"Resilience under pressure": deconstructing Lenovo's (00992) anti-fragile model.

Under the non-Hong Kong financial reporting standards, net profit increased by 22% year-on-year, while under the Hong Kong financial reporting standards, net profit doubled, with LENOVO GROUP (0092) recording a strong start in the 2026 financial year. On August 14th, LENOVO GROUP released its Q1 performance for the 2025/2026 financial year, achieving revenue of 136.2 billion yuan, a 22% year-on-year increase. Under the non-Hong Kong financial reporting standards, net profit was 2.816 billion yuan, a 22% year-on-year increase, while net profit under the Hong Kong financial reporting standards for shareholders increased by 112%, showing strong profitability. All business segments of the company experienced high growth trends during this period. The three main business groups of the company, IDG Group, ISG Group, and SSG Group, achieved revenues of 135.6 billion USD (approximately 973 billion RMB), 4.29 billion USD (approximately 310 billion RMB), and 2.258 billion USD (approximately 163 billion RMB) respectively, with year-on-year growth rates of 17.8%, 35.8%, and 19.8%. Despite the global operating environment affected by the Trump "tariff war," LENOVO GROUP maintained double-digit growth in performance and stood out in the industry, benefiting from the company's "anti-fragile" model, which ensured the continuity of performance growth. This "anti-fragile" model includes the company's multidimensional advantages, with core elements including leading market share and brand under a diversified business strategy, a global market presence and a strong supply chain system, as well as forward-thinking initiatives in the field of AI. Especially in the field of AI, since declaring the slogan "AI for All" in 2023, the company has accelerated AI across all its businesses. After the launch of the AI PC in May last year, the company solidified its leading position in personal intelligent AI hardware and achieved the fastest growth in its PC business in 15 quarters in this quarter driven by AI PC. With all business segments experiencing accelerated growth and fundamental driving factors, the company has also seen new investment opportunities. Overall high growth, multiple performance indicators reach historic highs In fact, the global business environment in the second quarter of this year was not friendly. In April 2025, Trump initiated a "tariff war" with "equitable tariffs" on various countries, particularly imposing higher tariffs on China, prompting retaliation from the EU and China, two of the world's largest economies, leading to the start of the "tariff war." The tariff war intensified global trade instability and undoubtedly triggered a deep restructuring of global supply chains. In the Q4 performance meeting in May, the media posed the most questions to the management about the impact of tariffs on the group's performance. At that time, the Group's chairman and CEO, Yang Yuanqing, made a commitment to "not lose market share or profits." It turns out that even in this background, LENOVO GROUP achieved strong performance growth. This financial quarter, the company's various performance indicators were very impressive, with revenue hitting a single-quarter high, doubling profitability. Looking at each quarter, the company has achieved high double-digit growth in revenue and net profit for five consecutive quarters. From a business perspective, all business segments achieved double-digit growth, with ISG Group leading the way in growth. During the period, IDG Group, ISG Group, and SSG Group accounted for 71.5%, 22.78%, and 11.99% of total revenues, respectively. In addition, under the global layout, the company achieved growth in the Asia Pacific region, China, the Europe-Middle East-Africa market, and the Americas, with significant growth in key regions, including a 37% increase in the Asia-Pacific market and a 36% increase in the Chinese market. LENOVO GROUP has surpassed industry growth levels in various fields and continues to solidify its leading position and strong competitiveness during the counter-cyclical period. Taking the PC business as an example, according to IDC's data on PC shipments for the second quarter of 2025, global PC shipments increased by 6.5% year-on-year, while LENOVO GROUP's shipments increased by 15.2%, increasing its market share to 24.8%. In comparison, the second-ranked HP increased by only 3.2%, and the third-ranked Dell decreased by 3%, with market shares dropping to 20.7% and 14.3%, respectively. The performance that exceeded expectations in adversity reflects the clear business strategy of LENOVO GROUP and the results of its hybrid AI development route, creating a strong and unshakable "anti-fragile" model. The three core dimensions of the "anti-fragile" model LENOVO GROUP's "anti-fragile" model is based on its performance resistance in adverse environments and the sustainability of its business growth. It has withstood the test of time in the face of forces beyond its control and economic risks, maintaining its industry-leading position. The company's "anti-fragile" model is mainly reflected in three core dimensions: The first dimension: Leading industry position in a diversified product portfolio. It is well known that LENOVO GROUP is a PC supplier, but this is only one of its businesses. In recent years, non-PC businesses have grown rapidly, with their revenue share close to 50%. The company's three major business groups, IDG Group, ISG Group, and SSG Group, have all maintained robust growth, avoiding the risks of a single business focus. Each business group occupies leading positions in multiple areas, providing strong competitive advantages for business development. Taking the IDG Group as an example, it achieved a strong year-on-year revenue growth of 17.8%, with the PC business achieving the fastest growth in 15 quarters. It is worth mentioning that AI PC continues to be a driver of industry growth. In the first quarter of the 2026 financial year, the AI PC shipments in the Chinese market accounted for 27% of the total laptop shipments; while in the global market, AI PC shipments accounted for over 30% of overall PC shipments. The market share of Windows AI PC is expected to surpass that of the overall Windows PC market, securing its position as the global leader in the Windows AI PC market. Institutional data shows that AI PC shipments are expected to grow by 77% in 2025, and are expected to account for 70% of total PC shipments by 2027. The high growth of AI PC and its huge market potential will continue to consolidate LENOVO GROUP's position as the leader in the global PC market, widen the gap with competitors in market share, and drive sustained growth in the performance of the IDG Group. The second dimension: Global markets