Lenovo Group (0992.HK) 2QFY26/27 Preview: Margins Better Than Feared, AI Infrastructure Momentum Intact

Citi expects Lenovo to deliver another solid quarter in 2QFY26/27, supported by continued ISG strength, stable IDG execution and sustained double-digit SSG growth. Although concerns over highly leveraged AI infrastructure operators have triggered volatility across the AI supply chain, Lenovo's direct exposure to higher-risk Neocloud customers remains limited, with robust risk controls and comprehensive receivable insurance mitigating balance sheet concerns. Citi forecasts 2QFY27 revenue of US$27.1bn (+33% YoY, +1% QoQ, largely in line with consensus) and non-GAAP net profit of US$1.18bn (49% above consensus), reflecting intact ISG revenue momentum and continued margin improvement (gross margin 1ppt above consensus). ISG remains the key earnings driver, with 135% YoY revenue growth and operating margin sustained at 9%. The target price is lowered to HK$40 from HK$50 to reflect potential dilution from convertible bonds and warrants and updated valuation, based on 13.6x FY27/28E diluted E