Lenovo’s AI Engine Drives Record Sales and a $100 Billion Ambition, Yet Valuation Questions Mount

Lenovo posts record $83.1B revenue, AI sales double, but stock's 175% YTD gain and overbought RSI spark debate on whether AI growth is priced in.

Lenovo’s fiscal year 2025/26 ended with a bang — a record $83.1 billion in revenue, a doubled quarterly profit, and a stock price that punched through a fresh 52-week high of 26.68 Hong Kong dollars. But beneath the celebratory headlines, investors are wrestling with a more nuanced question: how much of this AI-driven growth is already priced in?

The headline numbers leave little room for disappointment. Annual revenue climbed 20% to an all-time high, powered by a final quarter that saw sales leap 27% year-on-year to $21.6 billion — the company’s strongest three-month performance in half a decade. Adjusted net profit for the quarter reached $559 million, double the prior-year level, while the full-year adjusted figure rose 42% to roughly $2 billion. Lenovo also notched a record PC market share of 24.4% and its Motorola mobile unit delivered its best-ever shipment volumes.

The real engine, however, is artificial intelligence. AI-related revenues surged 84% in the fourth quarter, accounting for 38% of total quarterly sales. For the full year, they doubled to represent a third of the group’s top line. The Infrastructure Solutions Group (ISG) generated $19.2 billion in full-year revenue, with a fourth-quarter contribution of $5.6 billion (up 37%). Analysts at Guotai Haitong peg Lenovo’s AI server order backlog at $21 billion, spread across more than 5,800 AI customers. The company can produce over 70,000 server racks annually, more than 11,000 of which are equipped with direct liquid cooling. Deliveries of the GB300NVL72 systems have begun, and the “Rubin” platform is slated for the second half of 2026.

On the same day the results landed, Lenovo confirmed at GTC Taipei that it will be the primary partner for Nvidia’s new RTX Spark “Superchip”, which is expected to appear in Lenovo laptops and desktops from autumn 2026, bringing AI capabilities directly to end devices.

The price of momentum

The stock’s reaction was emphatic: a 4.75% gain on Monday, pushing the year-to-date advance to nearly 175%. The shares now trade well above their 200-day moving average, and the relative strength index sits at 86 — deep into overbought territory. That has sharpened the debate about valuation.

Lenovo currently changes hands at a price-to-earnings multiple of 19.9 times. That is above a calculated fair value of 17.7, but still well below the Asian technology sector average of 23.3 and a fraction of the peer group average of 75.8. A community-derived price target of 27.61 Hong Kong dollars implies further upside from the latest close of 24.00 Hong Kong dollars. The bullish case rests on the idea that as AI infrastructure, devices and services continue to scale, Lenovo can justify a higher earnings multiple. The cautious counter is that the current multiple already reflects much of the improvement — and that any slowdown in enterprise AI demand or margin pressure would leave little room for error.

Cooling innovation as a differentiator

A less familiar but potentially important piece of the puzzle is Lenovo’s collaboration with Frore Systems. The US-based startup announced in late May that it would work with Lenovo’s Innovation Accelerator on future products using the AirJet Mini, a solid-state cooling chip with no moving parts. The chip can dissipate 7.5 watts of heat, a 50% improvement over its predecessor, and is designed to replace conventional fans in compact systems.

For Lenovo, the partnership strengthens its hand in the premium AI hardware segment — especially AI PCs and edge devices that require cooling solutions capable of handling rising computational loads. While no direct revenue contribution has been quantified, the collaboration bolsters the narrative that Lenovo is investing in tangible hardware innovation to support its AI ambitions. Research and development spending rose 16% in the final quarter, much of it directed toward the “AI factory” concept and hybrid AI solutions for both enterprise and consumer customers.

A concrete anchor: the dividend

Amid the flurry of big-picture metrics, Lenovo’s board has proposed a final dividend of 33.70 Hong Kong cents per share for the fiscal year ended March 2026. The proposal will be put to shareholders at the annual general meeting on July 23. The ex-dividend date is set for August 5, with payment due on August 19.

That calendar gives the valuation discussion a fixed reference point. Investors are simultaneously weighing AI growth, infrastructure profitability, product innovation and capital returns — in a stock that has more than doubled since the start of the year.

CEO Yuanqing Yang has already raised the bar further, setting a target of $100 billion in annual revenue within the next two years. Guotai Haitong argues that the combination of an ISG turnaround and the AI pipeline could trigger a structural re-rating. Whether the current level holds will depend on whether Lenovo can turn its AI narrative into sustainably higher margins and repeatable growth — a test that the coming quarters will decide.