Xiaomi’s Contradictory Quarter: Profit Slump Meets an Upgraded Phone Target and a Nürburgring Record
Published on 07/26/2026 at 04:11 | Redaktion boerse-global.de
Xiaomi’s first-quarter results painted a picture of a company in transition, where a steep profit decline in its core smartphone business is being offset—at least in narrative terms—by an aggressive push into electric vehicles and artificial intelligence. The Chinese electronics giant reported a 43.1% plunge in adjusted net profit for the three months ended March, while group revenue slid 10.9% to 99.1 billion yuan. Yet just weeks later, management raised its full-year smartphone shipment target from 90 million to 110 million units, a move that signals a surprisingly swift recovery in component supply.
The contradiction between weak quarterly numbers and an upgraded annual outlook has left investors parsing signals. The stock fell 4.57% in Hong Kong to HK$28.4 immediately after the May 27 earnings release, but has since clawed back ground. In German trading, shares closed at €3.00 on Friday, up 0.17% on the day and 16.82% higher over the past 30 days—though still 53.96% below the 52-week high set last September.
Smartphone Headwinds and a Component Supply Rebound
The first-quarter damage in Xiaomi’s core business was severe. Smartphone and AIoT revenue dropped 14.5%, with device shipments falling 19.2%. Gross margin in the handset segment narrowed to 10.1%, squeezed by rising component costs and weaker volumes despite higher average selling prices. The pain was especially acute in India, a historically strong market where Xiaomi’s shipments slid from 5 million to 4.5 million units. Research firm Omdia projects a double-digit contraction for the entire Indian smartphone market this year.
But the supply-side picture has brightened considerably since March. Xiaomi’s decision to raise its 2026 shipment target to 110 million units—a 22% increase from the previous goal—was driven by stabilizing prices for DRAM and NAND memory chips and a normalization of component availability. This stands in contrast to reports from Nikkei Asia in mid-July, which described production cuts of up to 30% at Chinese rivals Oppo and Vivo due to memory shortages. Xiaomi’s upgraded forecast suggests it has navigated the supply crunch more nimbly than some competitors.
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EV Losses Narrow as the SU7 Leads Its Segment
The automotive division, still in its loss-making phase, is showing signs of commercial traction. First-quarter EV and AI revenue rose 6.9%, with 80,856 vehicles delivered. The segment posted an operating loss of 3.1 billion yuan, but the trajectory is improving. The average selling price dipped 1.3% to 235,100 yuan, reflecting a mix shift toward lower-priced variants.
The SU7 sedan has established itself as China’s top-selling all-electric sedan above 200,000 yuan, while the YU7 SUV ranks second in its segment. The high-performance YU7 GT variant generated international buzz by setting a new SUV lap record at the Nürburgring Nordschleife with a time of 7:22.755 minutes—a marketing coup that underscores Xiaomi’s ambition to compete on engineering credentials as well as price.
AI Spending Surges as MiMo Model Ranks Top
Research spending jumped 33.4% to 9 billion yuan in the first quarter, with the company now employing over 26,000 people in R&D. Xiaomi has earmarked at least 16 billion yuan for AI investments this year, with a three-year total expected to exceed 60 billion yuan. The open-source language model MiMo-V2.5-Pro tied for first place among open-source models on the Artificial Analysis platform, and the company has cut API prices for the model.
In a strategic milestone, AI-related revenue contributed to group sales for the first time—still a small line item, but one that management is betting will grow. The company’s cash position of more than 220 billion yuan provides ample runway to fund these investments even as the core business struggles.
Europe Beckons, Analysts Divided
Xiaomi is stepping up its European presence. In late June, it announced plans to invest €7.4 billion in European R&D between 2026 and 2028, and will make its first official appearance at IFA Berlin in September, where it plans to showcase its “Human x Car x Home” ecosystem. Product certifications in Thailand and Taiwan hint at an imminent global launch of the Redmi Note 17 series, which will feature larger batteries and microSD expansion up to 2 terabytes.
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The company also continues its share buyback program, purchasing 1.875 million Class-B shares on July 22 at prices between HK$26.60 and HK$26.76, for a total of roughly HK$50 million. On the same day, it rolled out a security update covering 58 device models across its Xiaomi, Redmi, and POCO brands.
Analyst sentiment remains split. At Smartkarma, Henry Soediarko struck a cautious note, warning that heavy capital spending on EVs and AI is weighing on profitability. His colleague Ming Lu, however, sees upside potential based on an expected smartphone sector recovery. The next major test comes on August 18, when Xiaomi reports second-quarter results—the first data point that will show whether the upgraded phone target is translating into actual sales momentum.
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