Good morning, and good evening. Welcome to Lenovo's Quarter two Earnings Webcast. Thanks to everyone for joining us. This is Jenny Lai, Vice President of Investor Relations. Before we start, let me introduce our management team joining the call today.
We have Lenovo's Chairman and CEO, Mr. Yang Yuanqing Corporate President and COO, Mr. Gianfranco Lenci Group CFO, Mr. Wang Wei Min President of Motorola, Mr. Sergio Buniak and Senior Vice President at Data Center Group, Mr.
Doug Fisher. We will begin with a presentation shortly. And after that, we will open the call for questions. Without further ado, let me turn the call over to Yan Qing. Yan Qing, please.
Hello, everyone. Thank you for joining us today. Last quarter, we delivered another quarter of solid performance despite the ongoing geopolitical uncertainties. We significantly improved the profit with the pretax income up 45% year on year to US310 million dollars and the net income up 20% year on year to US202 million dollars while maintaining a stable revenue of billion dollars Our Intelligent Device Group achieved 5% profit margin for the first time, thanks to solid profit contribution from both PC and Smart Devices and the Mobile business. PC and the Smart Devices, in particular, delivered a strong profit margin of 5.7% with more than 4% revenue growth in spite of supply shortages under the macroeconomic situation.
It's a software and services revenue grew 31% year on year. In PCs, we maintained our clear number one position by delivering record high shipments. With over 7% growth year on year, we outperformed a growing market by four points. Volume in high growth and the premier categories such as workstation, thin and light, visuals and gaming PCs continues to outgrow the market by double digits. Looking forward, while the macro challenges may continue, we are confident that we will continue to drive premier to market growth and the industry leading profitability.
We will achieve this through innovation, operational excellence and the strong execution in high growth and the premier categories. We will also continue to transform our business model and grow in software and services. Our mobile business delivered its fourth consecutive profitable quarter. Pretax income grew US57 million dollars year on year, reaching the highest since the motorized acquisition. In our stronghold, Latin America, activation grew almost 7% year on year.
Revenue, profit and the market share all grew year on year. In North America, activation was up nearly 5% year on year. Revenue, again, outgrew the market and the profit margin improved almost seven points year on year. Going forward, our mobile business will continue to strengthen profitability and seek opportunities to drive growth in new markets. We will continue to invest in innovation and the technology leadership.
Our Data Center Group profit continued to improve for the ninth quarter, while overall revenue declined due to lower prices for key components and the softness in demand from a couple of larger hyperscale customers. Meanwhile, the revenue for all other parts of the business was up 13% And particularly, revenue excluding hyperscale in China was up nearly 47% year on year. This double digit growth is driven by high double digit growth in high performance computing, software defined infrastructure and even stronger momentum in storage. Looking forward, we will drive revenue growth while improving profitability. We will continue our growth in non hyperscale, particularly in faster growing segments like software defined infrastructure and storage, while expanding our hyperscale customer base to return hyperscale to growth in the second half of this fiscal year.
At the same time, we will continue to invest in edge, telco and AI infrastructure to capture new opportunities. Our Intelligent Transformation showed a strong momentum. Smart IoT revenue grew 4x year on year, driven by strong growth in consumer Smart IoT and ARVR. Smart vertical revenue tripled, thanks to 76% growth in Data Intelligent Business Group revenue and the breakthrough in smart education. Commercial IoT business unit was established to develop new commercial IoTs, edge and the solutions to drive transformation.
Our software and services revenue grew 35 year on year, reaching almost US900 million dollars Particularly, Device as a Service more than tripled, Premier Support Service and Managed Service both grew high double digit year on year. We expect this business to generate $1,000,000,000 per quarter soon. Over 30 out of 105 Lenovo Capital and Incubator Group portfolio companies are now collaborating with Lenovo to support various areas of our 3S strategy. Also, in our flagship event, Lenovo Tech Award next week, we look forward to sharing our latest innovation and the progresses in intelligent transformation. As I mentioned before, Lenovo is like a mountaineer.
We are committed to driving transformation to reach new heights and to bring smarter technology for all. Thank you. Now let me turn it over to our CFO, Wei Ming. Wei Ming, please.
