The global technology industry is currently at a critical juncture of deep restructuring: on one hand, core components such as memory chips are experiencing an almost frenzied cycle of sharp price increases; on the other, tech giants are investing heavily in strategic bets and an arms race centered on artificial intelligence.
As a leading player in the global AI ecosystem, LENOVO GROUP has developed a strategy to navigate and evolve amid the shift from cloud-based AI training to on-device inference.
On February 12, 2026, LENOVO GROUP disclosed its third-quarter results for the 2025/26 fiscal year, with key metrics surpassing market expectations. As of December 31, 2025, the group’s revenue reached RMB 157.5 billion, representing a year-on-year increase of over 18%. Adjusted net profit rose by 36%, with profit growth doubling the rate of revenue expansion. Several investment banks, including Morgan Stanley, noted that gross margins were in line with market expectations. During the subsequent earnings briefing, LENOVO GROUP Chairman and CEO Yang Yuanqing committed to maintaining double-digit growth in the coming quarters.
That same afternoon, Winston Zheng, Senior Vice President and Chief Financial Officer of LENOVO GROUP, participated in an in-depth media interview, candidly addressing key market concerns: industry divergence following the memory price surge, the AI arms race and ecosystem evolution, and the path to profitability recovery for the Infrastructure Solutions Group. He elaborated on the logic behind LENOVO GROUP’s valuation reassessment.
"Our valuation will transition from being solely PC-dependent to one based on multiple products and business lines," Zheng stated frankly. He noted that LENOVO GROUP, which has already shifted toward AI and AI agents, is currently significantly undervalued. Benchmarking against peers, he argued that the company reasonably deserves a price-to-earnings ratio of 16 to 17 times, representing a 60% to 70% upside from its current valuation.
The Matthew Effect of the Memory Price Surge "We have never seen such a rapid increase—this is a surge," Zheng remarked. He believes that memory chip prices are on a fast upward trajectory, changing as frequently as every two weeks, which will significantly reshape the competitive landscape for PCs, smartphones, and servers, further polarizing larger and smaller manufacturers.
Specifically, as a leading brand, LENOVO GROUP, through continuous product innovation, is not only expected to further increase its PC market share but also to drive overall revenue growth through higher average selling prices. In contrast, smaller brands, with weaker bargaining power and limited capital, will be forced to either raise prices sharply or reduce product lines to survive, leading to continued erosion of their market share. According to third-quarter data, LENOVO GROUP’s PC shipments grew 15% year-on-year, outperforming the market for the 10th consecutive quarter. Its global PC market share rose to 25.3%, maintaining a lead of 5.2 percentage points over the second-place player for the eighth straight quarter.
Amid extreme tightness in memory supply, LENOVO GROUP adopted a strategy of "securing supply first, then considering price." "Securing inventory is crucial," Zheng emphasized. He pointed out that LENOVO GROUP’s long-standing relationships with major suppliers have long been a core competitive advantage. The company has already locked in large-scale memory resources through multi-quarter procurement contracts, ensuring supply volume and allocation.
"The value of this inventory has increased—the more I have, the more valuable it becomes," Zheng noted. In a surge cycle, he explained, inventory is no longer a turnover burden but an appreciating asset. LENOVO GROUP’s inventory consists of three main categories: component stock, finished goods awaiting delivery, and channel inventory.
As procurement prices fluctuate with the market, Zheng highlighted that LENOVO GROUP implemented a 5% operational expense control as early as April 2025, coinciding with shifts in international trade dynamics, to cushion the impact of rising costs. This demonstrates the company’s strong and mature operational capabilities.
Sustained Profit Growth for ISG In response to memory cycle volatility, LENOVO GROUP’s Infrastructure Solutions Group is playing a key role as a financial buffer. Zheng pointed out that unlike the volatile consumer electronics market, server customers are mostly enterprises with strong payment capabilities and rigid demand. Therefore, cost pressures from the memory surge can be passed downstream, preserving profit margins.
Third-quarter data showed that ISG revenue reached RMB 36.7 billion, up more than 30% year-on-year, hitting a record high. LENOVO GROUP had previously recorded a one-time restructuring charge of USD 285 million, which is expected to yield annual net cost savings of RMB 1.4 billion over the next three years, supporting continuous improvement in profitability. Management has committed to returning ISG to profitability in the fourth quarter and achieving sustained profit growth thereafter.
