Good morning, good afternoon and good evening. Welcome to Lenovo's Investor Earnings Webcast. This is Jenny Lai, Vice President of Investor Relations at Lenovo. Thanks, everyone, for joining us. Before we start, let me introduce our management team joining the call today. Mr. Yang Yuanqing, Lenovo's Chairman and CEO; Mr. Wong Wai Ming, Group's CFO; Mr. Ken Wong, President of Solutions & Services Group; Mr. Kirk Skaugen, President of Infrastructure Solutions Group; Mr. Luca Rossi, President of Intelligent Devices Group; Mr. Sergio Buniac, President of Mobile Business Group and President of Motorola. We will begin with earnings presentations. And shortly after that, we'll open the call for questions. Now let me turn it over to Yuanqing. Yuanqing, please.

Hello everyone and thank you for joining us today. Last quarter, despite the increasing challenges such as the ongoing pandemic, rising inflation, currency volatility, geopolitical tension and the supply shortages, we successfully grow our business and improve the profitability for the ninth consecutive quarter. Meanwhile, our years of persistent investment and efforts head of as our revenue mix from non-PC businesses reached to the highest level of over 37% in our history. Two factors were crucial for our strong results last quarter: first, the strategic foresight and strong execution; second, our operational resilience through our unique global local operating model. Today, the digitalization trend continues to accelerate. The hybrid work model is here to stay creating strong and sustainable demand for smart devices IoT, smart infrastructure and the intelligent applications and services. Thanks to our strong execution of digital and the intelligent transformation strategy. With the years of investments in diversifying the growth engines, our net income grew almost 11% year-on-year and 35% non-Hong Kong FRS basis, still on track to meet our commitment of doubling profitability in the near term. Revenue grow to US$17 billion and was up 5% year-on-year in constant currency. With our strong performance in our new growth engines, solutions and services, infrastructure and the mobile businesses also double digital revenue growth year-on-year. We also met strong progress for the doubling R&D investment in the coming months by growing R&D spending by 10% and headcount by 29% year-on-year. Meanwhile, we further the strengthened our well Lenovo platform and they realize our ESG goals. Now I will talk about each of our businesses, let's start with the SSG solution and the services growth. The trillion dollar IT services market continues to see strong growth by 2026, 75% of workers were adopted by hybrid working model, driving higher demand for premier and customer fulfillment services. Digital workplace expansion has increased demand for other service, for devices, infrastructure and the workplace management. Vertical solutions including smart cities, smart manufacturing, smart education and smart retail, as we expected to grow double digital CAGR through 2025. Last quarter SSG again delivered the high growth and high profitability. Revenue grow 23% year-on-year. Operating margin was further improved to almost 23% as well. We saw double-digit growth in revenue across all segments. Revenue from now hardware management service and the project and the solution services, now accounts for almost half of SSG business. At the same time, SSG continue to invest in software tools platforms under repeatable vertical solutions. That includes continued expansion of the TruScale as-a-Service portfolio to the broader digital workplace. We also launched the hybrid multi-cloud solutions and continued to develop our sustainability offerings. With a new strategic partnership with PCCW, we will expand our footprint in Asia Pacific. Our Infrastructure Solution Group, or ISG, continues to benefit from strong infrastructure market growth. The server market is expected to grow at the double-digit CAGR through 2025. The Edge infrastructure market will exceed US$41 billion and the storage will reach US$36 billion by 2025. Last quarter, ISG revenue exceeded US$2 billion for the first time, up almost the 14% year-on-year, the third consecutive quarter with positive operating profit. Cloud Service Provider segment, as well as server and storage revenue all reach the all-time records and outgrew the market. Hedge Computing revenue, almost the doubled year-on-year. In High Performance Computing, we maintained our leadership in the top five country list by adding more units with our Neptune liquid cooling technology. We will continue to invest in our comprehensive portfolio and in innovation, particularly in Edge and Services. We will continue to balance the scale and the profitability as we remain focused on being one of the fastest growing end-to-end infrastructure providers. For our Intelligent Devices Group or IDG, the PC market currently is experiencing a short term challenge, but people recognize the necessity of PC as a key productivity tool. The PC TAM is expected to be much higher than pre-pandemic levels in the long-term. Meanwhile, the scenario-based solutions market grew faster, smarter collaboration is one of them and expected to surpass US$80 billion by 2025. Driven by our operational excellence IDG overcame challenges while capturing opportunities. We maintain the industry-leading profitability with the operating profit over US$1 billion. We outgrew the market to strengthen our number one position in PCs, driven by strong growth in premier segments, such as gaming and workstations. At the same time, our smartphone revenue increased by more than 20%. The more impressive part is that such growth not just come from our traditional stronghold market of Latin America and the North America, but also expansion markets of Europe and Asia Pacific. Our expansion beyond the PCs continues. And now nearly 22% of IDG revenue comes from non-PC, smart devices, embedded computing/IoT, and the scenario-based solutions such as smart home and the smart collaboration. We continue to focus on innovation from smart devices to smart collaboration, and then to smart spaces. In smart devices, we focus on innovative form factors, extreme performance, adaptive intelligence, security, et cetera. For the digital workspace we are working on seamless connection and the integration allowing for the best possible mix of physical and the virtual collaboration. In summary, although external challenges may persist in the short term, we continue to see long-term opportunities. We see clear trend from smart devices to smart spaces, from computer to computing, from traditional IT to digitalization across all industries and the new IT architecture and from serving customers to protecting the planet, we will definitely innovate and capture these opportunities. You will see our vision and the progress in these directions of the tech world, our annual flagship event in October. With the solid performance, the Lenovo has proven that we have the right strategy, strong execution, the agility and the resilience to transcendent cycles. We are confident in our ability to overcome challenges, continue to transform, diversify our businesses and deliver sustainable growth and profitability improvements. Thank you. Now, let me turn you over to our CFO, Wai Ming. Wai Ming please.