Thank you, Yuanqing. I will take you through Lenovo financial and operational performance in Q2 fiscal year twenty twenty. Next chart, please. Let me first share with you the financial highlights. The group reported yet another strong quarter of year on year profit expansion across all businesses.
Our Q2 results demonstrated our ability to deliver strong margins and robust growth on earnings per share despite the component supply constraint and ongoing geopolitical uncertainties. The inevitable impact from the supply constraint and economy volatility has impacted different parts of our business under operation, and our group revenue was up 1% year on year to $500,000,000 in the quarter. Our efforts in driving continued sales mix improvements, such as expanding our market share in high growth and premium PC segments, have paid off. In addition, our transformation actions continue to accelerate. One key element in the Intelligent Transformation actions is that our software and service revenue were at a strong double digit rate year on year and now makes up over 6% of group revenue at a higher margin.
Gross profit in Q2 increased by 22% year on year and gross profit margin expanded 2.7 percentage points to 16.1%, thanks to the sales mix improvements. Operating expenses rose 16% to RMB1.7 billion and the E2R ratio was 12.9%, up 1.7 percentage point year on year due to spending on sales, marketing and promotion as well as employee bonuses tied to rewarding performance improvements. Our Q2 PDI increased 45% year on year and was the highest PDI in the fiscal Q2 since acquisition of eight eighty six and Motorola businesses. The PDI improvement was consistent across all business groups, and the most notable improvement came from PCSD and MBG reporting their highest PDI margin in history. Net profit attributable to equity holders was $2.00 $2,000,000 up from $168,000,000
in the same quarter of last year. Basic earnings per share came in at US1.69 dollars up from US1.41 dollars last year. The Board
of Directors in today's meeting declared an interim dividend of HKD6.3, representing a 5% increase to the interim dividend paid last fiscal year. Next chart, please. In Q2, our cash used in operation improved both quarter to quarter and year on year to an inflow of 1,400,000,000.0 The net debt position improved by $722,000,000 year on year, mainly due to better profit improvement and working capital management. Our inventory days improved four days year on year, thanks to disciplined inventory management. Next chart, please.
Our Intelligent Device business group, which includes PC and Smart Device business group and Mobile business group, had another strong quarter with PDI margin up significantly by 1.2 percentage point year on year to 5.1%, a new record for IDG. PTI was $620,000,000, up 33% year on year and also a new record for IDG. Next chart, please. In Q2, the component supply constraint kept the revenue growth of PCSD business group to a 4% year on year growth to CNY10.7 billion. Despite the external challenges, we are able to continue our growth and deliver record quarterly shipments.
We continue to hold strong market share in PC. In addition, our PC business is becoming more balanced, maintaining our stronghold in the Commercial segment while also gaining share in the Consumer segment, where we set a new market share record. Our strength in the High Growth and the premium segments also led to a favorable shift in sales mix. The revenue from premium product across workstations, thin and light, visual and gaming PC grew by double digits year on year and contributed more than 50% of total PCSD revenue. Together, the increasing contribution from high margin software and services business, the PCSD business group set a record PPI margin of 5.7% in Q2.
Next chart, please. For the fourth consecutive quarter, the Mobile Business Group achieved positive PTI and expansion in its PTI margin and both set a new height since our acquisition of the Motorola business. MBG revenue was $1,500,000,000 down 5% year on year due to our continued prioritization of core markets. This strategy focused on profitable or core markets, together with an improved portfolio, contributed to a year on year improvement of $57,000,000 on MBG pretax profit. The business group delivered a 3.6 percentage margin expansion versus the same quarter last year, thanks to improved profitability in our LA and NA markets.
We are refining this focused market strategy to select markets in Europe in an effort to accelerate the growth trajectory through new carriers relationship and improved product pipeline and leveraging the strength of our PCSD business. Next chart, please. Our data center business in Q2 continued to be impacted by sluggish hyperscale orders and component price corrections. DCG revenue was CNY 1,300,000,000.0, down 40% year on year in Q2. BrightWoS included our storage revenue and the software defined infrastructure, both up by strong double digits year on year, and our expanded storage portfolio and strong ThinkEdge offerings are gaining recognition in the market.
