Lenovo: Look Past Headline Earnings Contraction

2025-05-26 06:42:05 ET

Summary

• Lenovo's Q4 headline earnings drop was mainly attributable to non-cash items; normalized net profit actually rose 25% YoY on the back of revenue growth and margin expansion.
• The ISG (server) division outperformed with a 63% top-line jump, validating my earlier view on increased cloud-related investments.
• I expect FY26 normalized net income to grow strongly, driven by server profitability improvement, PC margin recovery, and smartphones' geographic expansion.

I'm still a bull on Lenovo Group (LNVGY) ( LNVGF ) (0992.HK). My prior March 10, 2025 article analyzed Lenovo's "ISG" (Infrastructure Solutions Group or Servers) and "IDG" (Intelligent Devices Group or PCs) divisions....

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