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 Lanci, Group CFO, Mr. Wong Wai Ming, President of Motorola, Mr. Sergio Buniac, and Senior Vice President at Data Center Group, Mr. Doug Fisher. We will begin with a presentation shortly. After that, we'll open the call for questions. Without further ado, let me turn the call over to Yuanqing. Yuanqing, 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 a Pre-Tax Income up 45% year-over-year to $310 million. The net income up 20% year-over-year to $202 million, while maintaining a stable revenue of $13.5 billion. Our Intelligent Devices Group achieved 5% profit margin for the first time, thanks to solid profit contribution from both PC and the 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 and the macroeconomic situation. Its software and the services revenue grew 31% year-over-year. In PCs, we maintained our clear number one position by delivering record high shipments with over 7% growth year-over-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 a 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. Pre-Tax Income grew $57 million year-on-year, reaching the highest since Motorola acquisition. In our stronghold, Latin America, activation grew almost 7% year-on-year. Revenue, profit, and 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 7 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 a softness in demand from a couple of large 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 hyperscale, particularly in fast-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 four times year-on-year, driven by strong growth in consumer Smart IoT and AR/VR. Smart Vertical revenue tripled, thanks to 76% growth in data intelligent business growth, revenue, and breakthrough in smarter education. Commercial IoT business unit was established to develop new commercial IoTs, edge, and the solutions to drive transformation. Our software and the services revenue grow 35% year-on-year, reaching almost $900 million. Particularly, Device as a Service more than tripled. Premier support service and managed service both grew high double digits year-on-year.
We expect this business to generate $1 billion 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 World next week, we look forward to sharing our latest innovation and progresses in intelligent transformation. As I mentioned before, Lenovo is like a mountaineer. We are committed to driving transformation to reach new heights and bring smarter technology for all. Thank you. Now, let me turn it over to our CFO, Wai Ming. Wai Ming, please.
Thank you, Yuanqing. I will take you through Lenovo financial and operational performance in Q2 fiscal year 2020. 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 this 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 $13.5 billion in the quarter. Our efforts in driving continuous 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 grew 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 $1.7 billion, and the E/R 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 x86 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 $202 million, up from $168 million in the same quarter of last year. Basic earnings per share came in at $0.0169, up from $0.0141 last year. The board of directors in today's meeting declare an interim dividend of HKD 0.063, representing a 5% increase to the interim dividend paid last fiscal year. Next chart, please. In Q2, our cash use in operation improved both quarter-to-quarter and year-on-year to an inflow of $1.4 billion. The net debt position improved by $722 million 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 Devices Group, which includes PCSD business group and MBG, had another strong quarter with PTI margin up significantly by 1.2 percentage point year-on-year to 5.1%, a new record for IDG. PTI was $620 million, up 33% year-on-year, and also a new record for IDG. Next chart, please. In Q2, the component supply constraint capped the revenue growth of PCSD business group to a 4% year-on-year growth to $10.7 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. 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, Visuals, 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 PDI margin of 5.7% in Q2. Next chart, please. For the fourth consecutive quarter, the mobile business group achieved positive PDI and expansion in its PDI margin, and both set a new height since our acquisition of the Motorola business. MBG revenue was $1.5 billion, down 5% year-on-year, due to our continued prioritization of core markets. This strategy focus on profitable or core markets, together with an improved portfolio, contributed to a year-on-year improvement of $57 million on MBG pre-tax profit.
The business group deliver a 3.6% margin expansion versus the same quarter last year, thanks to improved profitability in our L.A. and N.A. 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, 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 $1.3 billion, down 40% year-on-year in Q2. Bright spots included our storage revenue and the software-defined infrastructure, both up by strong double digits year-on-year. Our expanded storage portfolio and strong ThinkAgile 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. DCG further narrow its PDI loss by $9 million year-on-year, its nine consecutive quarter of year-to-year PDI 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 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 will 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 goal of growing at a market premium extend to our service 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 5G 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. This investment 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, Wai Ming. Now we are open line for questions. 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 question. 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 session. 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.
No question?
Operator, please go ahead to take our first question.