HPC revenue also grew by double digits, thanks to new projects wins. In China, our business also grew at a double digit rate, thanks to our expansion in sales coverage and product portfolio offerings. PCG further narrowed its PTI loss by $9,000,000 year on year, its ninth consecutive quarter of year to year PTI improvements. Next chart, please. Looking forward, the complexity of macro environment and supply constraints remain our primary challenges.
We are working to resolve the supply challenges and aim to minimize the revenue impact in the quarter. While there are sector challenges and not unique to our group, we will leverage our extensive experience in managing a multitude of macro environment challenges to drive growth and thrive as a business. Our goal is to lead in the intelligent transformation era and drive service and software to become key profit contributor in the long term. On the group level, we aim to deliver a premium to market growth on the top line, and we remain confident we will deliver profitable growth for the long term. On PCSD, our growth continues to be delivering industry leading profitability and increased sales in high growth and premium segment to sustain premium to market revenue growth.
This growth of growing at a market premium extends to our Surface and Software businesses. For Mobile, we will continue to deliver innovative new products, including our recent launch of several new models. We will look for potential growth opportunities and build more profitable core markets to sustain mobile's continued financial health. For the data center business, we will grow hyperscale customer base by leveraging our differentiated in house design for large scale applications with significant results expected in the next year. DCG will accelerate its market share gain in enterprise server, software defined infrastructure, high performance computing, storage and software and services businesses.
The global trend of data growth will lead to increased data center demand along with the launch of new technology and services, including the five gs and edge computing. The group will continue to invest across the smart infrastructure, smart IoT and smart verticals to accelerate our transformation and to sharpen the group's core competencies. These investments should strengthen Lenovo capability as a competitive end to end solution provider in the era of intelligent transformation. Thank you. Now we can take your questions.
Thank you, Waimin. Now we will open the line for questions. And this section will be in English only. Please be reminded to limit yourself to two questions at a time. Please also state your name and company before asking questions.
Operator, I will now turn it over to you. Please give us your instructions.
Ladies and gentlemen, we will now begin the question and answer If you wish to ask questions, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the pound or hash key.
Operator,
please go ahead to take our first question.
Your first question comes from the line of Gokul Hariharan from JPMorgan. Please ask your question.
Hi, good afternoon. Congrats on the good results. First question I had was on DCG and servers. I think YY mentioned we are looking to get back to growth in the second half of this fiscal. Could we talk about when do we get back to which quarter do we expect to get back to positive year on year growth?
And could we give a little bit more quantitative numbers around what kind of growth are we expecting for calendar 'twenty? And especially on hyperscale, could we talk a little bit about the broadening out of the customer debt from the one key customer that we have right now? And I had a follow-up question as well.
Okay. I will invite our doc, our Senior Vice President, COO of TCT, to answer your question.
Thank you, Wai Wai. Let me let me take this in two parts. Let's take a look at first hyperscale. And what we've stated is we're continuing to expand our relationships and engagement with a broader number of tier one, we call them, or the large hyperscale customers. And we are doing that.
We have deep engagements with many of these hyperscale customers, and we expect to see that broaden our portfolio and give us a better long term view of how we're gonna grow in hyperscale. I'm seeing the second half of this year coming in better than the first half. That's as granular as I'm willing to get. One of the challenges we have in hyperscale is it's it's a very lumpy process, and so it's very hard to, you know, measure it as systematically like you can in a traditional enterprise. But the view and projections going forward are we're optimistic that we're going to see growth in the second half compared to the first half of the year in hyperscale.
And as we continue to expand not only within the hyperscale customers we're already participating with, but as we pick up new projects with other customers. We're also participating with what we call the next wave, and we're seeing positive results starting to happen. Although they're smaller smaller customers, we're still seeing a positive result in the next wave. On enterprise side, we've done some very good things with our sales force. We've really drove and driven efficiency and focus on our sales force for both customer acquisition as well as our channel.