Thank you, Yuanqing. I will now take you through Lenovo’s financial and operational performance for Q1 in the 2023 fiscal year. We face a variety of macroeconomic challenges in the quarter, including the ongoing COVID-led disruption, foreign exchange rate volatility, geopolitical uncertainties, and changing global inflation. Despite this, our reported revenue remains steady year-on-year with a 5% growth in constant currency. Thanks to the growth of IT spending arising from digital transformation and our operational excellence in cost control and supply chain management. While China saw demand impacted by the lockdown, all other geographical markets have positive growth. Even though our PC business continue to grow at a premium-to-market, the Group's non-PC revenue have shown significant growth and now contributed over one third of our Group revenue. Our Group net income reached a record high for the first fiscal quarter at US$516 million. Net margin reached 3%, up 29 basis point from last year. A record for quarter one and a ninth consecutive quarter with year-on-year profit expansion. And we are on track to achieve our medium term target of doubling our net margin. Basic earnings per share, came in at US$4.39. To facilitate a more meaningful evaluation of Lenovo’s current operating performance and comparisons to other peers, we have also reported our adjusted profit prepared outside of the Hong Kong Financial Reporting Standards, as an additional financial measure. Excluding fair value gain or losses from the group strategic investments, amortization charges of intangible assets resulting from mergers and acquisitions and M&A related costs. Our non-HKFRS operating profit and net income jumped 21% and 35% respectively. You may refer to the appendix of our representation for more information on the supplemental non-HKFRS measures. In Q1, we maintain a net cash position of US$394 million, after a $1.1 billion reduction in net debt in the past year. However, the supply disruption caused by the Shanghai lockdown resulted in sales concentrated towards the last month or the quarter, which had driven a higher quarter end balances in account receivable and also impacted inventory. Two-third of our account receivables are less than 30 days. We expect the disruption to be temporary and free cash flow to improve. Contemplating further uncertainty in the capital market, the group successfully completed in July is US$1.25 billion dual-tranche bond offering, which include our inaugural green bond offering. In addition, a US$2 billion refinancing syndicated loan facility was completed in the same month with the improvement in margin compared to our existing facility, the two financing transactions together extended to group’s total average debt maturity by two years to nearly five years. SSG is a key beneficiary of the growth in new IT marking another outstanding quarter for the group. Revenue rose 23% to $1.5 billion and operating profit reached $329 million with a year-on-year growth of 25%. SSG further improve its operating margin by 36 basis points from the previous year to 22.6%. Deferred revenue an indicator for recurring business grew 20% year-on-year. The operating margin expansion was a strong driver for the group's continual growth. SSG achieved this by enriching its service offerings across all three of its segments for better profitability and scalability. Revenue of the Managed Services segment increased 70% year-on-year, inflation and delivery uncertainties stemming out from macro conditions are trickling a shift in CIO's preference from ownership to services, driving the popularity of asset service. The true scale asset service solution extended from server and storage to high performance computing. Revenue from Support Services and Project and Solution Services segments rose double-digit year-on-year, thanks to the enhanced portfolio, utilizing our intellectual property to address the growing IT workload. ISG continued to report strong quarterly performance, revenue grew 14% year-on-year to above $2 billion for the first time in this history. Making the group one of the fastest growing infrastructure solution provide this globally, leveraging is expanding solution portfolio, broadening customer coverage, and a unique fully integrated ODM plus business model, ISG successfully improve its operating profit by $22 million year-on-year to $11 million, marking the eight consecutive quarter with year-on-year profitability improvements. Cloud Service Provider revenue reached an all-time high supporting by a growing customer base, product portfolio and design wins. We increased capacity in our plants in Mexico and Hungary to capture future growth opportunities. Despite supply challenges, the ESMB segment sales also continue to grow with a focus on improving profitability and then expanded footprint in server, storage, edge computing services and multi-cloud solutions. ISG product sales beat Q1 records in server storage and AI and edge. IDG revenue declined 3% year-on-year, primarily from the weak consumer PC demand and the COVID-led