Xiaomi’s Buyback and AI Clearance Offer Respite as Core Business Faces Memory-Led Headwinds

Xiaomi buys back 3.8M shares and secures AI model approval, but Q1 profit plunges 59.5% as memory-chip costs surge; EV unit shows promise.

Xiaomi sent a two-pronged signal to markets on July 17, 2026, buying back 3.8 million of its own shares for roughly 102 million Hong Kong dollars — in a price range of 26.88 to 27.00 HKD — while simultaneously securing state approval in China for its on-device AI model, MiMo. The buyback underscores management’s desire to shore up confidence in a stock that has lost nearly 30% year-to-date, and the regulatory green light adds a layer of validation to a sprawling technology push that includes a pledged 16 billion yuan in artificial intelligence spending this year, rising to at least 60 billion yuan over three years.

That confidence, however, collides with a deteriorating profit picture. In the first quarter of 2026, Xiaomi’s revenue slipped to 99.1 billion yuan, down from 111.3 billion yuan in the year-earlier period, while operating profit cratered by 59.5% to 5.3 billion yuan. The core business of smartphones and AIoT did show sequential improvement in operating results, but the relief is being overshadowed by a memory-chip cost surge that Lei Jun has warned will push handset prices higher. Contract prices for DRAM are expected to rise 58% to 63% in the second quarter, with NAND flash climbing 70% to 75%, according to TrendForce, and Xiaomi has already raised prices on three models. President Lu Weibing projects flagship smartphone prices could exceed 10,000 yuan by year-end, with the chip cost trend persisting at least into 2027.

The pressure is visible in the market data. Global smartphone shipments fell 4% in the second quarter versus a year earlier, per Omdia, with Samsung holding 22% share, Apple posting a record quarter at 20%, and Xiaomi accounting for 11%. Counterpoint expects full-year 2026 global volumes to drop 13.9% to around 1.08 billion units — the lowest since 2013 — and forecasts a 28% decline in Xiaomi’s own shipments. Regional figures confirm the erosion: in the Middle East, Xiaomi’s first-quarter deliveries slid 28% to 1.2 million units while rival Honor surged 73%. In Southeast Asia, average selling prices rose 19% to $349, but unit sales at Xiaomi and several peers contracted.

Xiaomi’s electric-vehicle business offers a counter-narrative. The company delivered 104,199 EVs in China during the second quarter, according to the China Passenger Car Association, surpassing Mercedes-Benz in domestic passenger-car sales for the first time. June alone saw 34,738 vehicles handed over, including 20,414 of the SU7 saloon. In early July, the company unveiled the SkyNomad, a reconfigurable large SUV that will join the existing SU7 and YU7 lineups, and regulators have approved a new vehicle category for range-extender EVs to be built at the Beijing plant. Yet the auto unit’s contribution to the bottom line remains opaque, and the overall investment burden is heavy.

Xiaomi’s stock closed Friday at €3.03, down 1.43% on the day but up 3.51% over the past week and 8.57% over the past month. The longer trend is less forgiving: the shares are 29.93% lower since the start of 2026 and trade 53.39% below their 52-week peak set in September 2025. The price sits 20.66% under the 200-day moving average of €3.82, although it has crept 2.31% above the 50-day average. Analyst sentiment has cooled; Astrada Advisors downgraded the stock from Buy to Hold on July 14, citing the difficulty of meeting ambitious volume targets despite the new model introductions.

All eyes now turn to August 18, when Xiaomi’s board meets to approve the unaudited half-year results and decide on an interim dividend. The company will also make its debut at Berlin’s IFA trade fair in September as it pushes deeper into Europe. Between a booming EV business, a heavy AI investment cycle, and a smartphone division squeezed by memory costs and shrinking volumes, the second-half narrative is anything but straightforward for investors.