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Lenovo infrastructure group and Alibaba Cloud both make first annual profits

Chinese giants' enterprise businesses do well despite lockdowns. Other segments? Strap in for a bumpy ride

Ever since Lenovo acquired IBM’s x86 server business in 2014, one thing has proven elusive: profit.

Now the company can point to a pair of consecutive quarters, and a full year, in the black.

The Chinese kit-maker yesterday reported Q4 and FY 2022 results, with quarterly revenue of $16.7 billion representing seven percent year on year growth. Annual revenue reached $71.6 billion, an increase of 18 percent. Annual net income topped $2 billion.

The Infrastructure Solutions Group fell over the line for an annual profit of $6.7 million on $7.14 billion revenue, with a year on year revenue jump of $840 million producing the black ink. Most of the profit came in Q4, which pleased Lenovo as that quarter included lockdowns in the tech-centric Chinese city of Shenzen and that put a kink in the company’s supply chain.

Execs said Lenovo has eaten the increased cost of some components, but will pass on those costs soon and reap improved profits. Focusing in high margin products helped, too.

Lenovo also reported that it’s turned around its Motorola smartphone unit, which was profitable last quarter. But execs warned PC sales may dip, thanks to lockdowns in Shanghai causing supply chain problems and suppressing consumer demand. Management said global demand should keep the company’s PC sales steady, but that short-term wobbles are to be expected.

Chair and CEO Yuanqing Yang described the current market situation in China, and the world, as “challenging” and cautioned investors accordingly.

Alibaba was even more cautious, declining to offer guidance for the year ahead after posting results that beat expectations but still represented the mega-corp’s slowest ever growth. Quarterly revenue of $32.2 billion for the quarter was a nine percent year on year jump. Annual revenue of $134.5 billion was a 19 percent increase.

The company’s cloud produced $15.8 billion in annual revenue, $3 billion of which landed in Q4. Q4 revenue grew year on year despite revenue being less than a quarter of annual total – it appears Alibaba Cloud may encounter seasonal fluctuations.

The company said lockdowns hurt this past quarter, by making it hard to complete hybrid cloud projects.

CFO Toby Xu said in FY 2023, Alibaba Cloud “will focus on high-quality revenue growth, invest in talent and R&D and improve operating efficiency and expand internationally.”

The latter tactic will be closely watched, as Alibaba Cloud has the largest footprint of any Chinese cloud outside the nation’s borders.

While both companies clearly have plenty to worry about, at home and abroad, they can at least point to the red ink having stopped flowing in their business computing businesses. ®

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