We have a very strong channel first strategy, and it's playing out quite well for us. We're seeing positive results as as YY and YMing described. And our traditional enterprise server, I expect to see that continue next quarter.
Yeah. So I I want to add something here. So, actually, since we separate the operation in China so, actually, our China business, the strong growth last quarter. So, overall, it grow 70.
47% year on year.
Yeah. No. That's now have
the scale grow 47%. Yeah. So overall, it's still 18. Yeah. Yeah.
So double digit growth. So we we believe this trend can Yeah. Continue. So we will invest more in China. So not not only to drive the front end sales coverage, but also the China for China product portfolio.
Yeah. That's a very good point. As we bring on more sales engineers in this in China, we've seen dramatic results as you can tell by the results. So we're feeling very positive about that. The results were measuring those very carefully, and we're seeing very good results.
And we are doing very specific products that address the needs and the requirements in China, and we're seeing very good results from that as well. So thank you for pointing that out.
Thank you. Thank you. Yep. The next question comes from the line of Chris Yim from Bokon International. Please ask your question.
Hi. Thanks for taking my question. I also have a question on DCG. I would like to ask on the storage side, what kind of progress you're having in storage? And how is the China JV is going?
Also, given that you're ramping up new customer in hyperscale and also expanding your business in HPC and SDI, Can you talk about how is the near term profitability going to be for DCG? And can we expect some kind of timing, some kind of time line for to get get to breakeven point?
Well, I'll start with the last question first. I'm not in any position to tell you exact timing for our profitability. I'll let Waiming decide if he wants to tell you that. On the hyperscale, we're we're continuing to see our efforts in hyperscale pay off very well as our growth in double digits this year. I sorry, HPC.
We hold a 173 of the top 500 world records. We service 19 markets. We continue to really grow that area and and see positive results. You saw the agreement that YY signed with Bob Swan Intel, where we're going to continue to invest together and drive innovation As we focus really as a corporation on helping solve humanity's greatest challenges, we really stand for that, and and we're putting investments in that space. And it's it's coming coming to fruition very well for us.
I'm sorry. Your other question was around should've written it down. Storage. Oh, storage. Yes.
Yes. We're very, very positive about our storage effort. We went from addressing around 15% of the market with our storage portfolio prior to the investment engagement with NetApp. Now we're seeing us address well over 90% of the market in storage, and that is actually going very, very well. We saw high double digit growth in storage this quarter, and so we expect to see that trend continue as we bring on and train our sales force, and we have aligned our sales force behind storage, it's actually showing tremendous growth, and we're very positive and optimistic about that.
That's one of our one of our shining areas of growth for the data center group.
Can I add on the So I
think in terms of financial performance, although we are not giving any specific numbers, but I can actually show you what the strategy that we adopt? I think we'll continue to grow, I think, very aggressively on our top line, I think, from server, storage and others, but at the same time maintaining, think, a sustainable improvement in profitability, I think, quarter in, quarter out. So I think we actually take a take a a DG business. I think very strategically important by really, I think, getting back to, I think, scale as well as improving profitability, so that you can actually sort of see that going forward.
Yeah. So the so for our DCG business, so our goal is a little bit different from MBE. So, you know, in the past couple of quarters, so we put the profitability first for our MBG business. But for DCG, definitely, we believe from long term point of view, it will will be it should be. They know about the growth engine.
So we put it in our transformation zone. So definitely so the the the major goal is to we should drive the drive the growth. So as the Bob, we just said, so we have a a opportunity not just drive the growth in the hyperscale customers, but in the now hyperscale traditional enterprise business. So we want to drive even higher higher growth in that space, Definitely, driven by software defined infrastructure driven by storage driven by the service. So that that will be our our target.
And, also, we have a specific China strategy to drive the growth in China. So but definitely, meanwhile, we will we will not ignore the profit improvement. Okay.
Operator, we are ready to test the next question.
The next question comes from the line of Howard Koh from Morgan Stanley. Please ask your question.
Hi, guys. Congratulations on the quarter and thank you for taking my question. So my question is maybe for Doug, continuing on the server side. So can you talk about the kind of momentum you're seeing for hyperscale for the December? Because I remember three months ago, you guys talked about seeing a significant improvement in terms of demand for hyperscale from the key from your key existing hyperscale customer.