supply constraint. However, non-PC sales grew 12% year-on-year, thanks to several pockets of growth accounting for 22% of the business group revenue, its profitability remain robust at 7.5%. Thanks to the enriched product mix. In the PC business, the structural shift to the commercial and premium segments is supported by the digital transformation cycle and IDG investment in innovation to leverage the hybrid work model and lifestyle change. Commercial sales in China were impacted by the COVID lockdown. And one for the rest of the world continued to grow. Premium segment sales also grew 8% year-on-year, including a 28% growth on work stations and 14% growth in gaming. In the non-PC business, smartphone revenue grew over 20% year-on-year, supported by a robust growth trajectory across all geographical regions and an accelerated product transition towards 5G. Scenario-based solution are a new driver for IDG and our smart collaboration solutions maintain hyper growth rates of key wins in the global markets. Now let's talk about research and development. It is the main driver for innovative growth pillars to meet customer demand, despite various challenges. Although, our total expense remain flat year-on-year as a result of disciplined control, R&D investments still increased 10% year-to-year to drive various growth engines and business transformation to support the group services. Commercial sales, premium mix and ESG initiatives, these strategic priorities sustain the group operating margin at the record high level for Q1 at 4.6%. And they will enable us to better navigate through the macroeconomic challenges and demand uncertainties. Now let's look at the result of our ESG efforts. Lenovo expanded its use of closed loop post-consumer recycled content from 103 to 248 products in 2022 fiscal year. Our KPI required 100% of our PC products to contain PCL content materials. And 90% of electricity used in our global operations to be renewable by the 2026 fiscal year. Last month, the issuance of the group first green bond and the establishment of its first ever green finance framework make an important milestone in our ESG journey. These initiative support our vision to achieve net-zero by 2050, reaffirming our commitment to a more sustainable future. To further accelerate global ESG progress in November 2021, the company kick off the first phase of the Lenovo’s 360 Circle partnership, which will promote corporate citizenship and facilitate the group transition to adopting a more sustainable value chain within this business model. While the external business environment continues to be volatile, the strategic opportunities in digital and service led transformations are substantial and conducive to the growth of our high value at the products and services. The group will maintain its agility and resilience in tackling external uncertainties and challenges, while implementing a growth strategy. Like every business today, we are actively and prudently managing our cost structure across all elements to ensure Lenovo’s long-term growth and sustainability. Looking forward, SSG will drive scalable growth with high profitability, digitalization and post-pandemic changes in the workplace will increase demand for premier TruScale as-a-Service sustainability and vertical solutions. SSG will continue to broaden service offering with a go to sustain your double-digit growth and trajectory, while actively seeking business opportunity to broaden and deepen the geographical and vertical coverage of our services, especially for managed services and project and solution services. We aim to grow both organically and inorganically through various means including our strategic partnership with PCCW. ISG has built industry-leading end-to-end infrastructure solutions and expanded from server to full stack offerings that include storage, SDI software and services. ISG will expand its ESMB portfolio for higher profitability and capitalize on growth opportunities in AI Powered Edge, hybrid cloud, high performance computing and solutions for the Telco/communication sectors. For the CSP segment, the group has a unique ODM+ business model to address growing customer demand, increasing our customer base and procuring new accounts through design win. IDG will lead the global race in device innovation by enhancing features that support hybrid working, gaming, entertainment, green materials, and ESG design. Within the PC business, we will solidify our number one position with leading profitability. The smartphone business will focus on portfolio expansion and differentiation to take advantage of the accelerated 5G adoption and changing competitive landscapes. IDG will accelerate investment to score wins in new growth engines, including fast growing accessories and scenario based solutions. Our strong financial position provide a solid foundation for us to proactively pursue growth opportunities ahead. Finally, as always, we remain committed to driving sustainable growth and profitability for our shareholders. Thank you. And we will now take your questions.