The first question comes from the line of Gokul Hariharan from J.P. Morgan. 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? Could we give a little bit more quantitative numbers around what kind of growth are we expecting for calendar 2020? Especially on hyperscale, could we talk a little bit about the broadening out of the customer set from the one key customer that we have right now? I had a follow-up question as well.
Okay. I will invite our Doug, so our Senior Vice President and COO, DCG, to answer your question.
Thank you, YY. Let me take this in two parts. Let's take a look at first hyperscale. What we've stated is we're continuing to expand our relationships and engagement with a broader number of tier 1, we call them, or the large hyperscale customers. 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 going to 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 a very lumpy process, and so it's very hard to measure it as systematically like you can in a traditional enterprise.
The view and projections going forward are more optimistic that we're going to see growth in the second half compared to the first half of the year at hyperscale. 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 NextWave, we're seeing positive results starting to happen. Although they're smaller customers, we're still seeing a positive result in the NextWave. On enterprise side, we've done some very good things with our sales force. We've really 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, it's playing out quite well for us. We're seeing positive results as YY and Wai Ming described.
Our traditional enterprise server, I expect to see that continue next quarter.
Yeah. I want to add something here. Actually, since we separated operations in China, so actually our China business had strong growth last quarter. Overall, it grow 70
47%.
47.
Year-on-year.
Yeah. No, now hyperscale grow 47%.
18.
Still, yeah. Double digits growth. We believe this trend continue. We will invest more in China. 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 China, we've seen dramatic results, as you can tell by the results. We're feeling very positive about the results. We're measuring those very carefully, and we're seeing very good results. 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. Thank you for pointing that out.
Thank you.
Thank you. Yep. The next question comes from the line of Chris Yim from BOCOM International. Please ask a question.
Oh, 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 JVs going? 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 leader term profitability going to be for DCG? Can we expect some kind of timeline to get to breakeven point? Thank you.
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 Wai Ming decide if he wants to tell you that. On the hyperscale, we're continuing to see our efforts in hyperscale pay off very well as our growth in double digits this year. Sorry, HPC. We hold 173 of the top 500 world records. We service 19 markets. We continue to really grow that area 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, we're putting investments in that space, and it's coming to fruition very well for us. I'm sorry, your other question was around Should've written it down.
Storage.
Storage. Oh, storage. Yes. We're 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 well. We saw high double-digit growth in storage this quarter. 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 shining areas of growth for the Data Center Group.
Can I add on the.
Of course.
I think in terms of financial performance, although we are not giving any specific numbers, but I can actually show you with the strategy that we adopt, I think we will continue to grow very aggressively on our top line, I think from server storage and others. At the same time maintaining, I think a sustainable improvement in profitability, I think quarter in, quarter out. I think we actually take the DCG business, I think very strategically important by really, I think getting back to scale as well as improving profitability so that you can actually sort of see that going forward.
Yeah. For our DCG business, our goal is a little bit different from MBG. In the past couple of quarters, we put the profitability first for our MBG business. For DCG, definitely, we believe from a long-term point of view, it should be Lenovo's growth engine. We put it in our transformation zone. Definitely, the major goal is we should drive the growth. As Doug just said, we have an opportunity, not just drive the growth in the hyperscale customers, but in the non-hyperscale traditional enterprise business. We want to drive even higher growth in that space. Definitely are driven by software-defined infrastructure, driven by storage, driven by the service. That will be our target. Also, we have a specific China strategy to drive the growth in China. Definitely meanwhile, we will not ignore the profit improvement.
Okay.
Operator, we are ready to take the next question.
The next question comes from the line of Howard Kao from Morgan Stanley. Please ask the question.
Hi, guys. Congratulations on the quarter, and thank you for taking my question. My question is maybe for Doug, continuing on the server side. Can you talk about the kind of momentum you're seeing for hyperscale for the December quarter? Because I remember three months ago, you guys talked about seeing a significant improvement in terms of demand for hyperscale from your key existing hyperscale customer. Can you just kind of talk about how that momentum has changed over the past three months? How do we expect December quarter to look like? That's my first question. My second question is maybe for Gianfranco on the PC side. If I'm looking at your numbers correctly, your PTI margin for PCSD is the highest it's ever been at 5.7% PTI margin.