and supply chain. LENOVO GROUP's business covers 180 markets around the world, achieving balanced growth in each region through diversified market layouts. The Asia-Pacific region, China, Europe-Middle East-Africa market, and the Americas each contribute 20% to 33% of the company's total revenue, avoiding the risks of over-reliance on a single market. In the first quarter of 2026, all major regional markets drove growth, with revenue in China and the Asia-Pacific region (excluding China) growing by over 35%. It is worth noting that LENOVO GROUP's global market is not just a sales market. The company has established a global manufacturing layout with over 30 manufacturing bases in more than ten countries, enabling a unique "global resources, local delivery" model and creating a "China Plus" model. The company's end-to-end ODM+ operation ensures cost competitiveness and the ability to quickly respond to customer needs under local delivery, while benchmarking against best practices in the industry. "China Plus" and global manufacturing have built a strong supply chain ecosystem for the company, providing competitive advantages in manufacturing costs and supply advantages on the demand side, while maintaining a leading position in technology and product competitiveness. The company's strong network of suppliers includes upstream chip giants such as NVIDIA and Qualcomm, and its continued presence in the top ten of the Gartner global supply chain list makes it the top-ranked company in the Asia-Pacific region. The third dimension: Forward-looking layout in AI. In 2023, LENOVO GROUP proposed a doubling of R&D investment, based on the background of AI investment, and also declared the slogan "AI for All." In May 2024, the company launched the world's first AI PC, accelerated AI penetration across all businesses, continuously improved product capabilities, empowered business growth, and achieved growth for five consecutive quarters since 2024. Under a hybrid AI strategy, the development speed of its AI intelligent entity far exceeds market expectations. In terms of personal intelligent entities, the company has created a variety of products including AI PC, AI smartphones, and AI terminal devices, and has launched AI PC products in China featuring the "Tianxi" personal super intelligent entity, solidifying the global leadership position of AI PC. In the enterprise intelligent entity field, ISG and SSG serve as scene entries, with AI infrastructure business revenue growing by 155% year-on-year. This fully demonstrates the success of the company's layout in the enterprise intelligent entity. It is worth noting that the company is accelerating the construction of a unified AI entry, exploring a new paradigm of intelligent experience across terminals and ecosystems, and is also building an AI model factory, developing an intelligent entity platform to advance the comprehensive implementation of Lenovo's hybrid AI advantages. AI intelligent entities have become an important entry point in the AI era, and the company has taken the lead in laying out in different fields, firmly grasping the first-mover advantage, seizing market share, and consolidating its leadership position. Valuation on the rise, setting sail after breaking through performance bottlenecks The "anti-fragile" model has built strong competitive barriers and a solid moat for LENOVO GROUP, driving the company to maintain sustained high growth in performance and business blooming across economic cycles and unforeseeable economic risks. The company's strong fundamentals are also reflected in its valuation, with a trend of long-term bullishness since 2018, where its market value has multiplied by five times, providing substantial returns for long-term investors. In April of this year, when Trump launched the tariff war, causing market turmoil, the company's performance far exceeded the overall market. Although there was a retracement in that month, the company showed more resilience to market downturns. Starting the next month, it continued to rise and recorded four consecutive months of gains, with a 24.7% increase in market capitalization. Value investors continued to increase their holdings, with the shares held by the Hong Kong Stock Connect increasing. As of August 15th, the shares held by the Hong Kong Stock Connect reached 878 million shares, an increase of 123 million shares from the beginning of April, an increase in market capitalization of 1.479 billion Hong Kong dollars, clearly indicating investors' recognition of the company's long-term investment value. However, the company's valuation is still undervalued, with a current PE (TTM) ratio of only 10 times. Previous valuation logic was mainly based on performance growth drivers, with a greater focus on PC business growth logic. However, with non-PC businesses accounting for nearly 50% of revenue, ISG and SSG businesses experiencing high growth, especially driven by AI intelligent entities, valuation should be redefined using AI race logic. In the upcoming AI golden age of the next decade, LENOVO GROUP, with its first-mover advantage in AI intelligent entities, leadership advantages, product technology advantages, and globalization advantages, is expected to lead the development of the AI multi-trillion-dollar market, reflecting in performance growth, releasing long-term value, and further driving upwards valuation. Following the valuation trajectory of NVIDIA, according to AI race valuation logic, the company has a significant room for appreciation. The company has also been favorable by major investment banks and continually raised its target price. For example, Lyber Securities believes that the company's first quarter profits far exceeded market expectations and raised the target price to 12 Hong Kong dollars; JP Morgan believes that the company's PC business is strong, and profits for 2026 are expected to rise, raising the target price to 13 Hong Kong dollars; Citigroup Research also raised the target price for LENOVO GROUP from 13.30 Hong Kong dollars to 13.60 Hong Kong dollars; HSBC Research, believing that the business personal computer replacement cycle will benefit, raised the target price to 12.9 Hong Kong dollars. Taking the average of the target prices of these major investment banks, the average target price is 13 Hong Kong dollars, which is 20% higher than the current price. In conclusion, thanks to the "anti-fragile" model, LENOVO GROUP has maintained continuous high growth performance during counter-cyclical and economic risks beyond its control, with all business segments achieving high growth, significantly increased profitability, and its development of AI intelligent entities far ahead of its peers. In the multi-trillion-dollar AI race track, the company will also have the opportunity for a redefined valuation.