Thank you, Yuanqing. Now we are open the line for questions and this session will English only. Please be reminded to limit yourself to two questions at a time. Please also state your name and company, and all questions will be submitted online. Operator, I’ll now turn it over to you. Please give us your instructions. Operator? Operator, could you give us your instructions for a question collection?

We lost the operator.

Yes. Well.

[Operator Instructions]

Thank you. And we have our first question from Howard Kao from Morgan Stanley. Congrats the quarter and we have seen Intel and AMD driver [ph] PC market this year to more than 10% down year-to-year for a CY2022. Could you please share with us your view on PC 10 this year and next year. Additionally, this question to your finished goods inventory was up 13% of quarter-over-quarter. Any color on what products that is for and your strategy to work down finish the inventory in the coming quarters.

So I would invite our IDG President, Luca to introduce – to answer the first question then our CFO, Ming will answer your second question.

Okay. Hi everyone, good morning, afternoon and evening. So thanks for the question, Howard, and maybe allow me to give you some context before giving a numbers. So I think the situation can be viewed from two perspective reflecting different time horizons. So we feel good about the long-term of the PC industry as the digital transformation hybrid work and also the digital life for consumer in our opinion are unstoppable trends and that we see is right at the center of that. And we also see additional opportunity, which include a huge $400 million plus all the PC that have to be replaced and refreshed. And then also many new innovation will drive PC replacement in the mid-term. We also feel good about the quality of this demand with which has shifted toward higher end devices, premium devices, better features, higher patch of accessories, new services designed for the new hybrid. But meanwhile, we certainly recognize short-term headwinds obviously driven by unfavorable macro inflation, exchange rate and consumer confidence. So at this moment, we see consumer weakness not in gaming, where we continue to grow like we did in Q1 14%. SMB, a little bit of softness while enterprise and public sector are still showing a robust demand and we have good order and pipeline visibility for the rest of the year. And then this includes also premium services. I imagine a accessory attach and as a – just as a data point, we grew 28% in workstation in last quarter, achieving almost $1 billion revenue. And also our accessories business and visual business is growing a double-digital revenue. Now to end up with a number, we also see a softer PC market than we anticipated. And we are looking at a number between $300 million and $310 million, which implies 10% to 12% year-over-year decline. We did this market, we still continue to plan to grow at premium to market like we did in Q1. So even in this condition, we plan to extend our market share and particularly extend our commercial mix. As the next year and the year after we believe the market in the long-term – longer term will maintain around $330 million, which is aligned with the IDC and many analysts or search firm view at this moment. Thank you.

Hi, Howard. This is Wai Ming. I think your question about the total inventory, in fact, exactly comprises of pass as far as finished goods. Our finished goods, I think mostly PC is over 80% or nearly 90% of those is less than 60 days. So I think the rise, I think you mentioned – you asked is mostly I think due to the lockdown and the logistic issue that actually I think is seeing the increase. But from a perspective, I think all those inventory are clean and fresh. I think we are very comfortable that I think once the destruction I think get go away I think we can actually see the inventory coming down. Thank you.

