Lenovo's stock price surged significantly in May, rising 109% in a single month, marking its best monthly performance since 1999. The core driver of this rally was the company's latest financial report, which exceeded market expectations, particularly the accelerated growth of 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, marking its fastest quarterly growth in nearly five years; net profit was $521 million, a significant 479% increase from $90 million in the same period last year. Among major hardware manufacturers, such profit growth has significantly boosted market expectations for its valuation.
AI server business becomes the main driving force
What truly spurred market sentiment was the performance of Lenovo's Infrastructure Solutions Group (ISG). This division primarily serves large enterprises and cloud service providers, offering servers, storage, and data center products optimized for AI workloads.
This business segment generated $5.6 billion in revenue for the quarter, a 37% year-over-year increase; full-year revenue reached $19.2 billion, setting a new record. As enterprise customers' demand for AI inference deployments expands, traditional server vendors are beginning to benefit, and procurement is no longer dominated solely by a few hyperscale cloud providers.
Dell Data Drives Industry Revaluation
Lenovo's stock price surge is also related to Dell's latest data release. Dell announced first-quarter revenue of $43.84 billion, an 88% year-over-year increase, and raised its full-year AI server revenue guidance to $60 billion. Its AI server order backlog reached $51.3 billion.
This data was interpreted by the market as a sign that industry demand is still expanding. Investors used this to reassess Lenovo's potential gains in the AI server market, driving its stock price up as much as 31% on Friday.
- Lenovo's stock price rose 109% in May.
- Quarterly revenue was $21.6 billion.
- Quarterly net income was $521 million.
Enterprise customer demand continues to expand
One of the changes the market is paying attention to is that the demand for AI infrastructure is gradually expanding from hyperscale cloud vendors like Amazon and Google to a wider range of enterprise customers. For many companies, building a complete AI infrastructure from scratch is too costly, so they rely more on vendors like Lenovo and Dell that provide systems that can be deployed directly.
Lenovo's PC business also maintained growth. Its Smart Devices Group reported revenue of $14.6 billion in the quarter, a 24% year-on-year increase, and a global PC market share of 24.4%, the largest gap with the second-place competitor in 15 years. However, judging from the stock price reaction, the server infrastructure business was still the real driver of the valuation revision.
Compared to the overall performance of Hong Kong tech stocks, Lenovo's recent surge has been more remarkable. The Hang Seng Tech Index has fallen by more than 15% this year, with some internet platforms under pressure due to increased investment in AI hardware; Lenovo, on the other hand, is at the other end of the industry chain, mainly benefiting from the sale of infrastructure equipment.
The company's annual revenue reached $83.1 billion, a 20% year-on-year increase, surpassing $80 billion for the first time. Management also stated that it plans to increase annual revenue to $100 billion within the next two years.
GPU supply remains a limiting factor.
Despite strong demand, the expansion of Lenovo's AI server business is still affected by upstream chip supply. The company stated that ISG had over $21 billion in AI server demand reserves at the start of the new fiscal year, but the final delivery schedule still depends on securing sufficient Nvidia GPU quotas.
This also means that the AI server industry is currently competing not only on the size of orders, but also on the ability to acquire key chips.
