Lenovo’s stock surged as much as 31% on Friday, bringing its gains for May to 109% – its best monthly performance since 1999.
Shares of the world’s largest PC maker have more than doubled this month, making it the top performer on the Hang Seng Index year-to-date, with a 159% increase.
Strong Earnings Fuel Rally
The rally was driven by strong financial results. Lenovo’s fourth-quarter earnings showed quarterly revenue of $21.6 billion, a 27% year-on-year increase and its fastest quarterly growth rate in five years. Net profit reached $521 million, a 479% increase from $90 million a year earlier. Such a significant profit increase for a company of Lenovo’s size prompted the market to reassess its price targets.
Infrastructure Solutions Group Drives Growth
The company’s Infrastructure Solutions Group (ISG), which builds AI-optimized servers, storage systems, and data center products for large enterprise clients and cloud providers like Amazon, Microsoft, and Google, was a key driver of this growth. ISG posted record quarterly revenue of $5.6 billion, up 37% year-on-year, and reached $19.2 billion for the full fiscal year.
Across the entire company, AI-related revenue grew 84% year-on-year and now accounts for 38% of Lenovo’s total quarterly sales. More than one in three dollars that Lenovo earns today is tied to AI. Goldman Sachs more than doubled its price target on Lenovo following these results.
Dell’s Performance Further Boosts Investor Confidence
Dell’s recent performance also contributed to investor optimism. On Thursday, Dell Technologies reported first-quarter fiscal year 2027 revenue of $43.84 billion, an 88% year-on-year increase, and raised its full-year AI server revenue guidance to $60 billion. Dell’s AI server backlog now stands at $51.3 billion. Investors responded by buying Lenovo stock.
“AI server growth is obviously a driver, with demand now spreading from hyperscalers to enterprise for AI inferencing demand, which benefits conventional server OEMs like Lenovo and Dell,” said Bloomberg Intelligence analyst Steven Tseng.
Shift to Enterprise Clients
The shift in demand from hyperscalers like Amazon and Google to regular enterprise companies is a significant development. For the past two years, the AI infrastructure buildout has been concentrated around Nvidia chips and a few specialized players. Lenovo and Dell are now assembling the racks, qualifying the hardware configurations, and shipping compute-ready systems to businesses seeking AI solutions without building them from scratch.
PC Business Remains Strong
Lenovo’s PC business is also performing well. The Intelligent Devices Group posted $14.6 billion in fourth-quarter revenue, up 24% year-on-year, with Lenovo holding a 24.4% global PC market share – its widest lead over its nearest rival in 15 years. The AI PC wave is contributing to this success. However, server infrastructure is what significantly impacted the stock price.
Contrasting Performance in Hong Kong Tech
The rally is even more striking when compared to the performance of other Hong Kong tech companies. The Hang Seng Tech Index has fallen more than 15% this year, weighed down by internet platforms experiencing margin pressures due to AI hardware spending. Lenovo, on the other hand, is selling the infrastructure, not buying it.
Ambitious Targets Set
CEO Yuanqing Yang called fiscal year 2026 the best year in Lenovo’s 40-year history and set a target of $100 billion in annual revenue within two years. Full-year revenue reached $83.1 billion, up 20% – the first time the company has surpassed the $80 billion mark.
ISG enters fiscal year 2027 with an AI server pipeline exceeding $21 billion in committed demand, although the speed at which Lenovo can fulfill these orders depends on securing GPU allocations from Nvidia, which remains the primary supply constraint across the server industry.
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