Can you just kind of talk about how that momentum has changed over the past three months? And yeah. So how do we expect December to look like? So that's my first question. My second question is maybe for Gianfranco on the PC side.
So if I'm looking at your numbers correctly, your PM margin for PCSD is the highest it's ever been at 5.7% PDI margin. Obviously, is a combination of several factors, but what do you think is driving Is it mostly product mix? Or is it mostly a reflection of lower component pricing? And how sustainable do you think this new elevated PDI margin will be going forward?
Thank you.
So on the hyperscale question, we don't see any change. We from what we've stated, we believe the we'll see better results in the second half in hyperscale. We've seen some push out as we talked about last time, whereas they consume the capacity they have and bring on more. We're not we're not seeing a change in what they're demanding. It's just the timing.
So we're very engaged and very positive about the long term results with the hyperscale partners we have. And so we see the growth continuing in that space. And that's why as YY said, it's our scale engine, and we're gonna continue to invest there. It really provides tremendous advantage for us as we have one of the world's best supply chain organizations. We're utilizing that capability in our in house design to be a major, major player in hyperscale, and we'll continue to do that.
And so, yes, I see second half being, obviously, a improvement over first.
Okay. No. Yes. I think when when you look at our result, for sure, the major com components is coming from product mix. In the sense that when you look at our growth on workstation, gaming, Teen and Light, we are talking about, let's say, worst case, around 30%.
In some cases, even better than 30%. So we are strictly focused on the growth area and also where the margin usually is better. It is also true that we get some benefit from component costs going down. But frankly speaking, if I look at last quarter, component costs are starting to stabilize. They are still slowly going down, but it's much more stable than six nine months ago.
And we expect that this is going to be the same probably for in the next couple of quarters moving forward. So I would say, for sure, the mix. And if you look at commercial, I think it's already 70% of our mix. But we are still number one on both commercial and consumer. And even consumer, we reach a historical high market share.
The other good thing is that when we look at our geo, we have today all the geo, really all the geo without any exception, running more or less with the similar performance in terms of profitability. But I think it's probably the first quarter or the second quarter in our history where all the geo are running with the same or similar performance in terms of profitability. So I would say, product mix, good balance between the geo, some help from, from, component cost. Yeah. So
if we we were not impacted by supply, we would have even better
Oh, yeah. Performance. Yes. Yanxi. I think in in terms of revenue, it could be much better without any supply limitation.
And probably also profitability could be better because it's just addition additional margin falling down to the to the bottom line. But I think we have been mentioned managing relatively well considering the the overall situation in the market. Yeah.
So the also so we are very confident, so we can keep profitability level. Right? So the over time. Over time. Yeah.
All right. Thank you. Operator, we are ready for next question, please.
The next question is the follow-up question from the line of Gokul Hariharan from JPMorgan. Please ask the question.
Yes, hi. I had a couple of follow-up questions. One, on MBG. We've done a very strong improvement in profitability. We've held breakeven or above breakeven for the last three quarters.
Now we're coming into the era of five gs. Could you talk a little bit about what are the plans for five gs as well as, I think, Yungqing mentioned that we are also entering Europe selectively into some markets. So could you talk about what are the next plans for MBG? And what does it mean for MBG profitability? And one small follow-up question is for Waiming.
Waiming, could you talk a little bit about the increase in the factoring expenses? Is it a temporary thing? Do we expect that factoring cost to come down closer to the previous levels that we've seen last year once we enter into a new factoring agreement? Thanks.
So I think, Puneet, is on.
I I think, Puneet, will be on line. Yeah.
Puneet? Yeah. Can you hear me?
Could you please, could you please answer your question? Yeah.
Yeah. So So first I think our commitment was like five to six quarters of profitability. So we keep delivering on that. Moving forward, there are a few things that is going to help boost profitable growth. We are making good progress, leveraging synergies with PC in the enterprise side.
