) and Services (11%).
  • Lenovo’s recently announced partnership with SAP also generated growth, though the company didn’t provide specific details.

Lenovo Revenues: Executive Perspectives

In a prepared statement about the earnings, Lenovo Chairman and CEO Yuanqing Yang said:

“Our record results this quarter reflect our ongoing commitment to meeting the needs of the rapidly growing work-, learn-and play-from-home economy. All of our core businesses delivered year-on-year growth, while our Software and Services revenue grew to a new record. As the world continues to adjust to the ‘new normal’, we are confident in the long-term growth potential of both devices and cloud infrastructure. We will continue to leverage our core competences of operational excellence and global/local footprint, while accelerating our service-led transformation to better grasp opportunities and drive sustainable growth.”

The results are particularly impressive — considering three worldwide factors:

  1. Amid the coronavirus pandemic, spending on traditional infrastructure upgrades is under pressure.
  2. Even before the coronavirus surfaced, public cloud momentum was pressuring on-premises infrastructure spending.
  3. Plus the major public cloud service providers often build their own servers.

Amid all those challenges, Lenovo still grew its data center hardware and software sales in Q2 2020.

So what’s next? Keep an eye on Lenovo’s ThinkSystem AI-ready servers — which are designed for customers’ high-performance data analytics (HPDA) needs, the company says.

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