Lenovo's revenue reaches 589.9 billion: Interest overdue for three decades

In 1995, within Lenovo in Zhongguancun, Beijing, a path dispute that was destined to be written into the history of Chinese enterprises erupted.

Ni Guangnan, the chief engineer, advocated investing resources in self - developed chips, aiming to compete with Intel and follow the technology - industry - trade path. On the other hand, Liu Chuanzhi, the president, believed that Lenovo should leverage the cost advantage of Chinese manufacturing. He thought it was better to buy chips and operating systems rather than make them, focusing on expanding the market first and then accumulating technology.

Ultimately, Ni Guangnan was removed from his positions as chief engineer and director, and projects such as Lenovo's ASIC chips were aborted one after another.

This was a far - reaching decision. The essence of the trade - industry - technology path is to exchange the market for time and scale for space.

For an enterprise that emerged from the Institute of Computing Technology and lacked initial capital accumulation, this path was not without rationality. However, the real question is, after the enterprise has reached a considerable scale, will the trade - industry - technology path transform from an active strategic choice into a fixed organizational gene?

Thirty years later, Lenovo responded to part of this question with its best - ever financial report.

On May 22, 2026, Lenovo Group released its annual report for the fiscal year 2025/26: The annual revenue reached 589.9 billion yuan, breaking through the 500 - billion - yuan mark for the first time, a year - on - year increase of 20.3%. The adjusted net profit was 2 billion US dollars, a year - on - year increase of 42.1%, both hitting record highs.

The fourth fiscal quarter was particularly impressive, with revenue approaching 150 billion yuan, a year - on - year increase of 27.1%, the highest growth rate in nearly 20 quarters. The stock price soared by nearly 20% on that day, and the market value approached HK$200 billion.

Yang Yuanqing declared with high spirits that Lenovo would become a company with a scale of 100 billion US dollars within two years and fully transform into an AI - native company.

However, the term "the best year" itself implies a question: What did Lenovo experience in the years before?

In the business world where it takes a decade to assess a company's true nature, the celebration of financial report figures often obscures deeper structural issues. Are the dividends that the company is enjoying today the result of a genetic mutation or the delayed interest from the major decision made thirty years ago?

I. Two Lenovos in the Financial Report

When opening Lenovo's annual report for the fiscal year 2025/26, what catches the eye is not the figures but the rhythm. This is a company that exists in two time dimensions simultaneously.

The first Lenovo is a hardware empire rooted in the present.

All three business groups achieved double - digit revenue growth and were profitable across the board, which is a rare comprehensive performance for Lenovo in recent years.

The annual revenue of the IDG (Intelligent Devices Group) reached 418.5 billion yuan, a year - on - year increase of 16.6%. The global PC market share reached a historical peak of 24.4%, and the proportion of high - end PC shipments reached 50%. Motorola smartphones ranked among the top in the North American and Latin American markets, and the proportion of high - end product shipments reached a record high of 19%.

The annual revenue of the ISG (Infrastructure Solutions Group) was approximately 19.2 billion US dollars (136.2 billion yuan), a year - on - year surge of 32%. After years of losses, it achieved annual profitability for the first time. The operating profit in the fourth fiscal quarter reached 202 million US dollars, a record high.

The revenue of the SSG (Solutions & Services Group) exceeded 10 billion US dollars for the first time, and the operating profit margin remained stable at a high level of over 22%. The AI - related revenue doubled year - on - year, and in the fourth fiscal quarter, it accounted for nearly 38%. The AI servers equipped with the NVIDIA GB300 NVL72 platform have been fully shipped, and the order backlog for AI servers has swelled to 21 billion US dollars.

This set of data portrays a competitive Lenovo. Against the backdrop of the global PC market growth slowing down to 2.5%, Lenovo, with its diversified global manufacturing layout and long - term supply chain advantages, not only stabilized its basic business but also accurately grasped the second growth curve in the explosion of AI computing power demand.

However, the second Lenovo is hidden deep in the financial statements.

The annual gross profit margin decreased instead of increasing, shrinking slightly from 16.1% to 15.4%. The annual operating profit of the ISG was only 73.37 million US dollars, with a razor - thin profit margin. It was not until the fourth fiscal quarter that it exceeded 200 million US dollars driven by the concentrated delivery of AI servers. Although the proportion of high - end products in the mobile phone business has increased, the specific profit contribution has never been disclosed separately.

An even more hidden signal lies in the structure of R & D expenses.

The annual R & D investment was 2.49 billion US dollars, a year - on - year increase of 9%, and the R & D expense ratio was only 3%. Looking at this data on a longer time axis: Ten years ago, Lenovo's R & D expense ratio was about 2.6%; five years ago, it was about 2.9%. It was not until the fiscal year 2025/26 that it barely exceeded 3%.

This is an extremely gentle upward curve, so slow that it is almost impossible to see the turning strength of an AI - native company.

