Xiaomi's Buyback and AI Debut Fail to Stem Stock's Slide as 43% Profit Plunge and $5,600 EV Loss Bite

Shares hit €2.71 despite record buybacks and AI launch; revenue down 11%, EV losses mount, and analysts downgrade.

Xiaomi shares hit a fresh 52-week low of €2.71 on Tuesday, extending their year-to-date loss to 39.64%. The decline came despite a record Hong Kong dollar 20 billion buyback program and the launch of a new cloud-based AI assistant, underscoring how deeply operational headwinds are outweighing management’s countermeasures.

The company has been aggressively repurchasing its own equity since early June, buying back over HK$100 million worth of stock in a single day this week. To date, around 30 million shares — roughly 0.12% of outstanding capital — have been scooped up. Yet the selling pressure has only intensified. The stock’s relative strength index (RSI) has fallen to 25.8, deep in oversold territory, but the downtrend shows no sign of reversing.

What is spooking investors is the deteriorating core business. In the first quarter, Xiaomi’s revenue slipped 11% to RMB 99.1 billion, while adjusted net profit tumbled 43%. Smartphone shipments — the company’s main engine — shrank 19% to just under 34 million units, the steepest drop among the world’s top five handset makers. The problem is compounded by surging memory chip prices, which have roughly doubled, crushing margins on the 60% of devices sold for under $200. Smartphone gross margin has been squeezed to a wafer-thin 10.1%.

The pain is even more acute in the electric vehicle division. Xiaomi’s car-making arm posted an operating loss of RMB 3.1 billion in the first quarter, equivalent to roughly $5,600 for every vehicle delivered. Vice President Song Gang has described margins as “extremely thin,” noting the company’s survival hinges on supply-chain efficiency. The troubled SU7 model — an overworked variant — is dragging on profitability, and May sales slipped nearly 11% month-on-month. Through the first five months, total deliveries reached only about 150,000 units, leaving the full-year target of 550,000 looking increasingly out of reach.

Analysts are pulling back. Jefferies downgraded the stock to Underperform and slashed its price target to HK$25.49 (around €2.82). The bank called the smartphone margin target of 8% unrealistic and cut its own 2025 EV delivery forecast to 495,000 units. Goldman Sachs, meanwhile, expects second-quarter adjusted net profit to crater by 50% to RMB 5.4 billion and has trimmed its full-year estimates, though it maintains a HK$40 price target.

Management is pinning its hopes on the new MiMo Claw AI assistant, launched on June 16. The cloud-based agent can execute over 1,000 tool calls per session and claims to slash token consumption by up to 60% versus rivals. A free four-hour daily trial is available for users. But the market has so far shrugged off the tech upgrade as irrelevant to the immediate profit crisis.

The flood of negative news has pushed the stock to levels not seen in a year. Research and development spending jumped by a third last quarter to RMB 9 billion, adding to the cost burden. Until hardware margins recover and the EV unit stops haemorrhaging cash, the buyback and AI rollout may remain lonely battles. Xiaomi reports second-quarter results on August 26, when the board will have to convince investors that its own chip efforts can indeed salvage margins.