Thank you, Wai Ming. And now that’s move to question number two from Albert Hung from JP Morgan. Albert’s first question is, again, on PC market in the near-term, should we expect weaker than this second half given increasing demand weakness. And he also wanted to know, if we will be able to share some comment on channel inventory level and pricing dynamics specifically in consumer PC. And in the longer term, Albert, with that the PC market volume should be higher than pre-pandemic level due to higher install base. But do we expect [indiscernible] in 2023 before we return to a higher levels? And second question is on our BCG, ISG revenue which is record high in our fiscal quarter one. And there are more and more negative data points in the service space, however, and Intel already slow down and vendors also mentioning cloud weakness. Are we seeing similar demand weakness? So those are two questions.

Okay. So look, first question is [indiscernible] your answer. Second would be Kirk’s question.

Yes. Thank you, Yuanqing. So let me start with the first part. On the second one, now we know that the seasonality in the last two or three years was abnormal right due to higher demand in during the COVID time. So I probably will answer looking at the year-over-year, which we believe there’s a second half from a year-over-year perspective should be better that the first half. We should remember that Q1 was double-digit down. It was also because of the lockdown in China while Q2 should be a little bit better than Q1 as a year-over-year and from what we see, we believe that the H2 will be better than H1 still negative, but better than H1.

Negative will put a year-on-year.

Year-over-year, yes.

Better for the second half.

So the decline will be mild year-over-year than in H1. That is what we are seeing now. On the channel inventory, so our business is very diversified and you probably know that a significant portion of our business is by design without channel inventory. So that includes the relationship, include public sector and include our global account customers. Now for the business model that require channel inventory namely consumer and SMB, the level of the channel inventory is generally returned to pre-COVID level in most of the geographies and the in transit inventory, which is still – is a bit higher than the pre-COVID. And that is explained by the fact that the logistic time end-to-end is significantly higher than pre-COVID due to the logistic network congestion globally. So I think in the short-term, the channel inventory is poised to be at pre-COVID levels or lively above. But we also seeing that after the holiday season, we’ll have a path to return to let’s say pre-COVID levels or slightly lower that at least is our plan. I think there wasn’t another piece of your ask. Do we expect what happened in 2023? I think what we are thinking is now flat or slightly growth, but in the range of 1% to 3% not the big. Thank you.

Yes. Hi, Albert. This is Kirk. So from a infrastructure solutions group, relative to demand, I would say, we’re in a unique position, because we are almost perfectly balanced between public cloud and our on premise ESMB business. And that’s a unique position for us in the industry. If we look at cloud, we’re probably less exposed in China than some of our competitors. We see records backlog in cloud. If you look beyond China at the kind of next wave of the next 500 or so hyperscalers, we’re seeing well over 100% growth year-on-year. And remember, our profitability is growing in that space because we’re now building our own motherboards through our ODM+ model that Wai Ming mentioned. We’re also expanding from servers into storage, which is higher profit. We’re expanding in the next wave accounts. And we’re expanding our portfolio from Intel to including more and more AMD and ARM. So all of those are improving our profitability. So I think we still see record demand and growing market share within that demand. And ESMB, in April, we created a new ThinkEdge business unit. That business is now growing nearly 100% year-on-year for us with eight consecutive quarters of growth year-on-near. So this edge to cloud phenomenon is also driving a lot of ThinkSystem and ThinkEdge products at the edge in our Server business. And then lastly in storage we’re seeing tremendous growth in our Storage business, which is now growing 35% year-on-year, which I think from any analyst momentum is multiples of growth above the market. And that’s both the cloud and on-prem SMB statement for hyperconverge, traditional storage, software defined storage and cloud based storage. So all parts of our business, I think are strong with record backlog and we’re starting to see supply ease up, which is also going to help our responsiveness to our customers. Thank you.

Thank you, Kirk. Yang, would you like to add any more colors?

Yes, so definitely. So although we see PC market softness in short term so we are still optimistic on the longer term. And also Lenovo, we continue to drive the premier to the market. And also we will be more focusing on the premier product. So we are confident so we can drive the better average selling price so that our revenue growth will be better than the unit shipment. So that’s another additional comment part. But beyond the PC, you see our last quarter performance, so we believe our three other growth engine will continue to show the strong growth. So Kirk just talked about the ISG, so actually our SSG business, Solutions & Services business not only grow strongly, but also with much strong – much better profitability. Also our Mobile business, grow at more than 20% level. So we think this momentum – all this momentum can continue. So probably – so Buniac, you can comment on our Mobile business, so how we solidify our stronghold in North America, Latin America and expanding to the Western Europe and the Asia Pacific.

