If you look for any mention of storage or the ongoing Infinidat acquisition in Lenovo’s latest and record results you will be disappointed. The S word is just not mentioned.
Revenues for the Beijing-headquartered, Chinese-owned Lenovo in its first fiscal 2026 quarter, ended June 30, were up 22 percent Y/Y to $18.3 billion, with a profit of $505 million, up 108 percent. That’s profit measured by Hong Kong Financial Reporting Standards (HKFRS). Lenovo prefers its non-HKFRS measure of $389 million, up 22 percent Y/Y as the HKFRS measure was affected by a non-cash fair value gain on warrants, resulting from share price movements. Lenovo refers investors to focus more on its actual operating performance and non-Hong Kong FRS measures.
Chairman and CEO Yuanqing Yang stated: “By leveraging the resilience and flexibility of our supply chain and operational excellence, we overcame challenges brought by tariff volatility and the geopolitical landscape and achieved significant growth in both top and bottom lines. These record Q1 results underscore our ability to deliver on our promise to preserve competitiveness and continuously grow our business.”
The three component businesses all grew at double digits;
- SSG (services): $2.3 billion, a rise of 20 percent
- ISG (servers, storage, etc for business): $4.3 billion with a 36 percent increase
- IDG (PCs): $13.46 billion, climbing 18.4 percent.
This is great with, Lenovo saying, “The PC business reporting particularly strong numbers following the highest year-on-year revenue growth rate in 15 consecutive quarters and an all-time high market share of 24.6 percent.”
CFO Winston (Shao-Min) Cheng said in the earnings call: “ISG continued to broaden its customer base across both the CSP and ESMB segments in the first quarter with wins in cloud computing, security, content delivery, high-performance computing and AI server offerings applied across a range of leading educational institutions, financial companies and AI infrastructure providers.”
A standout item in ISG was the AI infrastructure business where “revenue more than doubled year-on-year with a robust pipeline and a clear product roadmap ahead. Revenue from industry-leading liquid cooling [Neptune] solutions grew 30 percent year-on-year.” AI infrastructure revenue more than doubled Y/Y and Lenovo has a “strong pipeline.” There was, it said: “China business revenue hypergrowth Y/Y.”
ISG sells into the Cloud Service Provider (CSP) and what it terms the ESMB (Enterprise, Small and Medium Business) market sectors. In other words the public cloud people on the one hand and on-prem organizations on the other. Revenues are split roughly 50:50 between them. Most if not all storage will go to ESMB customers. And most of that is OEM’d NetApp ONTAP storage sold as ThinkSystem DG (QLC flash), DM (flash and hybrid unified), and DE (flash and hybrid SAN).
Now it is buying Infinidat with completion later this year, and its products are clearly enterprise, and high-end enterprise at that.
Cheng said in the earnings call: “ISG recorded an operating loss of $86 million in the first fiscal quarter. Profitability was temporarily affected by strategic investments to enhance our long-term AI capabilities and accelerate the transformation of our ESMB business.” There was no explanation of what these ”strategic investments” were, and no analysts on the earnings call asked about them. In our experience, US analysts would have been all over the Lenovo execs about this.
The only strategic investment we know about is buying Infinidat and that $86 million operating loss could reflect the cost of that acquisition. We can see Infinidat helping to transform its ESMB business and, with Infinidat emphasizing its RAG capabilities, it will help with AI too. To support that idea we note that Infinidat has been awarded a “Best of Show” award for the “Most Innovative Artificial Intelligence (AI) Application” at the 2025 FMS: The Future of Memory and Storage conference.
CMO Eric Herzog said: “Our industry acclaimed InfiniBox G4 platform, coupled with our AI RAG reference architecture, delivers an enterprise storage capability that uniquely ensures the accuracy and contextual relevance of AI models to answer queries autonomously. Winning the prestigious Best of Show award at this year’s FMS conference is a testament to Infinidat’s strategic role in AI-centric enterprise environments.”
Lenovo reckons that the AI era brings huge opportunities for devices, infrastructure, solutions and services. Yang said: “Looking ahead, ISG is committed to investing in driving long-term growth and value through strategic market expansion, E/SMB business model transformation, AI infrastructure innovation and product development, to stay ahead of the AI curve and provide differentiated global competitiveness.”