Obviously, this is a combination of several factors, but what do you think is driving this higher elevated margin? Is it mostly product mix, or is it mostly a reflection of lower component pricing? How sustainable do you think this new elevated PTI margin will be going forward? Thank you.
On the hyperscale question, we don't see any change. From what we've stated, we believe we'll see better results in the second half in hyperscale. We've seen some pushout, as we talked about last time, whereas they consume the capacity they have and bring on more. We're not seeing a change in what they're demanding. It's just the timing. We're very engaged and very positive about the long-term results with the hyperscale partners we have. We see the growth continuing in that space, and that's why, as YY said, it's our scale engine, and we're going to 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 player in hyperscale, and we'll continue to do that.
Yes, I see second half being obviously an improvement over first.
Yes. I think when you look at our result, for sure, the major component is coming from product mix. In the sense that when you look at our growth on workstation, gaming, Thin and Light, we are talking about, let's say, worst case, around 30%. In some cases, even better than 30%. 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 cost going down. Frankly speaking, if I look last quarter, component cost has started to stabilize. They are still slowly going down, but it's much more stable than six or nine months ago. We expect that this is going to be the same probably for in the next couple of quarters moving forward.
I would say for sure the mix. If you look at commercial, I think it's already 70% of our mix. We are still number one on both commercial and consumer. 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. I think it's probably the first quarter or the second quarter in our history, where we have all the geo running with the same or similar performance in terms of profitability. I would say product mix, good balance between the geo. Some help from component cost.
Yeah. If we were not impacted by supplier, we could have even better performance.
Yes, Yuanqing. I think in terms of revenue, it could be much better without any supply limitation. Probably also profitability could be better because it's just additional margin falling down to the bottom line. I think we have been managing relatively well, considering the overall situation in the market.
Also, so we are very confident, so we can keep a good profitability level, right? Over time.
Over the year.
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 J.P. Morgan. Please ask the question.
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, four quarters. We are coming into the era of 5G. Could you talk a little bit about what are the plans for 5G, as well as, I think Yuanqing mentioned that we are also entering Europe selectively into some markets. Could you talk about what are the next plans for MBG and what does it mean for MBG profitability? One small follow-up question is for Wai Ming. Wai Ming, 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.
I think Buniac is on.
Buniac should be online.
Yeah. Sergio Buniac?
Yeah. Can you hear me?
Yeah. Could you please answer the question? Yeah.
Yes. First, I think our commitment was 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 is getting very promising. In 5G, of course, we are first to market with the 5G 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. We see that helping us grow our average selling price in markets like North America and Europe. Also, we are seeing very good reception on our future portfolio among European carriers. That will also help foster growth in the near future.
In terms of profitability, I mean, we are not giving any commitments, but our commitment is 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 also put us a little stronger in the premium space. As we move forward, we are coming back to the premium space, and the experience we have with 5G launch in terms of antenna, RF performance, I believe is going to help us grow in that space also.
By the way, actually.
Made a pretty decent profit in North America and Latin America. If you only consider these two geos separately. When you have this right, so actually in both markets, we made more than 5% PDI. Definitely if we want to expand into more markets, so probably we need some investment. Because we are still committed, so we will put the profitability first. We will make sure this will be a profitable growth.
One thing in my opinion is that we start to see the payback of what we did during the last 18 months.
Yeah.
Because we did a lot of things, and we also told that we were doing a lot of things. At the end, when I look, we really rationalized the product roadmap and the lineup. We shortened the product.
Development cycle
design, product development by almost 30%. We cut the cost in terms of we relook at our cost base, and we cut any kind of cost that was not bringing any return. This is why probably you see now that for more than four quarters, we are profitable. I think we built a very good, solid foundation. Now, I think we are also looking at the area where we can grow. As Sergio said, being very careful that we don't get into any risk in terms of profitability. We are making some tests in some countries in Europe, for example. We will do similar things in Asia, because we see a lot opportunity both in Europe and Asia. Still managing profitability very carefully because there is no reason to jeopardize what we did during the last 18 months.
Good. 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. I think this is the full quarter on which we, I think, moved the IDG financing, I think to sort of in-house grow and 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 it in-house, I think we'll actually be able to utilize that in 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. In all, Well we definitely, I think from a trend perspective, seeing, I think improving interest rate.