Yes. So I think despite the market was negative 9 points, we grew at 20% in revenue. We have our best Q1 in Latin America ever record, but enjoy growth in all regions in the globe. We grew 24% in Europe, 56% in Asia. So we are seeing growth across all the regions. Our AI is also increasing by $20 year-over-year showing a better mix. Our ad franchise, the new franchise just launched that’s on more on the Premium segment is growing from a small base, but growing 700% year-over-year. We expect that trajectory to continue grow as we have important launches coming between now and September 8. Also the Moto G it’s growing plus 30% year-over-year. So we are seeing cross segments and cross all the geos sustainable growth, that this factor will be driven to market in the current quarter in the near future.

Thank you. Thank you, Buniac. Next question, please.

Yes. Thank you both. And the next question is coming from Conor O Mara from Jefferies. Have you seen any order delays or cancelation in servers? Many are worried about and expecting cuts from hyperscale clients in particular.

This is Kirk. The simple answer is, no, we are not seeing that. I think we're gaining share relative to our competitors and the accounts that we are the strongest in seem to be winning in the market. So, we're not seeing order cancellations. And in fact, we have record backlog and have confidence. Several quarters out on a rapidly growing cloud business.

Yes. So, we definitely believe so this quarter, probably the second half of the year, so our eyes keeping will continue to grow and very, very strong growth. So, and also, so if you read also hyperscale companies a performance, you see, they're still growing faster, so no matter is Microsoft, the Amazon, or Google. So their cloud of business are still growing strongly.

Thank you. And the next question is coming from [indiscernible] Does management expect a strong demand for gaming devices continue in the next top month?

Yes. So look for sure the gaming segment is a growing one, and certainly doing better than the overall consumer segment. Now in the, to make a forecast of the next 12 months for the general market is not easy, but I believe that it'll continue to do better than the consumer market while probably if the entire consumer market is down, because of the reasons that we mentioned the macro cetera, et cetera. I think it's reasonable to believe that also the gaming will slow down a little bit, but still remain positive and growing while, so to give you some data point, we grew, I think I mentioned before 14% year-over-year in revenue. And the other thing I'm confident given our position in the overall gaming sector globally, is that we will continue to be able to grow a premium to market, no matter what will be the market. So continue to gain share also in the gaming segment, given our portfolio that is really strong, and we have a lot of new products and innovation coming in the gaming in the next 12 months. Thank you.

Thank you. And the next question is coming from Albert Hung from JPMorgan. Regarding to the channel lockdown, did channel lockdown result in order backlog affecting the June quarter. So we expect a strong rebound second half for the China market.

So definitely, the last quarter China was impacted by the lockdown, particularly in April, and the and May, but since June so we have seen the positive signal. So definitely not just the consumer segment performance is better than we expected, particularly for the June 18 dotcom [ph] sales. But also we see the better resulting the commercial segment as well. I still believe second half should be better than the first half in China market. Luca you want to?

No, no, I think, I'm aligned with you. We also believe the second half should be better than the first half. The consumer is showing from the six – from the June promotion is showing science of recovery. I think there was also question on the backlog. I don't know this, if this was referred to the China business or the overall business, but if it was referred to the overall business we continue to have significant backlog at the end of every quarter. Now, obviously if you compare it to one year ago, the backlog is gradually reducing to more normal levels. But in general, I can tell you that the backlog is still significantly higher than what was the average backlog of quarter and pre-COVID is still the case.

Yes.

Thank you. And the last question is coming from [indiscernible] and congratulations on the results. I would like to check the extent of the impact of foreign exchange to the business.

Let me, it’s Yuanqing. I think if it is state the foreign currency, I think we're – we will report about 5% up and in terms of margin, I think the company adopted a very I think prudent hedging policy. I think our margin I think is exactly sort of protected by having the right financial insurance. Thank you.

Yes. So general speaking, stronger U.S. dollars will have and more challenge might impact our performance. Because 80% of our supplies in U.S. dollars, but 70% of our market is not U.S. dollars market. [Indiscernible] So – but Yuanqing, I think maybe I should actually add one other point. I think, Lenovo being a global company, I think our business actually spread around the four geographies. I think U.S. account for above maybe 30% and therefore, while the U.S. strong U.S. dollar may be a little bit more challenge, but on the other hand, Lenovo also been less impacted by I think depending down for any decline in any one geography, because we, as I think have a very well-balanced global business. So that is also one the things that while we continue to see that local be able to maintain the growth and profitability.

