Xiaomi’s Giant Bet on AI and EVs Comes at the Cost of a Sharper Profit Squeeze
27.05.2026 - 13:43:56 | boerse-global.de
Xiaomi’s stock lurched to a 52-week low of €3.12 on Wednesday, leaving the Chinese tech group nursing a year-to-date decline of nearly 30%. The sell-off came even as Xiaomi reported a slight revenue beat for the first quarter of 2026 and unveiled an aggressive price cut for its artificial intelligence offerings — a sign that investors are more focused on the mounting cost of the company’s platform ambitions than on its top-line growth.
Revenue reached 99.14 billion yuan for the three months to March, edging past consensus estimates. But the picture beneath the headline was far less rosy. Adjusted net profit collapsed 43.1% to 6.1 billion yuan, driven largely by surging memory-chip costs that compressed smartphone margins. A year earlier, the bottom line had stood at 10.7 billion yuan. The hardware engine that once powered Xiaomi’s ascent is clearly losing steam.
The company shipped 33.8 million smartphones in the quarter, holding on to its position as the world’s third-largest handset maker for the 23rd consecutive period, with a global market share of 11.3%. Yet the combination of higher input costs and a deflationary tech environment in China has forced Xiaomi to pursue a different kind of growth — one built on software, services, and a sprawling connected ecosystem.
AI as the new centre of gravity
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Within days of the earnings release, Xiaomi slashed the API prices for its MiMo-V2.5 series of AI models by up to 99%. Existing customers also saw their consumed credits reset and their inclusive volumes raised. The company attributed the aggressive move to a new cache architecture that dramatically reduces inference costs. The strategic logic is plain: lure developers and enterprise clients onto the platform in order to cut dependence on low-margin hardware sales. Xiaomi has committed total AI investment of US$8.7 billion through to 2029.
The “Human × Car × Home” vision that CEO Lei Jun has championed is beginning to take tangible shape. The MiMo-V2.5 models were released as open source under an MIT licence in April, and the voice assistant, Xiaomi miclaw, is now running in a limited beta on PCs and the Xiaomi Smart Home Screen. The breadth of the platform is already substantial: the company’s AIoT ecosystem counted 1.1187 billion connected devices (excluding smartphones, tablets and laptops) at quarter-end, a rise of 18.5% year-on-year. The number of users with five or more connected gadgets jumped 22.3% to 23.6 million — a metric that management views as a proxy for customer stickiness. The Xiaomi Home app reached 117 million monthly active users in March, while the AI assistant hit 169.3 million.
Internet services provided a rare bright spot. Segment revenue edged up 4.3% to 9.5 billion yuan, underpinned by a record performance in mainland China and strong advertising demand. The gross margin for the unit came in at a robust 76.1%. Advertising revenue alone rose 7.8% to 7.1 billion yuan, offering a buffer against the volatility of hardware earnings.
EV growth, but losses pile up
The most expensive leg of Xiaomi’s transformation remains its electric-vehicle business. The Smart EV, AI and Other Initiatives segment generated 19.9 billion yuan in revenue, of which 19.0 billion came from car sales. Xiaomi delivered 80,856 vehicles in the quarter, a 6.6% increase from the prior year. But operating losses in the segment hit 3.1 billion yuan, squeezed by purchase-tax subsidies for early buyers and higher component prices. The gross margin stood at 20.1%.
The product lineup is expanding fast. On May 21, Xiaomi unveiled the YU7 sport-utility vehicle, starting at 233,500 yuan, along with a high-performance YU7 GT variant that set a new lap record for SUVs at the NĂĽrburgring. The company also plans to hold a hardware event in Vienna on May 28 to introduce the Xiaomi 17T series, featuring upgraded Leica camera technology.
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Buyback in place, but no short-term fix
In an effort to steady the ship, the board has authorised a share buyback of up to 20 billion Hong Kong dollars, valid until the 2027 annual general meeting. The company had already repurchased roughly 8.4 billion HKD worth of stock since the start of this year — but the programme has done little to arrest the slide. The shares trade 53% below last year’s peak of €6.69.
Xiaomi’s research and development spending rose 33.4% to 9.0 billion yuan in the quarter, with the division now employing 26,048 people. That level of investment is essential to building the integrated platform the company is chasing, but it also compounds the margin pressure that is spooking investors. For the near term, the market appears to be applying a sharp discount to any growth narrative that is not accompanied by demonstrable bottom-line progress.
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