The pricing in the capital market also honestly reflects this split. Lenovo's market value is about 20 billion US dollars, less than one - eighth of Dell's, while Dell's revenue scale is about 1.4 times that of Lenovo.

The gap lies not in scale but in profit margins and the autonomy of core technologies. Dell's ISG operating profit margin reaches 14.8%, and its AI server shipments exceed 25 billion US dollars. Even though Lenovo's ISG has achieved a quarterly profit breakthrough, its overall operating profit margin is still far below 10%.

Investors believe that Dell can earn higher added value from AI server orders, while for Lenovo, they still see it as a super integrator that wins by scale.

The real picture of the best - ever financial report becomes clear: It is a story about interest.

The path chosen thirty years ago is still paying considerable returns on schedule. Excellent operational capabilities, a strong supply chain, and stable customer relationships are all Lenovo's core assets for crossing economic cycles.

However, the principal, the capabilities to define a technology company such as self - developed operating systems, core chips, and basic models, have never been truly invested in.

II. Old Problems with New Faces

Is it AI - native or just AI - packaged?

To understand Lenovo's current AI strategy, we must first look back at the painful lessons it learned in the mobile phone business.

Lenovo Mobile was in a favorable position twice. On the eve of the explosion of the Chinese smartphone market, Lenovo was one of the few manufacturers with brand, channel, and manufacturing capabilities.

However, excessive cooperation with operators led to a messy product line, mainly focusing on low - margin, low - end mobile phones. When the operator subsidies declined and faced competition from Huawei and Xiaomi, Lenovo was at a loss.

The bigger problem was Lenovo's strategic vacillation.

Lenovo's mobile phone business changed several leaders in just a few years. Each leader took office with different ideas and left with unfinished plans.

The most significant strategic mistake occurred after the acquisition of Motorola. In 2014, Lenovo spent 2.9 billion US dollars to acquire this money - burning hole from Google, aiming to surpass Xiaomi and become the third - largest in the world. Two years later, Lenovo's global market share in mobile phones completely dropped out of the top five.

The integration after the acquisition was far from smooth: In 2015, the pre - tax loss of the mobile phone department reached 292 million US dollars, and Motorola's shipments decreased by 31% year - on - year.

The defeat of the mobile phone business was not an isolated incident. For a long time, almost all of Lenovo's diversification attempts outside the PC business followed a similar pattern: starting with high ambitions, wavering in the middle of execution, and ending up fruitless.

The repeated occurrence of this pattern has led to Lenovo being regarded as a company that is hard to imagine without the PC business in the capital market for a long time.

It is in this historical context that Lenovo has encountered the AI wave. A question that must be faced is: Is Lenovo's current AI dividend a real genetic mutation or just another successful extension of its trade - industry - technology path in the new technology cycle?

Some analysts point out that the more than 30% AI content in Lenovo's products is more like a well - packaged number game. AI PCs rely on the Windows replacement wave and price premiums, and AI servers depend on cloud provider orders and chip stacking. The so - called super - intelligent agents are barely perceptible to users.

According to Canalys' definition, a computer can be called an AI PC as long as it has AI - related modules, regardless of whether it has AI capabilities. In actual experience, AI PCs are far from achieving the ideal effect. Currently, consumers' replacement wave is not mainly to experience AI in advance but to replace their old computers.

In the AI computing power market, Lenovo still plays the role of a system integrator: It purchases GPUs from NVIDIA, adds its own liquid - cooling technology, and assembles them into server clusters for delivery to cloud providers and enterprise customers.

This is a profitable and rapidly growing business, but there is a gap in core technology between Lenovo and the AI - native companies that are highly valued by the market.

The AI - native story that Lenovo tells is closer to being AI - ready. It can enable its hardware to better carry AI workloads, but it is not the original creator of AI capabilities.

If AI is really an epic opportunity for Lenovo, what is the price of obtaining profits?

The tension between AI investment and profit return is the most worthy detail to examine in this financial report.

In the fourth fiscal quarter, AI - related revenue increased by 84% year - on - year, accounting for 38% of the group's total revenue. The annual AI - related revenue doubled year - on - year. The annual revenue of the ISG increased by 32% year - on - year, achieving annual profitability for the first time.

An embarrassing fact is that the gross profit margin is decreasing.

The direct reason for the decline in the overall gross profit margin is the low profit margin of the ISG. In other words, Lenovo uses volume and scale to promote the AI infrastructure business, but the marginal profit of the infrastructure business itself is not higher; instead, it drags down the overall level.

Yang Yuanqing simply explained the contradiction: If the direction is right, profit is just a matter of time. He believes that in the future, AI infrastructure will shift from training - dominated to inference - dominated. Currently, about 70% to 80% of GPU servers are used for training, and only 20% to 30% are used for inference. In the future, this situation will be reversed, and the demand for inference will further increase.