Thank you, Wai Ming and Yuanqing. So the next question is coming from [indiscernible]. Your IDG business has been holding up very well. Despite the industry position down 15% year to year in second quarter calendar quarter based on the third party data. How did Lenovo shipments do and non-PC shipments seem to be – seem to have help has that expected to hold up as well? Thanks.

Yes. So let me start with the end. So we certainly expect to hold it up and do even better. That's our plan. So as you have noted our calendar Q2, we did well. We grew at premium to market gaining share. We extended our lead and solidified our number one position in the PC. And we certainly plan to continue that. Now, obviously we are aware of the weather conditions are not full sun. There is maybe a little bit of rain in the short term, and then we are certainly taking proactive actions in several fronts to be able to prudently, navigate the situation to, we want to continue to deliver industry leading profitability while gaining share. And at the same time, we will continue to invest in foundational technology, product innovation, so that we protect our long-term competitiveness. And as you rightfully noticed, our non-PC business continued to grow last quarter was at 22%. And obviously within this 22%, we are happy and proud that our smartphone business like Sergio was mentioning after many years of work as now in a situation where we are strong in Latin America, strong in north America. And now we have a profitable growth strategy to attack EMEA, Asia Pacific. Then we have a strong accessory business growing double digit, strong visual business growing double digit. We are expanding, extending our service penetration rate in the commercial business. And then our Smart Collaboration Business is also growing very fast. So we not only we want to maintain the PC grow, but we also want to accelerate the other grow engines to deliver what we have committed to the market. Thank you.

Yes. Not just – as Luca said so in IDG, so we are driving non-PC business growth including our mobile business growth. So I'm very confident. So our other two growth engine ISG and the SSG will continue to grow at the double digit at the least double digit level. So that can offset the PC software needs. So – but definitely Luca has much more confidence. So we will drive the PC premier to the market and we will drive the premier PC, so to offset the unit shipment.

Thank you. And the next question is coming from Robert Cheng from Merrill Lynch. His first question is on consumer PC demand has shown weakness that company see any weakness or order pushback from corporate PC market now. And question number two, what is the regional sales breakdown of Lenovo's corporate server market and any weakness from corporate server market which market is showing the strongest growth and which market is showing weakness?

So I think the PC question I will answer. So yes, the consumer PC market has shown weakness, certainly as we mention while any weakness on corporate PC market or the pushback. I think we still see a reasonably robust demand and we have a good pipeline visibility with the corporate and enterprise customer for the rest of the year that I can say. Thank you, Kirk.

Sure. I think the question was around the regional breakdown of our corporate server market. So the Americas, which would be North America and Latin America is our largest geography and is also our fastest growing geography, if you take out the cloud service provider business. We had double-digit growth in North America, Latin America, Asia Pacific and our global accounts which are the largest corporate accounts we covered globally, all had double-digit growth. Europe was probably the softest just because of the conflict that we had. But as you saw, we had record in server, we had record in storage, we had records in Edge, we had records in com service providers and we think we're growing at a significant premium to market. ESMB again even though some of the analysts have taken the number down, it is still a growth market year-on-year and we're growing at a premium to that we believe as we look forward.

[indiscernible]

I think the question was regarding corporate? We're also impacted by the currency because Euro actually dropped year-to-year 10% percent. Well, we don't actually have any currency impact.

Yes, of course. But just even without the cloud customers in China, we did grow in the corporate server business in China?

Yes.

Okay.

All right. Because of time constraint we'll take the last question for this conference call. The last question is coming from Britney Lam from Ovata Capital. What is the operating margin outlook for the rest of the year, which settlement while the relative stronger goes and with margin expansion, mobile segment goes? What are the key drivers given overall market, sales is quite weak? Those are the questions.

Ken you can take the questions.

Yes, the operating margin for the second half of the year. And so that's the question? I think when the move our [indiscernible] what are the key drivers I think given the overall weakness in sell through.

