Yang Yuanqing planted a seed in the server business twelve years ago, and it has finally bloomed in the AI era, as capital markets voted with a nearly threefold stock price increase.

Who could have imagined that in just six months, from April 1 to September 29, Lenovo Group Ltd (HKG: 00992) shares would surge dramatically, pushing its market capitalization past HK$440 billion.

In the public's conventional impression, Lenovo has always been a PC giant that rises and falls with industry cycles, and the periodic fluctuations of the personal computer business have essentially defined the company's volatility over the past several decades.

However, the driving force behind this round of dramatic valuation re-rating is no longer the familiar PC base business. What has excited capital markets is the ISG (Infrastructure Solutions Group) business, which represents the future of computing power.

Looking back to 2014, Yang Yuanqing pushed for the US$2.3 billion acquisition of IBM's x86 server business, and at the time, skepticism from the outside was overwhelming.

Over the following eight long years, this business continued to lose money, team integration repeatedly encountered setbacks, and countless people were bearish on this gamble.

Despite loss pressures and market doubts, Yang Yuanqing and Lenovo Group Ltd (HKG: 00992) did not give up, persistently betting on the computing power track and firmly believing that AI would ultimately reshape the industry landscape.

After round after round of organizational adjustments and technological accumulation, enduring dormancy and pain, the once-struggling server business transformed into a pillar of AI computing power and became Lenovo's second growth curve.

In the 2025/26 fiscal year, Lenovo Group Ltd (HKG: 00992) generated revenue of US$83.075 billion, up 20.3% year over year. Adjusted net profit attributable to shareholders reached US$2.049 billion, up approximately 42% year over year. The ISG (Infrastructure Solutions Group) business, including the AI server business, recorded revenue of US$19.188 billion, roughly one-third the size of the IDG business.

According to a research report from Soochow Securities, Lenovo's ISG business operating profit is projected to reach US$1.794 billion in the 2026/27 fiscal year and approach the operating profit scale of the IDG business in the 2028/29 fiscal year.

The veteran PC giant has thus broken free from its cyclical label and completed its transformation into an AI growth stock.

Behind this twelve-year persistence, what choices, pains, and unresolved challenges remain?

The seed planted by Yang Yuanqing 12 years ago finally meets the AI era tailwind

The explosive performance and sharp stock price rise of Lenovo Group Ltd (HKG: 00992) stem from a seed planted by Yang Yuanqing 12 years ago.

In January 2014, Lenovo Group Ltd (HKG: 00992) announced an agreement with IBM to acquire IBM's x86 server business for US$2.3 billion. After the acquisition was completed, Lenovo would rank first in China and third globally in the x86 server field.

At that time, Lenovo had just become the world's largest PC manufacturer and was beginning to look toward longer-term areas.

In Yang Yuanqing's judgment, the value of this acquisition was clear: first, servers were expected to become the second-largest business pillar after PCs, diversifying the group's operations; second, compared with the roughly 5% gross margin of PCs, the server industry generally had gross margins above 20%, offering broad market space and stronger growth potential.

But this acquisition also drew some skepticism. IBM's x86 server business was under profit pressure, and whether Lenovo could quickly achieve stable profitability after acquiring it was a key question. In addition, the x86 server business mainly served the enterprise market, which differed greatly from Lenovo's accumulated PC sales capabilities, and post-acquisition integration was also a huge challenge.

Subsequent developments confirmed both sides' judgments. After Lenovo acquired IBM's x86 server business, the data center business to which it belonged, and later the ISG business, remained loss-making for a long time, only achieving full-year profitability for the first time in the 2021/22 fiscal year, ending March 2022, eight years after the acquisition.

On the integration path, Lenovo also made missteps: in the early days, it directly reused its PC sales team to sell servers. However, PC sales lacked enterprise-level customer resources and professional capabilities, which instead caused server sales to decline.

But short-term losses and integration pains did not shake Yang Yuanqing's and Lenovo Group Ltd's (HKG: 00992) long-term judgment on the server industry. As early as 2017, Yang Yuanqing firmly declared: "Without question, AI is the future, and Lenovo has bet its entire fortune to enter this field." The data center business was also positioned as the infrastructure support for Lenovo's transformation from a hardware company to an AI-based "device + cloud" company.

Industry waves quietly shifted, cloud computing rose, and AI large models drove an explosion in computing power demand, with the market moving from simply purchasing hardware to purchasing computing power capabilities. Lenovo accordingly adjusted its server business positioning, shifting from "selling hardware" to "selling computing power."

At the end of 2025, Lenovo initiated organizational adjustments in the ISG business, cutting and simplifying traditional computing product lines, concentrating R&D resources on AI training and inference tracks, and upgrading its sales system simultaneously. This restructuring incurred US$285 million in expenses.

More importantly, at GTC 2026 in March 2026, Lenovo Group Ltd (HKG: 00992) officially became a global launch partner for NVIDIA Vera Rubin NVL72.

