CICC: Lenovo's Long-Term Net Profit Margin Target Clarified, SuperNode Commercialization May Drive Revaluation

Lenovo Group's AI infrastructure business and its potential for profitability improvement continue to attract institutional attention.

On September 19, CICC released its latest research report on Lenovo Group, stating that following participation in the September 16 Sina Finance AI Investment Summit and Lenovo Group Investor Exchange, the company has further clarified its long-term profitability improvement path. Additionally, with the acceleration of supernode commercialization, Lenovo's competitiveness in the AI infrastructure space is extending from standalone servers to system-level capabilities. CICC maintains a "Outperform" rating on Lenovo Group with a target price of HKD 51.

Long-Term Profitability Targets Clarified

A key signal from Lenovo is the further clarification of its long-term profitability improvement goals. Lenovo Group Senior Vice President and CFO Wong Wai Ming stated that while continuing to drive growth, the company aims to raise its net profit margin to between 5% and over 8% in the long term. Notably, Lenovo has explicitly referenced Dell's profitability levels as an important benchmark, believing that its technological advantages, global channel presence, and supply chain capabilities provide a foundation for achieving comparable profit margins.

This suggests that as high-growth businesses such as AI servers continue to scale, the market's focus on Lenovo in the next phase will extend beyond revenue expansion to include profitability improvement as a core metric. Previously disclosed at Investor Day, Lenovo's net profit margin targets are:

• 1–2 years: Over 3%
• 3–5 years: Over 5%
• 5+ years: Over 8%

Looking ahead, net profit margin improvement is expected to become a significant driver of the company's fundamental performance.

AI Server Business as a Key Profitability Driver

One of the core variables supporting margin improvement is the continued scaling of the AI server business. In Lenovo's FY2026/27 first fiscal quarter, the AI server potential business opportunity pipeline grew 157% quarter-over-quarter, reaching USD 54 billion, covering hyperscale cloud service providers, emerging cloud service providers, and enterprise clients.

CICC believes that rapid AI server growth, improved ISG profitability, and the expansion of higher-margin businesses such as AI PCs, storage, and services are expected to jointly support the company's net profit margin targets.

Supernodes: A New Growth Frontier

Supernodes are emerging as a new growth direction for Lenovo's AI infrastructure business. Chen Zhenkuan, Vice President of Lenovo Group and General Manager of China Infrastructure Business Group, stated that as large language model parameter sizes continue to increase, traditional 8-GPU servers are gradually becoming insufficient to meet model demands. Supernodes with 32 or more GPUs are expected to become critical infrastructure for the next phase of training and inference.

CICC believes that Lenovo, with its full-stack product portfolio and global delivery capabilities, is well-positioned to capture the industry opportunity as AI infrastructure competition shifts from standalone servers to system-level competition.

This shift also means that the market's assessment of Lenovo's server business is expanding from "how many servers are shipped" to encompass the product and delivery capabilities of the entire AI infrastructure system. As computing infrastructure complexity increases, server vendors must simultaneously possess capabilities in computing, storage, networking, and system integration. Supernode commercialization will become a key test of vendors' system-level competitiveness.

Enterprise Inference and Edge AI as Long-Term Growth Drivers

On the demand side, CICC believes that enterprise inference and edge AI will also constitute long-term growth drivers for Lenovo. Management estimates that the AI industry is still in the early stages of infrastructure buildout. As enterprise data, organizational structures, and processes are gradually integrated, inference demand is expected to accelerate.

Lenovo currently covers smart devices, infrastructure, and solution services. CICC believes this full-stack layout is well-positioned to benefit from the ongoing penetration of AI demand—from training to inference, and from the cloud to enterprises and edge devices.

Earnings Forecast and Valuation

CICC maintains its non-HKFRS net profit forecasts for Lenovo at:

• FY2026/27: USD 40.6 billion
• FY2027/28: USD 49.8 billion

The target price remains at HKD 51. According to the report, CICC expects Lenovo's Infrastructure Solutions Group (ISG) revenue to increase from USD 19.188 billion in FY2025/26 to USD 30.7 billion in FY2026/27, and further to USD 42.981 billion in FY2027/28. The server business remains a key revenue growth driver for the company over the next two years.

Summary

Overall, with the expansion of AI server order pipelines, continued improvement in ISG profitability, and the gradual commercialization of supernodes, enterprise inference, and edge AI, Lenovo's growth narrative is extending from AI infrastructure revenue expansion to encompass profitability improvement and system-level competitiveness. CICC's reaffirmation of the long-term net profit margin path and supernode commercialization progress provides new fundamental indicators for the market to assess Lenovo's valuation in the next phase.