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. Because we really would want to take the in-house to drive more cash, I think, from the operation.
All right. Thanks, Wai Ming. Let's take the next question please, operator.
Thank you. The next question comes from the line of Arthur Liao from Fubon Securities. Please ask your question.
Good afternoon, everybody. I have a sort of question to ask Gianfranco. As you mentioned, I saw you said gross margin is pretty good for the PC. That is because component is more stable. I just want to ask you a concern with you for 2020. You think that for PC, the bucket still can keep the component price stable? This is my first question. Second question, it's very exciting for you, PC revenue are up. As I know that some of the PC deploying earlier, before December, especially in June and December. That's the American trade war with China. I guess this is not short demand. I'm not sure what you view for 2020, especially the commercial replacement probably slowed down. This is my second question for PC. This is my PC question.
As I said, on component cost, I think, frankly speaking, if I look at the current environment and the current situation, I would expect not to see any major increase on component cost, at least for the next six months, for the next couple of quarters. It depends on a lot of things, demand on hyperscale, demand on PC, and so on. When I look at the overall picture, capacity is still bigger than demand. Memory, frankly speaking, when you look at in the open market of flash and DRAM, they're still going down.
Okay.
I would not expect to see any major change for the next six months. If I was so good to predict also the following six months, I will have a good crystal ball and probably I am going to do something different. No, we are quite confident that for a certain period of time, 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, you are mainly talking about U.S., probably? You 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 or these things. At least not from our side, but frankly speaking, also from competition, We saw it last quarter in the sense that between October and September, yes. At least for Chromebook, for certain things. 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 Windows 10 is not finished yet.
In the sense that we are not alone, together with Microsoft, with other people, we know that there are still probably almost 100 million PCs still based that are running with Windows 7 or even before Windows 7. They will move probably in the next six to nine months. This transition has been done for large customer, large enterprise, and in some area of the world. There are small customer or medium customer and area of the world where transition is not finished yet. Also there, I would expect for the next six months to continue to see the upgrade to Windows 10 moving forward.
Okay. My second question is probably for Mr. Doug Fisher. I think this is for data center and this is for server. I just want to consult with you for our outlook for 2020. The reason because we know that Intel's server CPU probably will launch in the third quarter or the first quarter for what we call Ice Lake. That's why some of the supply chain or even the industrials were thinking that the first half year 2020 will be muted. What do you think about, and how do you look about the global server demand for 2020? In the risk Intel will delay because we know right now they compare to AMD's gain market share is very aggressive and is sponsored by TSMC.
I miss a doubt from your side, from your data center, especially the cloud CSP already contribute 40% of total worldwide server. Do you think as AMD will lose market share in server? 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 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. We've been working with AMD for years, and now we have an enterprise platform. We're very proud of that. 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 going to impact what we do. We're going to continue to drive the platform roadmap 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 going to continue to do better than the market is doing. We've done that quarter to quarter, and we're going to continue to do that. 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 going to continue, is fastest transition. We're already gearing up, and when the platform is available, we'll transition to that as quickly as we have done in the past.
We have a very, very good record of transitioning with the newest technology and leading the industry on that. That's why we always have the top performance marks in the industry by far. These are not ours. These are independent performance marks that you can find on sites like from Intel will showcase that we know. We're going to continue that, and I'm very excited about 2020. Unlike Gianfranco, I'd love to have a crystal ball, but I'm going to stick with my day job and ship platforms that are the top performance and number one in reliability and customer satisfaction, and we're just going to go win our unfair share.
I see.
Okay. Thank you. No more question from me. Thank you.
All right. Thank you. We are running out of time to take any more questions. Sorry for those questioning 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 close that, I want to say something here.
Sure.
All the questions are related to our three core businesses. Actually, if you ask me, what I'm more satisfied with the last quarter performance. Yeah. I would say that would be our transformation dashboard. Actually our service and software revenue grow by 36%. It's not easy. Also our Smart IoT quadrupled. Our Smart Vertical revenue tripled. Those are definitely a good signal. Our transformation strategy really works, and our execution is very determined. I just want you to see those results as well. Yeah, service and software. Now almost a $1 billion business per quarter.
Okay. Thank you, Yuanqing, for the additional highlights. 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.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.