Xiaomi's Two Bets: A Phone Business Retrenching, an EV Business Accelerating
Published on 08/22/2026 at 07:31 | Redaktion boerse-global.de
The market's reaction to Xiaomi's latest quarterly report looks, on the surface, like a paradox. Net profit down more than a fifth, smartphone shipments off by over a quarter, and yet the stock has climbed steadily since the numbers landed last Tuesday. The explanation lies less in the headline figures than in what management says comes next.
President William Lu has declared the worst of the smartphone downturn over. The surge in memory-chip prices that has squeezed margins across the electronics industry is now decelerating, with further relief expected in the second half of the year. That framing reframes the narrative: not a demand problem, but a cost problem that is gradually resolving itself.
A deliberate trade-off in handsets
The second-quarter numbers show a company that has chosen margin over volume. Smartphone shipments fell 26.5 percent to 31.2 million units, yet the average selling price jumped 25.9 percent to 1,351 yuan. Revenue from the segment still slipped 7.5 percent to 42.1 billion yuan, but the strategic intent is clear — competing on premium devices rather than chasing market share in a saturated market burdened by expensive components.
Nomura, which reaffirmed its "Neutral" rating on Wednesday, attributed the revenue beat specifically to that ASP uplift and stronger IoT sales. The gross margin of 19.8 percent came in below the 20.4 percent consensus, but investors largely shrugged — an acceptance that a transition phase carries a cost as long as the trajectory holds.
The EV engine keeps revving
Meanwhile, the electric vehicle business is expanding with an intensity that evokes Xiaomi's early smartphone ascent. Deliveries reached 104,199 units in the second quarter, up 28.2 percent year on year, with segment revenue climbing 15.9 percent to 23.9 billion yuan. The division still operates at a loss of 2.6 billion yuan, but management has raised its full-year delivery target to 550,000 vehicles — a significant step up from the 410,000 originally planned for 2025.
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That target revision signals confidence that the EV operation can eventually rein in losses and become a core pillar of the group. The operating deficit of roughly 385 million US dollars in the segment is, in this view, the price of admission rather than a warning sign.
Group-level figures remain under pressure: second-quarter revenue fell 6.1 percent to 108.922 billion yuan, while net profit dropped 20.3 percent to 9.46 billion yuan. Adjusted net profit fared worse, down 42.6 percent to 6.22 billion yuan. For the first half, revenue totaled 208.06 billion yuan, a decline of 8.4 percent, with net profit down 37.6 percent to 14.2 billion yuan. The gross margin contracted from 22.5 to 19.8 percent, weighed down by historically high memory-chip costs.
Ecosystem growth offers a counterpoint
The AIoT ecosystem provides a brighter picture. Connected devices grew 17.4 percent to 1.161 billion, and monthly active users rose 4.8 percent to 766.5 million. The cohort of users with five or more connected devices expanded 20.2 percent to 24.6 million — evidence that Xiaomi's platform strategy is taking root beyond the smartphone.
The company has also been buying back its own shares, with 377.5 million shares repurchased by August 13 at a cost of 11.7 billion Hong Kong dollars, within a program sized at 20 billion Hong Kong dollars. Plowing capital into a margin-thin future business while simultaneously repurchasing equity sends a clear message about balance-sheet confidence.
A recovery with limits
The stock closed Friday at 3.16 euros, up 3.9 percent on the day and 11 percent over the week. Yet the shares remain 27 percent below their level at the start of the year and roughly half their 52-week high of 6.54 euros, reached on September 25.
That leaves the central question for observers: is this rebound the start of a genuine turnaround, or simply relief that the quarter wasn't worse than feared? Xiaomi's answer is deliberately two-pronged — a handset business pivoting from volume to value, and an EV business chasing growth at scale. Both bets are running in parallel, and both still need time to prove themselves.
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