Core Viewpoint - Lenovo reported strong financial performance in Q1 FY26, with revenue of $18.83 billion, a year-on-year increase of 22.0%, exceeding Bloomberg consensus expectations by 7.2% [1] - The growth was primarily driven by robust demand for hybrid artificial intelligence solutions, although gross margin declined to 14.7%, down 1.9 percentage points year-on-year due to the suspension of H20 shipments in the domestic infrastructure business [1] Group 1: IDG (Intelligent Device Group) - IDG revenue grew by 18.0% year-on-year, with operating profit increasing by 15.0% year-on-year in Q1 FY26 [2] - The global PC market share reached a record high of 24.6%, with AI PC penetration exceeding 30% [2] - The PC business revenue rose by 20.0% year-on-year, maintaining a leading position in the Windows AI PC sector [2] Group 2: ISG (Infrastructure Solutions Group) - ISG revenue increased by 36.0% year-on-year, driven by capital expenditures from global CSP customers in AI and traditional servers [3] - Despite the revenue growth, ISG recorded an operating loss of $85.52 million due to the suspension of H20 shipments and increased R&D investments in AI products [3] - Future improvements in revenue and profitability are expected with the launch of new products and the resumption of H20 sales [3] Group 3: SSG (Solutions and Services Group) - SSG revenue grew by 20.0% year-on-year, with an operating profit margin increase of 1.2 percentage points [4] - The business achieved its 17th consecutive quarter of revenue growth, with strong performance in support services and AI solutions [4] - AI solutions are showing strong momentum, particularly in manufacturing and supply chain sectors, with expectations for double-digit revenue growth in FY26 [4] Price Target and Rating - The target price has been raised to HKD 16.0, reflecting a 4.4% increase from the previous target of HKD 15.3, corresponding to approximately 15 times FY2026E PE [1][4] - The company maintains a "Buy" rating based on the acceleration of AI product deployment and growth in global PC market share [4]

Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 16.00, up from the previous HKD 15.30, reflecting a 4.4% increase [1][5]. Core Insights - The company reported a 1QFY26 revenue of USD 18.83 billion, representing a year-over-year increase of 22.0%, exceeding Bloomberg consensus estimates by 7.2%. The Non-HKFRS net profit attributable to shareholders was USD 389 million, also up 22.0% year-over-year, driven by strong demand from global mixed AI developments [1][5]. - The gross margin for 1QFY26 was 14.7%, a decline of 1.9 percentage points year-over-year, primarily due to the suspension of H20 shipments in the infrastructure segment and changes in product mix [1]. Summary by Segment IDG (Intelligent Devices Group) - IDG revenue grew by 18.0% year-over-year in 1QFY26, with operating profit increasing by 15.0% year-over-year. The global PC market share reached a record high of 24.6%, with AI PC penetration exceeding 30% [2]. - The PC business revenue increased by 20.0% year-over-year, maintaining a leading position in the Windows AI PC sector [2]. ISG (Infrastructure Solutions Group) - ISG revenue rose by 36.0% year-over-year in 1QFY26, driven by continued capital expenditures from global CSP customers in AI and traditional servers. However, the segment recorded an operating loss of USD 85.52 million due to the suspension of H20 shipments and increased R&D investments [3]. - Future improvements in revenue and profitability are expected with the launch of new products and the resumption of H20 sales [3]. SSG (Solution Services Group) - SSG revenue increased by 20.0% year-over-year in 1QFY26, marking the 17th consecutive quarter of growth. The segment's revenue from support services and AI solutions showed strong performance, particularly in manufacturing and supply chain sectors [4]. - The overall contribution of these services to SSG's total revenue increased by 3 percentage points to 58% [4]. Financial Projections - The company expects revenue growth of 0.7%, 2.3%, and 3.8% for FY2025, FY2026, and FY2027, respectively. Non-HKFRS net profits are projected to be USD 1.69 billion, USD 1.89 billion, and USD 2.12 billion for FY2026, FY2027, and FY2028, reflecting year-over-year growth rates of 17.6%, 11.3%, and 12.4% [5][9].