This single graph shows why it is so damn hard to make any profits out of AI - even if you get $15 billion annual revenue

• Lenovo’s AI server sales exploded in 2026, yet profits remain flatlined
• Lenovo’s CSP division bleeds cash despite surging hardware demand
• Explosive AI demand reveals data center economics stacked against OEMs

The Infrastructure Solutions Group (ISG) at Lenovo has seen record-breaking revenue growth in recent quarters, particularly from AI-related servers, with its most recent financial quarter seeing it record $4.29 billion in sales, a 35.8% increase year on year.

This follows several consecutive quarters of expansion driven largely by rising demand for generative AI and high-performance computing workloads.

However despite the rapid and consecutive expansion, the group still reported an operating loss of $86 million, underscoring the difficulty of converting growth into profitability, even for huge businesses like Lenovo.

Revenues surge, profits do not

The graph above shows a striking gap between revenue and profit in AI infrastructure.

ISG’s annual revenue surges sharply after 2022, climbing toward nearly $20 billion by 2026, yet ISG’s annual operating income remains flat, hovering just above or below zero.

This contrast shows how even rapid revenue growth in the AI sector does not necessarily translate into meaningful profitability, as high costs continue to weigh heavily on margins.

According to The Next Platform, Lenovo generated $18.83 billion in sales and $2.77 billion in gross profits, a margin of 14.7%.

Lenovo’s CFO, Winston Cheng, said the margins would have been “north of 17%” if the Cloud Service Provider (CSP) segment were excluded.

“If gross profits were ‘north of 17 percent’ – call it 17.2 percent so it rounds down – then the non-CSP part of Lenovo had $16.42 billion in sales and around $2.82 billion in gross profits,” The Next Platform said.

Therefore, the CSP division posted a gross loss of $50 million and an operating loss of $305 million once costs are allocated proportionally.

That translates to Lenovo losing $1.00 for every $7.90 it earns from selling CSP hardware, which is largely tied to AI systems.

The Next Platform concluded Lenovo’s ISG sold nearly $3 billion in AI systems in Q1 F2026, up 2.8X year on year and 18.7% from Q4, and its AI pipeline is estimated at above $10 billion, likely near $12 billion.

Yet, with volatile server demand, U.S.-China tensions, and thin AI/HPC margins, Lenovo’s hard work and gains have not translated into strong profits.

Lenovo’s challenges mirror those faced by other OEMs in the data center industry. Server spending has been inconsistent, and margins on AI hardware are thin, leaving most of the profits with component suppliers like TSMC and Nvidia.

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