AI server demand strong! EB Securities maintains a "buy" rating on Lenovo (00992).

Recently, LENOVO GROUP (00992) announced its performance for the second quarter of the 2025/26 fiscal year ending September 30, 2025: quarterly revenue increased by 15% year-on-year to 146.4 billion yuan, setting a new high for the quarter and significantly exceeding market expectations; adjusted net profit increased by 25% year-on-year to 3.66 billion yuan, with net profit growth far exceeding revenue growth, demonstrating the group's operational resilience and strategic certainty in navigating in a complex environment. In response to this, EB SECURITIES released a research report, which analyzed the following aspects: 1) FY26Q2 PC revenue increased by 17% year-on-year. According to IDC data, the company's PC shipment market share for 25Q3 (corresponding to FY26Q2) was 25.5%, an increase of 1.7 percentage points year-on-year; according to the company's announcement, Lenovo's AI PC held a 31.1% shipment market share, ranking first in the global Windows AI PC market. FY26Q2 AI PCs accounted for 33% of the company's total PC shipments. 2) FY26Q2 smartphone activations reached a historical high, mainly driven by strong sales of high-end models such as Razr and Edge. In terms of regional sales, the sales performance in the Asia-Pacific region and the high-end mobile phone sales in the Indian market were good. The company actively leveraged its supply chain advantages to respond to rising storage costs, with the impact on the company lower than its peers. ISG business: Strong demand for AI servers, with triple-digit year-on-year growth in the Neptune liquid cooling solution. FY26Q2 ISG revenue was $4.087 billion, an increase of 24% year-on-year, including: 1) Cloud infrastructure business revenue increased by 21% year-on-year, reaching a historical high; 2) Enterprise infrastructure business revenue increased by 30% year-on-year. Operations incurred a loss of $0.32 billion, narrower than the $0.36 billion loss in the same period last year. During the period: 1) AI server revenue grew at a high double-digit rate, mainly due to increased adoption downstream and product iteration. 2) Revenue from the Neptune liquid cooling solution increased by 154% year-on-year; 3) The profitability of the ISG business revenue in the Chinese market continued to improve. SSG business achieved a historical high in quarterly revenue: FY26Q2 SSG revenue was $2.556 billion, an increase of 18% year-on-year, maintaining double-digit growth for 18 consecutive quarters; operating profit margin was 22%, unchanged year-on-year. Support services revenue increased by 16% year-on-year, generating deferred revenue of $3.6 billion, an increase of 17% year-on-year; operating services and project and solution revenue increased by 29% and 13% year-on-year respectively, totaling 59.9% of SSG's overall revenue, up 1 percentage point year-on-year. It has become the core engine of profit growth, and operational services + projects and solutions achieve customer cost optimization through differentiated and vertical solutions, maintaining a higher revenue growth rate.