Asia Tech Wire (Aug 16) -- Although Lenovo (0992.HK) reported solid overall results for the first quarter of fiscal 2025, which ended in June, investor concerns about the profitability of its server business could weigh on its shares, according to Morningstar analyst Kazunori Ito.

Lenovo's operating profit margin fell to 3.2% in the first quarter, down from 3.5% in the previous quarter, raising concerns that strong revenue growth hasn't translated into profit growth, he said.

Particularly noteworthy was the fact that while server sales rose about 25% from the third quarter, profitability did not improve significantly.

He added that it will take longer than expected for the server business to return to profitability due to the rising costs of meeting strong server demand and the slim margins of the business.