Profit Wipeout and Slowing EV Rollout Dwarf Xiaomi's Record Buyback and Hybrid Approval

Xiaomi's shares fall to €2.80, down 38% YTD, as Q1 profits plunge 43%, smartphone shipments drop 19%, and EV sales decline; buyback fails to lift sentiment.

Xiaomi secured a critical regulatory green light this week for its first extended-range electric vehicle, clearing the way for hybrid production in China. Yet the milestone did nothing to slow the stock's slide, which hit a fresh 52-week low of €2.80 yesterday. The disconnect between the company's strategic advances and the market's deepening pessimism has rarely been starker.

The sell-off has erased more than 38% of Xiaomi's value since the start of the year, with the shares now trading at just over half the June 2025 peak of €6.69. That is a brutal backdrop for what remains the largest share buyback in the company's history — a programme worth up to HK$20 billion launched on 2 June. Xiaomi immediately spent roughly HK$298 million buying back 10.5 million Class-B shares on the first day alone, but the market brushed it aside.

Underlying the slump is a sharp deterioration in profitability. First-quarter revenue fell 11% year-on-year to 99.1 billion renminbi, while adjusted net profit tumbled 43% to 6.1 billion renminbi. Earnings before interest and tax plunged 70%. Jefferies responded by downgrading the stock to "underperform" with a price target of HK$25.49, implying further downside of around 14% from the previous close. The bank pointed to weakening EV sales, shrinking smartphone margins and rising component costs.

The smartphone business — still the core of Xiaomi — is under particular pressure. Global shipments dropped 19% in the first quarter to 33.8 million units, the steepest decline among the top five vendors. Roughly 60% of devices sell for under $200, leaving the division acutely exposed to rising memory chip prices. Premium-tier price increases have failed to offset the margin erosion.

Electric vehicles, the growth story that once excited investors, have turned into a major drag. The YU7 model that sold 37,869 units in January managed just 9,876 in April — a fifth consecutive monthly decline. Xiaomi's management still insists it can deliver 550,000 vehicles in 2026, but the company managed only 150,317 in the first five months, a year-on-year increase of just 13.5%. Jefferies is sceptical and has cut its own forecast to 495,000, while slashing the valuation multiple for the EV unit from 2.2 times to 1.5 times projected 2026 sales.

Xiaomi is betting heavily on hybrids to regain momentum. MIIT, the Chinese industry ministry, has opened a comment period for the company's application to produce extended-range electric vehicles, which combine a battery pack with a small petrol generator. The first model, codenamed Kunlun N3, will be sold under the new Skynomad sub-brand. It is a full-size SUV over 5.3 metres long, with a combined range of around 1,500 kilometres and a starting price of roughly 200,000 yuan — well below rivals from Li Auto and Aito. Plans for 2026 also include a refreshed SU7 with 902 kilometres of range, an SU7 Executive Edition and two EREV SUVs in five- and seven-seat variants.

Research and development spending continues to climb, rising 33.4% to 9.0 billion renminbi in the first quarter, with a full-year target of 40 billion. The RSI stands at 28.2 — firmly in oversold territory — and the stock trades roughly 33% below its 200-day moving average. Analyst views are split, ranging from Jefferies' bearish HK$25.49 to Goldman Sachs' buy rating at HK$40.

The fundamental tension is clear: Xiaomi is investing aggressively for growth, while the market demands proof of profitability. With the second-quarter earnings season approaching, the next set of numbers will either vindicate the optimists or confirm the pessimists' view that the gap between ambition and execution has simply become too wide to ignore.