We have just starting, but it's getting very, very promising. In five gs, of course, we are first to market with the five gs launch with Verizon a few months ago. We are going to see a few products coming in the near future. We are not announcing anything today, but we see that helping us grow our average selling price in markets like North America and Europe. And also we are seeing very good reception on our future portfolio among European carriers.
So that will also help foster growth in the
near future. In terms of profitability, mean, we're not bringing commitments,
but I mean our commitment is like on profitable growth. So we're not taking any routes that will affect profitability. We're being very cautious. We have also an important announcement coming next week. We cannot comment today.
That's put us a little stronger in the premium space. So as we move forward, we are coming back to the premium space and the experience we have with five gs launch in terms of like antenna RF performance, I believe it's gonna help us, you know, grow in that space also.
So by the way, so so actually, we made a pretty decent profit in North America and Latin America. So if you only consider this two years separate, so is right. So, actually,
both
so in both market, so we made more than 5%. Yeah. PDI. Yeah. So so definitely, if we want to expand into more market, so probably we need some invest investment because we we we still we are still commit committed, so we will put the profitability first.
So we we will make sure so this will be a profitable growth.
One thing, in my opinion, is that we we start to see the payback of what we did during the last eighteen months. Yes. Because we did a lot of things, and we also tell that we we were doing a lot of things. But at the end, when I look, we really rationalized the product road map
and the lineup.
We shortened the product design the design product development by almost 30%. We cut the cost in terms of we really, really relook at our cost base, and we cut any kind of cost that was not bringing any return. And this is why you see now that for more than four quarters, are profitable. But I think we built a very good solid foundation. Now I think we are also looking at the area where we can grow.
But as Sergio said, being very careful that we don't get into any risk in terms of profitability. But here we are so we are making some tests in some countries. In Europe, for example, we will do similar things in Asia because we see growth opportunity both in Europe and Asia, but still managing profitability very, very carefully because there is no reason to jeopardize what we did during the last eighteen months.
Good. So to go on factoring costs, I think, in fact, you should actually sort of look at it in both two ways. One, obviously, is the rate of the interest rate. The other is really the usage. We I think this is a full quarter in which on which we, I think, moved the IGF financing, I think, to a sort of in house quarter on quarter.
I think we are actually making progress. I will continue to see improvement of the interest rate. But at the same time, because taking in house, I think we'll actually be able to utilize that in a more efficient way, meaning that I think we probably will be able to do generate a little bit more cash, I think, from the receivables that we have. So in all, I don't see while we definitely, I think, a trend perspective, seeing, I think, improving interest rate. But at the same time, I think I will see that I think the absolute dollar probably will come down a little bit, but not significant.
But because we really would want to take the in house to drive more cash, I think, from the operation.
All right. Thanks, Hua Min. That's the next question, please, operator.
Thank you. The next question comes from the line of Arthur Liao from Fubong Securities. Please ask your question.
Good afternoon, everybody. I have a sort of question to, like, ask John Franco. As you mentioned, I saw you said gross margin is pretty good for the PC. That is because the component is more stable. I just want to ask you to consult with you for 2020.
Do you think that for PC, the bucket still can keep the component price stable? It's my first question. And second question, it's very exciting for you, PC revenue up. But as I know, there's some of the PC deploying earlier before December, especially in June and December, that's the American trade war with China. So I guess this is not true demand.
I'm not sure what you view for 2020, especially on the commercial replacement of property store down. So this is my second question for PC. So this is my this is all this is my PC question.
I would say on on component cost, I think, frankly speaking, if I look at the current environment and the current situation, I would expect that not to see any major increase on component cost, at least for the next six months, for the next couple of quarters. Then it depends on a lot of things, demand on hyperscale, demand on PC and so on. But when I look at the overall picture, capacity is still bigger than demand. And, memory, frankly speaking, when you look at, in the open market of, flash and DRAM, they are still going down. So it's, I I would not expect, to see any major change for the next six months.
If I was so so good to predict also that the following six months, I will have a good crystal ball, and probably, I'm going to do something different.
I see.
But I'm but no. It's I think for a so we are quite confident that that for for for for a certain period of time, we we we will see a certain stability in terms of component.
