Lenovo CFO Says Company Undervalued as AI Server Orders Exceed $50 Billion

On September 16, at the "AI Investment Summit" hosted by Sina Finance, Zheng Xiaoming, Senior Vice President and Chief Financial Officer of Lenovo Group, joined Wu Yi, Co-Head of China Research and Chief China Strategist at BofA Global Research, for a high-level dialogue titled "Global Pricing of AI Infrastructure: Seeking Certainty Assets for AI Investments."

Stock Performance and Record Financials

Over the past year, Lenovo has been one of the standout tech stocks in the Hong Kong market. As of the closing price on September 16, Lenovo Group (0992.HK) was quoted at HK$33.80, up approximately 189% from HK$11.70 a year earlier (Source: iFinD HK Stock Quotes).

Financial performance also reached record highs:

• Q1 FY2026/27 (ended June 30, 2026):
• Revenue: US$26.9 billion (+43% YoY) — highest quarterly growth in nearly five years
• Adjusted net profit: US$1.1 billion (+176% YoY) — first time exceeding the US$1 billion threshold
• AI-related revenue: US$9.3 billion (+60% YoY), accounting for 35% of total group revenue

• FY2025/26:
• Full-year revenue: US$83.1 billion (historic record)
• Adjusted net profit: US$2 billion (+42% YoY)

Valuation Gap with Dell

Despite strong performance, Zheng Xiaoming stated that Lenovo's intrinsic value has not yet been fully reflected in its valuation.

"Compared with Dell, our valuation is roughly one-seventh of theirs, yet our revenue and net profit do not differ by sevenfold. We are completely undervalued by the market."

Revenue and Profit Guidance

Zheng provided forward-looking guidance:

• Revenue target: "The US$100 billion revenue target mentioned by Yuanqing (Yang Yuanqing) may be achieved this year."
• Net margin trajectory: "In the long run, our net margin will definitely move toward 5%, especially for value-added services, which can reach above 8% in the long term."

This guidance is supported by an improving profitability curve:

• Q1 FY2026/27 adjusted net margin: 4.0% (up nearly 2 percentage points YoY)
• Adjusted operating margin: 5.7%

Discussing the gap with Dell, Zheng believes Lenovo holds advantages in technology, channels, and supply chain, and has "the opportunity to achieve their level of profitability."

"If Lenovo can achieve US$150 billion in revenue with a net margin of 5 to 8 percentage points, we will not only avoid layoffs but also continue hiring — specifically recruiting AI talent."

He added that the rise in share price stems not only from market factors but more significantly from internal business improvements, such as customer engagement and pricing strategies.

Order Backlog and AI Infrastructure Demand

Zheng's confidence in the "undervaluation thesis" is rooted in order backlogs. He revealed that Lenovo's pipeline (backlog orders) for AI-related businesses has grown rapidly:

• Started at over US$10 billion
• Grew to over US$20 billion
• Exceeded US$50 billion in the latest quarter — all consisting of backlog orders for AI servers

He cited an example of a neocloud vendor client that initially budgeted annual revenues of several hundred million dollars, but grew into a "double billion" (hundreds of billions) dollar-scale order client within 9 to 10 months.

"We see many opportunities like this."

Industry Positioning and Growth Drivers

During the summit's opening remarks, the moderator cited IDC data noting that Lenovo has risen to first place globally in x86 server shipments.

Zheng defined the current wave of AI infrastructure development as a long-term construction cycle for "compute factories." He mentioned that NVIDIA is working with several top global private equity funds to design a US$500 billion capital pool to support neocloud construction — and that what AI factories require are precisely the foundational facilities provided by Lenovo.

"Our true momentum in overseas markets is just beginning."

Incremental Business: Storage Acquisition

Zheng disclosed that Lenovo officially completed the acquisition of a storage company in April this year. Combined with synergies from its services business, this "can improve our overall profit margins and offers significant room for growth."

On AI Investment Overheating

When asked whether AI investment is overheating, Zheng's response was clear:

"We only see substantial demand."

He acknowledged that neocloud companies generally face constraints such as insufficient credit ratings and limited financing access — areas where Lenovo can provide certain forms of support. He noted that he discussed this topic with major global private equity funds in New York.

Closing Remarks

"Yuanqing has said this is a ten-year opportunity for AI. Lenovo is boldly transforming, and the stock market has been relatively supportive this year. But I believe this is still just the beginning."

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