Xiaomi's Annual Report: A Potential Pivot to Shareholder Returns

Xiaomi may announce its first-ever dividend amid strong EV growth and profit, while navigating margin pressure and a major tax dispute in India.

Tonight's release of Xiaomi's 2025 annual results carries significance beyond the usual financial metrics. For the first time since its initial public offering, the company's board may approve a dividend payment. This potential shift comes as the stock, having declined nearly 44% over the past twelve months, appears to be in search of a catalyst to restore investor confidence.

Operational Strength Meets External Challenges

The company enters this earnings period from a position of underlying strength. Its second-quarter 2025 performance was robust, with adjusted net profit doubling to RMB 10.8 billion. Revenue surged 30.5% to a record RMB 116 billion. A standout performer was the electric vehicle division, which delivered 411,837 units—surpassing its own full-year forecast of 300,000. Notably, the EV segment achieved its first quarterly operating profit in Q3.

Despite this operational progress, two substantial pressures weigh on the business. First, a significant margin squeeze is evident. According to Counterpoint Research, memory chip prices have escalated between 80% and 90% this quarter. Xiaomi has chosen to absorb these increased costs by holding prices steady for its flagship smartphones, a strategy that protects market share but compresses profitability. Second, a protracted tax dispute in India presents a financial overhang. Authorities have frozen approximately $610 million in assets, and a potential penalty could exceed $150 million. This regulatory challenge has coincided with a dramatic erosion of Xiaomi's once-dominant market share in India, which has fallen from over 30% to 12%.

The Dividend Question and Strategic Partnerships

For the fourth quarter of 2025, the consensus estimate among fourteen analysts points to earnings per share of CNY 0.24. However, the board's decision regarding an inaugural dividend is likely to garner more attention than this bottom-line figure. Initiating a payout would signal an evolution in the corporate narrative, moving from a pure growth story toward a commitment to tangible shareholder returns. Such a move would be a strong statement regarding cash flow resilience, particularly given the company's high capital expenditure and announced plans for smartphone price increases in 2026.

Investors are also monitoring strategic discussions with Stellantis NV. Reports suggest the parent company of Fiat is exploring avenues for Chinese manufacturers to engage in its European operations, potentially involving stakes in brands like Maserati and access to production capacity. No formal agreement has been reached, and Stellantis has characterized the talks as routine industry discussions.

Looking ahead, Xiaomi has set an ambitious target of 550,000 EV deliveries for 2026. The launch of an updated SU7 model series is scheduled for April. Whether today's financial results and a potential dividend announcement can provide sufficient impetus to lift the share price from its current level near the 52-week low of €3.44 will become clearer during the investor webcast scheduled for 7:30 PM Beijing Time.