Yes. I think we just need to clarify which business because that, if this is a general question or maybe we can talk about PC and then server and then Sergio attach the mobile. Okay. So on the PC, I think clearly as said, we will drive and this is because this is the segment that gives more opportunity. We will drive more than proportional efforts to grow our commercial business, which comes with better service attach, better accessory attach, et cetera, et cetera. So the SMB enterprise, public, this will be the segment that offer more opportunity while we will continue to do our regular consumer business. But this is not probably this year, the segment that will offer the best opportunities for grow or margin expansion. Talking about margin expansion, probably I should mention that in commercial we have several drivers that can help to expand the margin which are namely service penetration rate, visual accessories, more premium devices. We have several new product launches in the course of the year that we believe will help us to rise the AUR and also help us to drive margin expansion, that is for the PC.

Yes. And the data center space relative to operating margin. I think the way we think about it is improving our margins in the public cloud space. And then separately, can we improve our margins in the ESMB space? I think in both cases, we have confidence we can do that. In the cloud space, our ODM+ model, we're bringing in more of our motherboard design and development in-house. We're expanding into storage at an aggressive rate with new customers and deeper market share in the customers we have, which is higher margin, we're expanding with more AMD and arm products, which will also expand our margin. So for all those reasons, I think we believe our cloud margins will improve. On the ESMB side again, we're growing storage at 35% overall in terms of our total storage market and our ESMB market is in the mid-double-digit as well. So with that and the services and software that get attached to that, I think we're also confident. And then lastly, our CPU suppliers are going to be doing announcements throughout our, the remainder of our fiscal year. And that's an opportunity for us to refresh our pricing with fresh products in the market. And we will have our largest portfolios ever launching time to market with those transitions. So the only issue is what will be the mix of, the public cloud business versus ESMB, because obviously there's a blended margin between the two, but that's something, we can't necessarily predict right now.

So on our side of the mobile, the margin has been consistent, stable across many quarters. I think the growth; I mean we cannot define one single item. I think it's given the solid execution. We are growing, as we said, in average view with records in regions that we are, have solid market share like Latin America, but also growing significant digital market Asia and Europe. And I think also on the segments as you, if you look on the edge, that's the new franchise just launched. We saw 700% grows. We expect that to continuous delivering a significant market share gain that segment. Also we are seeing across our multitude family significant gains on net promoter score, that's increasing the retention of existing customers and bringing new customers. So I would say our growth is across geography, across product, and even we are seeing now some traction on the B2B commercial side of the market leveraging the Lenovo sales footprint. So many areas of growth, very consistent across multiple spaces.

And yes, don't forget our last driver of the profitability improvement, which is our SSG. So we cannot…

Yes. Wong Wai. Yes, I was about to chime in. So SSG Solution & Services Group, I think we are very happy about the momentum that we have built into the business. Indeed, I think this is the third – the fifth consecutive quarter that we see a very strong result double digit year-to-year growth in terms of revenue and also a relatively high operating market. As we share with the analysts and media friends today, we continue to see a very strong IT services demand from the market, right mainly need driven by the digital transformation, and this is what SSG, right? The Solution & Service Group in Lenovo is tasked to drive for the group, right. Now in terms of outlook, we could continue to see the strong demand in specific, in two practices. One is the devices service, right and also infrastructure as a service. In Lenovo, we all call it the true scale as a service, right? This is a very strong growth of area driving from hybrid cloud and also the modern workplace solution, right. So this is our target to continue to drive growth and profitability, contribution to the group overall. So back to you Yang. Thank you.

Thank you, Ken. And analyst and investors so, you have heard from four of our business leaders to talk about their confidence to improve the profitability in their respective business so definitely the number as a whole. So we are very confident to hold down our, not just the GP margin, but also operation margin, as well as net income ratio. So it's still our commitment to drive the double net income ratio. So from fiscal year 2021 base, so we are very confident. So we are still on track to drive that. So meanwhile this is still our commitment to – for the investing innovation in the R&D. So we were doubled our expense in R&D, so in midterm as well. So we believe – we'll still deliver our commitment.

Thank you, Yang Yuanqing. Thank you everyone. And we thank you very much for joining today's call. If you still have further questions, please feel free to contact me or the IR Team directly. The replay of this webcast will be available in the next couple of hours on our Investor Relations website. Thank you again for joining us. Bye-bye now.

Thank you. Bye-bye.