Zheng acknowledged that previous profit pressure on ISG stemmed mainly from misalignment between past decisions and market trends. The group is now determined to eliminate product lines not aligned with future trends, ensuring the business captures the benefits of computing demand. Currently, ISG’s growth momentum is deeply tied to AI infrastructure needs. In the third quarter, revenue reached RMB 36.7 billion, up over 30% year-on-year, a historic high. Notably, the Neptune liquid cooling technology business, strongly driven by AI, grew 300% year-on-year, translating hard technology into pricing advantages.
More importantly, LENOVO GROUP is strengthening ISG’s long-term competitive barriers through "in-house capabilities and vertical integration." In January 2025, the group announced the acquisition of Infinidat, an Israeli high-end enterprise storage systems company, which is currently under regulatory review. Zheng indicated that bringing key IP in-house will allow LENOVO GROUP to adopt an integrated "server plus storage" procurement approach, enabling solution synergies and reducing reliance on third-party OEM products. The incremental benefits of this acquisition have yet to be realized but are expected to become a significant growth driver.
As restructuring effects materialize and self-developed IP is integrated, ISG’s contribution to overall revenue is set to increase significantly, becoming a key engine for LENOVO GROUP’s valuation reassessment. Zheng projected that a substantial portion of the group’s double-digit growth in the coming quarters will come from ISG.
AI Competition Will Converge on Endpoint Access "They are spending money, and we benefit—they need to buy our products. That’s a good thing," Zheng commented, referring to massive capital expenditures and fundraising recently disclosed by global tech giants. He analyzed that while this capital-intensive competition strategy differs fundamentally from LENOVO GROUP’s approach, it will ultimately translate into long-term demand for computing infrastructure, providing LENOVO GROUP with sustained order flow. Third-quarter data showed that LENOVO GROUP’s AI server revenue grew 59% year-on-year, with deliveries beginning for B200, B300, and GB300 servers based on the latest GPU platforms.
"None of these players will abandon the AI race within the next five years," Zheng predicted, noting that no major tech company is likely to exit midway. Whether it’s Google, Meta, or xAI overseas, or ByteDance, Alibaba, and Tencent domestically, all are making significant investments.
As AI transitions from training to deployment, competition for endpoint access is inevitable. Zheng cited examples such as OpenAI hiring Jony Ive from Apple to define new devices, Perplexity’s deep collaboration with Motorola, and ByteDance’s efforts to enter hardware through its Doubao AI agent. These signs indicate that the strategic value of the endpoint market is being repriced. As a global leader in PCs, smartphones, and tablets, LENOVO GROUP aims to enhance on-device experience through multi-model integration, targeting an increase in daily active rates for on-device AI from the current 40%-50% to 70%-80%.
A deeper transformation involves the redistribution of profits across the industry chain. Zheng noted that in the PC and smartphone eras, most profits were captured by chipmakers and operating system providers. The emergence of AI agents, however, could颠覆 this dynamic. "In the future, there may be greater opportunities for shared profits," he suggested. While traditional software companies face disruption from AI’s rise, hardware-focused companies like LENOVO GROUP, by securing endpoint access and integrating multiple models, may gain bargaining power not seen in years.
Additionally, Zheng shared an anecdote: he once asked an AI model to simulate the competitiveness of cloud AI versus on-device AI, and the conclusion was that "Hybrid AI is optimal." This aligns with LENOVO GROUP’s strategy: dual-drive growth through personal and enterprise intelligence, advancing a hybrid AI approach with a "one-body, multi-device" layout on endpoints. Third-quarter data revealed that LENOVO GROUP’s AI-related revenue surged 72% year-on-year, accounting for 32% of total revenue. This better-than-expected performance indicates that the hybrid AI strategy has passed rigorous financial validation.
Navigating the sharp fluctuations of the memory cycle and driving growth toward sustainable profitability through a hybrid AI strategy, LENOVO GROUP has established a solid foundation to leap into the AI and agent markets and achieve corresponding valuation reassessment. In this process, single-quarter gross margin metrics are insufficient to fully reflect the company’s value or define LENOVO GROUP today. With continuous operational improvements, sustained ISG profitability, and expanding AI-related businesses, LENOVO GROUP’s long-term competitiveness is accelerating, and its value appreciation potential is widening.