Okay.
On your question on December shipment, frankly speaking, we have seen some movement in the past. We are not seeing and you are mainly talking about U. S. We are talking about U. S, I think.
We are not seeing a big movement in terms of shipment for December in order to prevent the tariff these things, at least not from our side, but frankly speaking also from competition. We are not seeing the we saw it last quarter, you know, last quarter in the sense that between August and September, yes, at least for the Chromebook for for certain things. But this quarter, we really don't see this kind of movement. One good thing when I look at PC and I look at commercial, I think the transition to from to Windows 10 is not finished yet. It's not that we are not alone together with Microsoft, with other people.
We know that there are still probably almost 100,000,000,000 PC installed base that are running with Windows seven or even before Windows seven. And they will move probably in the next six to nine months. But the transition has been done for large customer, large enterprise and in some area of the world. But there are small customer or medium customers in the area of the world, but transition is not finished yet. Also there, I would expect for the next six months to continue to see the upgrade to to Windows Windows 10 moving moving forward.
Okay.
My second question is probably for mister Doug Frish. I think this is for data center and this is for server. And just want to consult with you for our outlook for 2020. The reason because we know that Intel's service CPU probably will launch in the third quarter or the first quarter for, we call, isetech 10 nanometer. And that's why some of our supply chain or even in industrial were thinking that the first half year twenty twenty will be mute.
And what do you think about it? And how do you look about the global server demand for 2020? I mean, the risk of the Intel delay because we know right now that compared to MDs, market share is very aggressive as a response by TSMC. So I'm just a doubt from your side, from your data center, especially the caller's ISP already contribute 40% of total worldwide server. And did you think that AMD will be lose market share in server?
So this is total my question for server side.
Yeah. If you take a look at the server side, we made an announcement on the AMD front. We we made our announcement in August with AMD. We launched our first AMD platform in an enterprise space. We obviously work with AMD in the cloud space.
And so we've been working with AMD for years, and now we have an enterprise platform. We're very proud of that. It it really drove a lot of top performance benchmarks, which we're well known for. We're number one in performance in the industry, and we'll continue to do that. The timing for my view, the timing for Intel platforms is not gonna impact what we do.
We're gonna continue to drive the the the platform road map that we have today. We're seeing us grow within the market. If you take a look at really a market that was declined, we actually did much, much better than the market. That's our commitment. We're gonna continue to do better than the market is doing.
And so we've done that quarter to quarter, and we're going to continue to do that. So we pay less attention to what they're doing overall, and our objective is to grow within the market that we have. When it comes to the new platform, we've had a tradition which we're gonna continue fastest transition. So we're already gearing up, when the platform is available, we'll transition to that as quickly as we have done in the past. We have a a very, very good record of transitioning with the newest technology and leading the industry on that, which gives us that's why we always have the top performance marks in the industry by far.
And these are not ours. These are independent performance marks that you can find on sites like from Intel. We'll showcase that well. So we're gonna continue that. And two I'm very, very excited about 2000 plus.
Unlike Sean Franco, I'd love to have a crystal ball, but I'm gonna stick with my day job and ship platforms that are the top performance and number one reliability and customer satisfaction, and we're gonna go win our end fair share.
I see.
Thank you. Okay. Thank you. No more question for me. Thank you.
Alright. Thank you. We are running out of time to take any more questions, and sorry for those questions online. If you have any further questions, feel free to contact us directly. We thank you very much for joining today's call.
The replay of this webcast
before you Yes. Hope that I I want to say something here. So Sure. All the question are related to our three core businesses. So, actually, if you ask me, so the what I'm more satisfied with the last quarter performance.
Yeah. So I would say that will be our transformation dashboard. So, actually, our service and and software revenue grow by 36%. So it's not easy. So and also our smart IoT quadruples, our smart vertical revenue triple.
So those are are definitely good signal. So our transformation strategy really works, and our execution is very determined. So I just want you to see those results as well. Yeah. So service and the software, so now almost 1,000,000,000 business per quarter.
So
Okay. You, Yanqing, for the additional highlights. And, again, 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 today. Bye.
Bye.
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