Xiaomi: Buyback and AI Nod Lift Sentiment as EV Sales Surge, Yet Profit Squeeze Lingers

Xiaomi buys back HK$102M in shares, gets MiMo AI approval; EV deliveries overtake Mercedes-Benz in China, but revenue drops and memory costs threaten margins.

Xiaomi sent a dual signal to markets on July 17: it bought back 3.8 million of its own shares for roughly HK$102 million, at prices between HK$26.88 and HK$27.00, and simultaneously secured Chinese regulatory approval for its on-device AI model, MiMo. The moves underscore a company trying to project confidence in its equity even as the financial picture grows increasingly nuanced. The stock closed at €3.03 on Friday, down 1.43% on the day, though it has gained 3.51% over the past week and 8.57% over 30 days. Yet the longer view remains harsh — the shares are still 29.93% lower year-to-date and stand 53.39% below the 52-week high set on September 25, 2025.

The cross-currents in Xiaomi’s earnings explain the tension. Revenue for the first quarter of 2026 came in at 99.1 billion yuan, a decline from 111.3 billion yuan in the year-ago period. Operating profit dropped 59.5% year-on-year to 5.3 billion yuan. But the core business showed sequential improvement — operating profit from core operations nearly doubled versus the fourth quarter of 2025. Research spending climbed 33.4% from the prior year to 9.0 billion yuan, underscoring the heavy investment underway in AI and automobiles.

Auto business overtakes Mercedes-Benz in China

The electric vehicle division is now a genuine second engine. Xiaomi posted automotive revenue of 19.9 billion yuan in the first quarter, with over 80,000 vehicles delivered. In the second quarter, that pace accelerated: the China Passenger Car Association reported 104,199 EV deliveries, enough to overtake Mercedes-Benz in the domestic market for the first time. June alone saw 34,738 vehicles handed over, including 20,414 units of the SU7. The newly announced SUV series “SkyNomad,” described as a reconfigurable large-space model, will join the existing SU7 and YU7 lineups. Xiaomi also filed paperwork in early June for a new electric vehicle line with a range extender, to be built at its Beijing plant, and a larger model built on an all-new platform is slated for the second half of the year.

AI investment ramps up as regulatory hurdles clear

The MiMo approval is part of a broader AI push. Xiaomi announced on July 16 that it plans to invest at least 16 billion yuan in artificial intelligence this year, with a cumulative budget of more than 60 billion yuan over three years. The company’s open-source language model, MiMo-V2.5-Pro, tied for first place in global open-source benchmarks, and a day before the buyback news, Xiaomi released the “Embodied Generative Model” Xiaomi-Robotics-U0, a 38-billion-parameter model designed to generate training data for robotics applications. On the software front, HyperOS 3.3 based on Android 17 is rolling out to the Xiaomi 17, 17 Ultra, and 15T Pro in Europe, while the July 2026 Android security patch is being deployed across a wide range of Xiaomi, Redmi, and Poco devices.

Memory-chip cost spiral threatens margins

A looming challenge sits in the supply chain. Xiaomi executives have warned that soaring prices for memory chips will push handset costs higher. CEO Lei Jun said in May that anyone planning to upgrade their smartphone within the next year should do so sooner rather than later. Lu Weibing, a top manager, expects memory-chip price increases to persist through the end of 2027. TrendForce forecasts DRAM contract prices to rise 58% to 63% sequentially in the second quarter, and NAND prices by 70% to 75%. For a mass-market electronics maker like Xiaomi, the pressure on margins will be intense unless it can pass the full cost increase to customers.

Product pipeline targets premium segment

Despite the cost headwinds, Xiaomi is pushing into higher price brackets. The foldable Mix Fold 5, spotted running HyperOS 4 on Android 17, is rumored to feature an Xring-O3 chip, a 200-megapixel camera, and a 6,000 mAh battery, with a launch expected in August — positioning it against Samsung’s Galaxy Z Fold 8. The Xiaomi 18 Pro, expected in September, has already received a Chinese certification; it is tipped to carry a Snapdragon 8 Elite Gen 6 chip and dual 200-megapixel cameras. September will also mark Xiaomi’s debut appearance at IFA in Berlin, a move to strengthen its European presence. In China, the Redmi Note 17 Pro is already shipping with a 9,000 mAh battery and a free battery replacement if capacity drops below 80% within four years.

Analyst caution tempers the product buzz

Not everyone is buying the bullish narrative. Astrada Advisors downgraded Xiaomi from Buy to Hold on July 14, citing the difficulty of achieving the aggressive volume targets for 2026 despite the new model launches. Technically, the stock sits just 2.31% above its 50-day moving average but remains 20.66% below the 200-day average — a pattern that suggests the recent rally has yet to establish a sustained uptrend. With memory costs climbing, EV investment still weighing on the balance sheet, and a core handset business facing margin erosion, Xiaomi’s mix of record revenues, AI milestones, and buyback confidence presents investors with a picture that is anything but straightforward.