A series of adjustments finally brought performance results. Starting in the 2025/26 fiscal year, the losses in Lenovo Group Ltd's (HKG: 00992) ISG business narrowed sharply and quickly turned profitable, ushering in explosive growth. In the fourth quarter of the 2025/26 fiscal year, ending March 2026, the ISG business turned profitable, with revenue reaching US$5.6 billion, operating profit reaching US$202 million, and operating margin rising to 3.6%.

In the first quarter of the 2026/27 fiscal year, ending June 2026, Lenovo's ISG business revenue reached US$8.51 billion, nearly doubling year over year, with operating profit of US$777 million and an operating margin of 9.1%. By the end of the quarter, its AI server order backlog had grown to RMB 360 billion.

This directly drove a surge in Lenovo Group Ltd's (HKG: 00992) stock price. Wind data shows that from April 1, 2026, through the close on September 29, Lenovo Group Ltd (HKG: 00992) shares cumulatively rose 302%, while total market capitalization grew from approximately HK$110 billion to HK$440.5 billion, an exceptionally outstanding performance.

This veteran PC leader has shone even more brightly in the AI era.

Aiming for AI-native: How strong is Yang Yuanqing's confidence?

At Lenovo Group Ltd's (HKG: 00992) 2026/27 fiscal year kickoff meeting in April 2026, Yang Yuanqing announced that Lenovo would fully transform into an AI-native company.

He stated: "AI is not an add-on project, not an extra layer, and certainly not an afterthought," requiring that everything from product design to business processes be rebuilt around artificial intelligence.

Yang Yuanqing defined the new fiscal year as the year of "AI delivery," with the goal of delivering personal intelligence and enterprise intelligence products to customers, improving the ecosystem, and establishing Lenovo's leading position in hybrid artificial intelligence.

AI Native, also called intelligence-native, generally refers to a systemic paradigm with AI as the underlying architecture and core driving force, rather than simply "AI + tools."

Silicon Valley investor Jeremiah Owyang once said: "The operating logic of AI-Native companies is: first look for AI, and if you can't find it, build AI yourself, and only then hire people."

Lenovo Group Ltd (HKG: 00992) currently has enormous advantages in its AI-native strategic transformation.

Lenovo is a pioneer in hybrid artificial intelligence, and its AI PC business has developed rapidly in recent years. Data shows that Lenovo ranks first globally in the Windows AI PC segment, with a market share of 31%. In addition, Lenovo's AI PC shipments as a share of total sales also exceeded 30%.

At the same time, Lenovo's growth in the AI server business has also been rapid. According to data published by IDC, in the global x86 server market in the second quarter of 2026, Lenovo ranked second globally by sales, behind only Dell, but its shipments reached 286,000 units, up 45.6% year over year, jumping to first place globally.

To complete the computing power storage chain, in January 2025, Lenovo announced the acquisition of Infinidat, an Israeli provider of high-end enterprise storage solutions. According to market estimates, the transaction amount reached the billion-dollar level, making it Lenovo's largest technology acquisition since its 2014 acquisitions of IBM's x86 server business and Motorola Mobility, filling out its high-end enterprise storage landscape.

Looking at Lenovo's entire AI layout, from AI PCs to AI servers and then to storage, Lenovo Group Ltd's (HKG: 00992) AI strategic layout has always revolved around hardware.

This is the corporate DNA engraved in Lenovo Group Ltd's (HKG: 00992) bones: reducing costs through supply chain integration, increasing market share through channel expansion, and enabling the two to work together to improve efficiency and gain competitive advantage.

But to become an AI-native enterprise, it needs not only AI hardware entry points, but also a series of AI solution capabilities including large models and Agents. This is exactly the weakness that Lenovo Group Ltd (HKG: 00992) urgently needs to strengthen.

Fundamentally, Lenovo's core products, PCs and servers, are mature markets where competition is based on supply chain integration efficiency, which is Lenovo Group Ltd's (HKG: 00992) strength. In other areas that require competing on innovation capability and speed, Lenovo Group Ltd's (HKG: 00992) historical track record is not outstanding.

From the perspective of R&D investment, Lenovo Group Ltd's (HKG: 00992) R&D expense ratio has basically remained between 3% and 4% over the years, while OpenAI and Anthropic, currently recognized as AI-native companies, invest significantly more in R&D, leaving a clear gap compared with leading AI-native enterprises.

At present, Lenovo Group Ltd (HKG: 00992) has also launched multiple AI products, including the Tianxi AI personal super agent, the cross-platform personal super agent Lenovo Qira, and the industry's first enterprise super agent, Lenovo Lexiang, but their influence remains relatively limited.

At the same time, as AI Agents accelerate their iteration, whether Lenovo Group Ltd's (HKG: 00992) hardware-embedded AI products can keep up with industry competition and iteration speed and maintain a certain level of market competitiveness still needs further verification.

Relying on twelve years of long-term commitment, Lenovo Group Ltd (HKG: 00992) has achieved leading advantages in servers and PCs, seized the dividends of the AI era, and delivered impressive performance and capital market results.

However, competition in the AI industry is white-hot, and technological iteration advances by leaps and bounds. Whether Lenovo, with its hardware advantages in hand, can strengthen its software ecosystem shortcomings and truly complete its AI-native transformation is worth continued market observation.