Source | Benyuan Finance

Author | Li Youshan

If not for the nearly faded 'ThinkPad' logo on office computers, many might assume Lenovo has been swept away by the tide of mobile internet, left dazed on the shore. With a market cap of HK$300 billion, a starkly different reality emerges—it has merely been lying low, never truly exiting the stage.

Starting as a small company in a communication room of the Chinese Academy of Sciences, Lenovo rose to international fame in 2005 with its audacious acquisition of IBM's PC business, securing its place at the pinnacle of the global PC industry. However, due to path dependency and strategic missteps, it later found itself mired in a decade-long transformation dilemma.

Now, as AI enters its payback phase, the 40-year-old 'tech dinosaur,' once criticized for complacency and mere assembly, has returned with a record-breaking financial report: annual revenue surpassing $80 billion for the first time, with adjusted net profit growth (42%) more than double that of revenue growth (20%).

This time, can it truly shed its reliance on 'trade, industry, and technology' and evolve from an excellent hardware integrator into a genuine technological innovator? The answer may lie in its performance over the next decade.

1. Old Guard Taps into AI Dividends

An unexpected financial report for the first quarter of fiscal year 2027, showing revenue of $43.8 billion (up 88% year-on-year), propelled Dell Technologies' market cap to $205.946 billion at closing, stirring the entire AI industry chain.

AI hardware stocks surged in tandem in Hong Kong, with peer Lenovo Group's market cap surpassing HK$300 billion.

This capital frenzy is not mere herd behavior. In the recently concluded fiscal year 2025/26, Lenovo also achieved remarkable results. Annual revenue grew 20% year-on-year to $83.1 billion, with adjusted net profit surging 42% to $2 billion, marking Lenovo's best fiscal year ever.

In the fourth quarter alone, revenue grew 27% year-on-year, the highest growth rate in nearly 20 quarters; adjusted net profit doubled year-on-year, with net profit attributable to shareholders surging nearly fivefold. For a hardware company, this is quite robust (stable).

Lenovo's three major businesses consist of the Intelligent Devices Group (IDG), focused on hardware like phones and computers; the Infrastructure Solutions Group (ISG), handling servers and enterprise-grade products; and the Solutions and Services Group (SSG), providing differentiated enterprise services like integration and cloud.

In the past, the market valued Lenovo primarily as a PC manufacturer. At this year's April oath-taking rally (oath-taking ceremony) for the new fiscal year, Yang Yuanqing announced two new goals:

First, to exceed $100 billion in revenue within two years, and second, to fully transform into an AI-native company.

The latter clarifies Lenovo's future direction: shifting from selling computers to selling AI and ecosystems, allowing AI to Refactoring (reconstruct) all workflows and lifestyles.

With global AI capital expenditures surging, the highly anticipated ISG business, positioned upstream in the AI industry chain, serves as the best window and largest variable for observing Lenovo's AI prowess in this financial report.

ISG primarily deals in servers, storage, and switches, reaping AI dividends with annual revenue surging 32% to $19.2 billion, the fastest growth among the three businesses. In the fourth fiscal quarter, ISG shone even brighter, not only turning a profit but also setting a new quarterly revenue record of $5.6 billion, up 37% year-on-year.

AI servers, the core infrastructure for computing power, saw a surge in enterprise-level orders. By the fiscal quarter's end, Lenovo's annual order backlog reached $21 billion, with AI server revenue growing 50% year-on-year and officially entering NVIDIA's latest-generation supply chain. NVIDIA's GB300 NVL72 rack solution began deliveries in the fourth fiscal quarter, with the next-generation Rubin architecture-based platform set to launch in the second half.

In terms of profit margins, ISG improved to 3.6% in the fourth fiscal quarter, though the annual figure stood at just 0.4%, relying on scale to dilute costs rather than technological barriers, still plagued by the industry's common issue of revenue growth without proportional profit growth.

For comparison, Dell's ISG division reported an operating profit margin of 10.5% in the most recent fiscal quarter, three times that of Lenovo, indicating that Lenovo's ISG profitability foundation still needs further strengthening.

In terms of market share, IDC data shows Dell leading the global server market in Q4 2025 with a 10.0% share, followed by Supermicro at 9.3%, and Lenovo and Inspur both around 4%.

While the industry shouts 'All in AI,' Lenovo entered early, with Yang Yuanqing declaring in 2017, 'Lenovo has bet its entire fortune on AI.'

However, compared to firms like Kunlunxin developing self-researched AI chips and GPUs, Lenovo's AI self-research layout (layout) in chip, model, and software ecosystem layers remains relatively weak, reflected in the group's low R&D rate of around 3%.

Lenovo lacks control over core chips and models, as well as operating system entry points. Its AI servers rely heavily on NVIDIA's GPUs, while its Tianxi personal AI agent is essentially just an interface accessing third-party models, with an ecosystem and value-added services still underdeveloped, limiting its bargaining power.

