Sealand Securities Co.,Ltd. has released a research report maintaining a "Buy" rating on LENOVO GROUP (00992). The report cited the company's significant progress in hybrid AI as a key factor, leading to an adjustment in its profit forecasts. Sealand Securities now projects LENOVO GROUP's revenue for FY2026 to FY2028 to be $80.144 billion, $87.600 billion, and $93.235 billion, respectively. The forecasted non-HKFRS net profits for the same periods are $1.796 billion, $1.973 billion, and $2.111 billion, corresponding to non-HKFRS P/E multiples of 8.0x, 7.2x, and 6.8x.
The primary views of Sealand Securities are as follows: LENOVO GROUP released its FY2026 third-quarter financial results. For the period, which corresponds to the natural year's fourth quarter of 2025, the company reported revenue of approximately $22.204 billion, representing an 18% year-over-year increase and an 8.6% sequential increase. The gross margin was approximately 15%. Net profit reached $546 million, up 60% quarter-over-quarter, while the non-HKFRS net profit was $589 million, a 36% increase compared to the same period last year.
The significant growth in adjusted net profit is primarily attributed to efficiency optimizations and an increased contribution from high-end product portfolios. In FY2026 Q3, the company's revenue reached $22.204 billion, with all three business groups achieving double-digit year-over-year revenue growth. Revenue related to artificial intelligence surged by 72% year-over-year, accounting for 32% of the company's total revenue. Regarding profitability, the adjusted net profit for FY2026 Q3 was approximately $589 million, a 36% year-over-year increase, which is double the rate of revenue growth. The adjusted net profit margin increased by 34 basis points to 2.7%, reflecting improved operational leverage, efficiency optimizations, and a greater revenue contribution from high-end product portfolios and services.
Intelligent Devices Group (IDG): The business group's revenue increased by 14% year-over-year in FY2026 Q3, while operating profit grew by 15%. Profitability for PCs, tablets, and other smart devices remained robust, benefiting from rising average selling prices and improved net profit margins in segments such as premium PCs, AI-powered PCs, gaming PCs, and PC peripherals. The PC peripherals business achieved high double-digit revenue growth with significantly enhanced margins, further improving the overall product mix and profitability.
Infrastructure Solutions Group (ISG): A strategic restructuring is underway and is expected to accelerate the group's return to profitability by FY2027. In FY2026 Q3, revenue for the Infrastructure Solutions Group reached a record high of $5.2 billion, a 31% year-over-year increase, driven by an expanded customer base for cloud infrastructure services. The company has implemented a strategic restructuring plan, resulting in a one-time restructuring charge of $285 million. This initiative aims to optimize the cost structure and continuously improve operational capabilities by adjusting the product portfolio and upskilling employees. Through this plan, the company anticipates accelerating its return to profitability in the next fiscal year and enhancing its profit-making ability, targeting annual net cost savings exceeding $200 million for three consecutive fiscal years.
Solutions and Services Group (SSG): The group's quarterly revenue grew by 18% year-over-year in FY2026 Q3, marking the 19th consecutive quarter of double-digit growth. The operating profit margin improved to 22.5%, nearing a historical high. Within the group's revenue, the proportion from managed services and project and solution services continues to increase, serving as key drivers for maintaining growth momentum. The company has strategically positioned itself in the fastest-growing segments of the IT services industry, targeting a total addressable market of $360 billion. In areas such as digital workplace services, hybrid cloud, artificial intelligence, and sustainability, the Solutions and Services Group is growing at twice the average market rate.
Risk factors include intensifying industry competition; a slower-than-expected recovery in businesses such as PCs and servers; technological disruption that could supersede the company's existing advantages; delays in the deployment of AI applications on end-user devices; disparities across different regional stock markets; increased product cost risks due to US tariff policies; and foreign exchange volatility.