The SSG (Solutions & Services Group) provides another possibility. Its annual revenue exceeded 10 billion US dollars for the first time, a year - on - year increase of 19%, and the operating profit margin remained above 22%.

This part of the business is closer to the scenario - based implementation of AI on the enterprise side and has stronger profit elasticity than pure hardware sales.

The AI terminal business is also worthy of attention. The sales share of AI PCs in the Chinese market has accounted for 42.1% of PC sales. This means that AI terminals are not only sold at a higher price but also in larger quantities.

So, the AI direction is indeed right, and the profit gap exposes a deeper tension: The ISG proves that it can sell products, while the SSG and AI PCs prove that it can make money. How high Lenovo can fly at present depends on the game between these two forces.

III. Leap and Hidden Lock

Just one week before Lenovo released this financial report, a scene at a banquet in the Great Hall of the People in Beijing was repeatedly captured by the media: Yang Yuanqing and Elon Musk were sitting at the same table, which reminded many people of the conversation twelve years ago.

In the 2014 CCTV program "Dialogue", Musk and Yang Yuanqing were on the same stage. The host asked Yang Yuanqing how he viewed Tesla's marketing ability. Yang counter - asked the host to ask Musk how many customers he had. Musk honestly replied that he had more than 30,000 customers.

Yang Yuanqing smiled slightly and said the "famous quote" that was later repeatedly cited: Lenovo sells five devices per second, and the annual sales volume exceeds 115 million units.

Many people still interpret this as Yang Yuanqing's arrogance today, but the fact is different when considering the context at that time.

At that time, Lenovo had just become the world's number one in the PC market, and the acquisition of IBM's PC business had achieved full profitability. Yang Yuanqing's status as Liu Chuanzhi's successor was already established. On the other hand, Musk's Tesla was deeply trapped in the production capacity hell, and it would still take some time for the Model S to be mass - produced.

In a consumer electronics world driven by sales, it is highly unlikely that anyone would support a startup company that only sells a few thousand cars a year.

What Yang Yuanqing did not foresee at that time was a profound paradigm shift in the hardware industry. At that node, Lenovo was essentially still a hardware - selling company.

Twenty years later, Musk's Tesla has become one of the technology companies with the highest market value in the world. The real difference is not in the increase or decrease in sales volume but in the fact that Musk is betting on a new species with intelligence as the core, a data - driven and continuously evolving intelligent system.

However, although this comparison is dramatic in terms of dissemination, it ignores a key fact: In the same year as that conversation, Yang Yuanqing led the acquisition of Motorola Mobile and IBM's x86 server business for 2.9 billion US dollars. The latter is the foundation of Lenovo's current AI infrastructure business.

Although Yang Yuanqing could not foresee the future of AI - as - a - service, he spent more than a decade expanding the company's technological foundation from PCs to full - stack AI infrastructure, achieving another silent leap.

Back to the present, the confidence for Yang Yuanqing to set a new goal for Lenovo, to achieve revenue of over 100 billion US dollars within two years, comes from the two aces accumulated through this silent leap.

The first ace is Lenovo's deep - seated partnership with NVIDIA.

Lenovo is the only "full - capacity player" from China in the NVIDIA ecosystem. The two sides have cooperated for more than 30 years, and now they have entered a new stage of the "AI Infrastructure Community".

The second ace is Lenovo's global supply chain resilience.

Lenovo has a global manufacturing network and a "global - local" operating model. During the wave of rising storage chip prices and tariff shocks, it passed the stress test relatively smoothly with its strategy of locking in inventory in advance.

Three years ago, when the AI large - model first triggered a frenzy of computing power, Lenovo seemed to be an outsider. It was neither at the upstream of computing power like NVIDIA nor writing code and telling stories like OpenAI. The capital market could only price it at a discount as an "old - fashioned PC manufacturer".

Three years later, with a 58% annual increase in stock price, a market value approaching HK$200 billion, and an AI revenue share of 38%, Lenovo has proven that in the big game of AI, the value of hardware, computing power, and terminals has finally been recognized.

IV. Conclusion

After getting the best - ever report card, the real test has just begun.

In the new stage where AI is shifting from training to inference, more enterprises are starting to calculate the cost of Tokens. Whether Lenovo can transform the ISG from a hardware revenue - increasing unit into a high - profit engine will determine whether it is just an AI - concept company or a real AI - native enterprise that has crossed the economic cycle.

Thirty years ago, two men were arguing about Lenovo's future in an office in Zhongguancun.

The man who wanted to make chips left. In the following thirty years, as an academician of the Chinese Academy of Engineering, he repeatedly expressed the same regret in different occasions: What would it be like today if Lenovo had chosen another path back then?

History cannot be assumed. When we examine Lenovo's record - breaking financial report, we must admit the great success of the trade - industry - technology path. It has allowed Lenovo to survive and grow large enough to stay at the table in every technological wave.

However, the repeated defeats in the mobile phone market,