To address high-end storage shortcomings, Lenovo acquired Israeli storage company Infinidat in April, potentially laying a crucial foreshadowing (foreshadowing) for the next decade's growth.

2. PC Segment Remains Dominant

As repeatedly mentioned by Lei Jun in 'The Fire of Silicon Valley,' that fervent and extraordinary era saw a group of tech geeks and dreamers harness the power of computers, liberating them from sealed machine rooms and thus changing the world.

The book vividly depicts the tumultuous PC golden age and precisely captures Lenovo's starting point.

According to Tianyancha information, Lenovo Group was founded in 1984, initially named 'Legend.' It listed on the Hong Kong Stock Exchange in 1994, acquired IBM's PC business in 2005, becoming the world's third-largest PC manufacturer, and reached the top global PC market share in 2013.

To this day, the IDG business selling PCs, phones, and tablets remains Lenovo's cash cow and foundation.

In fiscal year 2025/26, Lenovo's IDG business generated $58.9 billion in annual revenue, contributing about 70% of total revenue; operating profit accounted for roughly 64.6%, with an operating profit margin of 7.2%. However, this segment's growth rate was 17%, the lowest among the three businesses.

Omdia reports that global PC shipments reached 279.45 million units in 2025, up 9.2% year-on-year. Factors like Windows 10 end-of-service replacements and pandemic-driven device refresh cycles fueled the PC market's recovery. Lenovo shipped 70.85 million PCs in 2025, with high-end PCs accounting for 50% of shipments.

The internal growth driver came from AI PCs, with Lenovo's AI PC annual sales surpassing 2.53 million units, doubling year-on-year.

Notably, AI PCs commanded higher prices, though costs also rose. Take soaring storage as an example: Citigroup predicts DRAM prices will surge 200% year-on-year in 2026, with NAND up 186%.

Moreover, AI PCs have yet to demonstrate disruptive product strength like Doubao phones, with Lenovo's management acknowledging that current AI PC buyers, attracted by AI features, are still concentrated among a few professional groups.

This implies that if market supply and demand reverse and storage prices fall, Lenovo's PC business will still face pressure, making profit preservation a challenge.

Built on Lenovo's vast hardware installed base, the SSG solutions and services business performed admirably.

Annual revenue surpassed $10 billion for the first time, with operating profit margins exceeding 20%. Accounting for 12% of revenue but supporting 30% of operating profit, it serves as Lenovo's high-profit margin engine.

Overall, Lenovo's business structure typically involves 'subsidizing high-scale, low-profit hardware businesses with low-scale, high-profit service businesses,' with SSG struggling to compensate (offset) scale shortcomings, raising questions about growth resilience.

3. Betting on Token Economy

Fiscal year 2025/26 marks Lenovo's 'first year of the new AI decade,' with the financial report highlighting a 105% year-on-year increase in AI-related revenue.

Fully advancing AI transformation, Lenovo's AI delivery strategy revolves around two directions: 'Personal Intelligence' and 'Enterprise Intelligence.' For personal intelligence, it launched Tianxi AI 4.0, while enterprise-grade AI services adhere to three core principles: hybrid AI priority, value delivery first, and ecosystem co-construction and win-win.

Yang Yuanqing declared, 'Lenovo is not a PC company. Lenovo is a full-stack AI technology company.'

Shifting from selling hardware to building ecosystems, Lenovo unveiled its Enterprise Longxia Lake solution and the Token Factory, fully betting on the Token economy, striving to ensure every Token is calculable, cost-effective, and generates value.

Competition in the Token economy track (track) is fiercer than ever.

At the compute infrastructure layer, Huawei, Inspur, and New H3C dominate, with the top three vendors capturing nearly 70% of China's AI server market, leaving Lenovo to compete fiercely in the cracks.

At the cloud-based large model and services layer, internet giants like Alibaba Cloud, Tencent Cloud, Baidu Intelligent Cloud, and Volcano Engine possess complete tech stacks encompassing large models, compute power, storage, and networks, enabling them to offer Token services at rock-bottom prices. Lenovo's reliance on a 'middleman markup' model faces structural disadvantages from inception.

Beyond competitor pressure, Lenovo confronts two major AI industry challenges: accelerated technological iteration and fragmented customer demands. These challenges are equitable for all vendors but pose particularly severe delivery tests for traditional hardware firms like Lenovo.

Amid this complex competitive landscape, Lenovo is not without opportunities. It boasts the world's largest PC user base, a nationwide channel network, robust supply chain management, and enterprise customer resources. If it can fully leverage these strengths and pursue a differentiated competition route, it could well secure a place in the enterprise-grade AI services market.

In the AI wave, Lenovo has secured its ticket; how long this transformation marathon lasts depends on its commitment to investment. *All rights reserved. Unauthorized reproduction prohibited; data support from Tianyancha.

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