Lenovo's stock price strengthened significantly in May, rising 109% for the month—the best monthly performance since 1999. The primary driver of this rally was the company's latest earnings report, which exceeded market expectations, particularly due to accelerated growth in its AI server-related business.
Quarterly profits increased significantly
The company's latest quarterly revenue reached $21.6 billion, a 27% year-over-year increase—the fastest quarterly growth in nearly five years; net profit amounted to $521 million, a 479% surge compared to $90 million in the same period last year. Such a significant profit increase has notably raised market expectations for its valuation among major hardware manufacturers.
AI server business becomes the main driver
What truly drove market sentiment was the performance of Lenovo’s Infrastructure Solutions Group (ISG), which provides AI-optimized servers, storage, and data center solutions primarily for large enterprises and cloud service providers.
This business segment generated $5.6 billion in revenue for the quarter, a 37% year-over-year increase, and reached $19.2 billion in revenue for the full fiscal year, setting a new all-time record. As enterprise customers expand their demand for AI inference deployment, traditional server manufacturers are beginning to benefit, no longer leaving procurement dominated solely by a few hyperscale cloud providers.
Dell's data drives industry reassessment
Lenovo's stock price accelerated upward, also due to Dell's latest disclosed data. Dell reported first-quarter revenue of $43.84 billion for its new fiscal year, an 88% year-over-year increase, and raised its full-year AI server revenue guidance to $60 billion. Its backlog of AI server orders has reached $51.3 billion.
This data is viewed by the market as a signal that industry demand continues to expand. Investors reassessed Lenovo’s potential gains in the AI server market, driving its stock price up by as much as 31% on Friday.
- Lenovo's stock price rose a cumulative 109% in May.
- Quarterly revenue amounted to $21.6 billion.
- Quarterly net profit amounted to $521 million.
Corporate client demand continues to expand.
One shift in market focus is that demand for AI infrastructure is gradually expanding beyond hyperscale cloud providers like Amazon and Google to a broader range of enterprise customers. For many companies, building complete AI infrastructure in-house is too costly, so they increasingly rely on vendors like Lenovo and Dell to provide ready-to-deploy systems.
Lenovo's personal computer business also continued to grow. Its Intelligent Devices Group recorded revenue of $14.6 billion for the quarter, a 24% year-over-year increase, with a global PC market share of 24.4%, the largest gap from the second-place competitor in 15 years. However, the stock price reaction suggests that the server infrastructure business remains the primary driver of the valuation upgrade.
Compared to the overall performance of Hong Kong’s technology stocks, Lenovo’s recent rally has been more pronounced. The Hang Seng Tech Index has declined over 15% this year, as some internet platforms face pressure from increased AI hardware investments; Lenovo, however, sits at the other end of the supply chain, primarily benefiting from the sale of infrastructure equipment.
The company's annual revenue reached $83.1 billion, a 20% year-over-year increase and the first time it surpassed $80 billion. Management also stated plans to increase annual revenue to $100 billion over the next two years.
GPU supply remains a limiting factor.
Despite strong demand, the expansion of Lenovo’s AI server business is constrained by upstream chip supply. The company stated that as ISG enters the new fiscal year, it has a backlog of over $21 billion in AI server demand, but the final delivery pace still depends on securing sufficient Nvidia GPU allocations.
This also means that the AI server industry is currently competing not only on order volume but also on the ability to secure critical chips.