Key Takeaways:
Lenovo Group reported first-quarter revenue of $26.94 billion, up 43 percent year over year, with adjusted net profit jumping 176 percent to $1.075 billion — the first time the Hong Kong-listed company has crossed the $1 billion mark in a single quarter.
"These results not only exceeded expectations, but the market is increasingly recognizing that Lenovo's strategy is effective, our transformation is tangible, and our performance is sustainable," Chairman and CEO Yang Yuanqing said.
The Infrastructure Solutions Group (ISG) posted revenue of $8.51 billion, up 98 percent, with operating margin expanding to a record 9.1 percent — nearly double the 4.63 percent consensus. AI server order backlog reached $54 billion, up 157 percent quarter over quarter, spanning hyperscale cloud providers, AI cloud and enterprise customers.
Shares jumped 21 percent to a record high after the results. The group expects full-year revenue to exceed $100 billion, reaching its stated target ahead of schedule.
ISG operating profit reached a record $777 million. The 9.1 percent margin far exceeded the most bullish broker forecast of 5.2 percent from CITIC CLSA; UBS projected 4.0 percent, JPMorgan 4.8 percent and Morgan Stanley 4.5 percent.
The Intelligent Devices Group (IDG) generated revenue of $17.1 billion, up 27 percent, with operating margin holding at 7.1 percent. Global PC market share reached 24.2 percent, extending Lenovo's lead over the second-place competitor by more than five percentage points for a 10th consecutive quarter. AI PC market share rose to 25.1 percent, and tablet revenue surged more than 80 percent.
The Solutions and Services Group (SSG) posted revenue of $2.9 billion, up 28 percent, with operating margin expanding to a record 24.2 percent. AI services revenue grew at triple-digit rates as customers moved from experimentation to production deployments, with managed services and projects together accounting for over 62 percent of SSG revenue.
AI-related revenue grew 60 percent to $9.3 billion, accounting for 35 percent of total group revenue. R&D expenses rose 30 percent to $682 million.
On a statutory basis, Lenovo recorded a net loss of $609 million, versus a $505 million profit a year earlier, driven by a $1.7 billion non-cash fair value loss from the revaluation of warrants issued in 2025. Adjusted net margin widened to 4.0 percent from 2.1 percent.
Citi maintained its Buy rating with a target price of HKD31, implying a fiscal 2028 price-to-earnings ratio of about 13.6 times, valuing ISG at 16.7 times earnings in line with peers.
The results confirm that AI infrastructure demand is converting into profit, with ISG now a core earnings engine on par with IDG. Investors will watch whether the $54 billion AI server backlog sustains margin expansion through the fiscal year.
This article is for informational purposes only and does not constitute investment advice.
