Xiaomi's Chip and EV Progress Contrasts with Steep Profit Slide as Stock Nears Low

Xiaomi's stock near 52-week low after Q1 profit drop 43% despite chip breakthrough, HK$20B buyback, and EV deliveries above 30,000 for second month.

Xiaomi is making headlines with a flurry of operational achievements – a domestically developed 3-nanometer chip entering production, a new HK$20 billion buyback program kicking off, and EV deliveries holding above 30,000 vehicles for a second straight month. Yet the market remains singularly unimpressed: the stock trades at roughly €3.11, barely a whisker above its 52-week low of €3.08, and has shed 30.7% since the start of the year. Over the past twelve months, the decline has deepened to 46.6%.

The disconnect stems from a brutal first-quarter earnings report that saw adjusted net profit plunge 43.1% year-on-year, hammered by a five-fold surge in memory chip costs. Smartphone shipments – still Xiaomi’s core business – fell 19% to 33.8 million units, the steepest drop among the world’s five largest handset vendors. There was a silver lining: the average selling price reached a record 1,310 renminbi, confirming that the premiumisation strategy is gaining traction even as volumes shrink. Research and development spending jumped 33.4% to 9.0 billion yuan as the company pours money into vertical integration.

On the chip front, Xiaomi is taking a technological leap. Production of the “Xuanjie O3” processor is set to begin in June at TSMC using a 3-nanometer process, making Xiaomi the first company on the Chinese mainland – and the fourth globally – to bring a smartphone chip of this precision to market. It will first appear in the MIX Fold 5 foldable handset, with wider deployment across other smart devices planned. The company claims a 15% improvement in instructions-per-clock and a more than 30% boost in peak performance over the previous generation. But the edge may be fleeting: Apple and Qualcomm are expected to move to TSMC’s 2-nanometer node later this year.

The EV division, meanwhile, is showing signs of operational stability after a shaky start to 2025. Xiaomi Auto’s official Weibo account reported “more than 30,000” deliveries in May – the exact figure was not disclosed – following April’s first breach of that threshold. For the first quarter, the unit delivered 80,856 vehicles, a 6.6% increase year-on-year, though management cautioned that fading sales of the original SU7 generation had weighed on the numbers. The segment generated 19.9 billion renminbi in revenue with a gross margin of 20.1%, but an operating loss of 3.1 billion renminbi persisted, hurt by purchase tax subsidies and higher component prices. The average selling price of its cars slipped from 238,301 to 235,116 renminbi over the quarter, partly due to the model mix shift. Late May saw the launch of the YU7 GT (entry price 389,900 renminbi) and the YU7 Standard (233,500 renminbi); cumulative deliveries of the YU7 series have now reached 232,000 units ten months after market entry.

Investors received a fresh dose of capital allocation news this week. A new HK$20 billion (approximately US$2.55 billion) share buyback programme took effect, replacing a completed scheme under which Xiaomi repurchased around HK$14.6 billion worth of equity. On 28 May, the company had already bought 10.5 million shares for HK$298 million as a prelude. At the annual general meeting in Beijing, shareholders will vote on several key resolutions: the re-election of board directors, the re-appointment of PricewaterhouseCoopers as auditor, and – most crucially – a mandate for the board to repurchase up to 10% of issued shares. Directors are also seeking authorisation to issue Class-B shares and related securities, giving Xiaomi flexibility for future capital moves.

Looking further ahead, Xiaomi’s electric-vehicle ambitions extend to Europe. The company plans market entry in the second half of 2027, starting with Germany, followed by right-hand-drive markets including the UK, Japan, Australia and India from the first half of 2028. The broader XRING chip ecosystem is expected to eventually span smartphones, tablets, vehicles and wearables, reinforcing the push for vertical integration.

For now, the stock is technically overbought – the relative strength index stands at 76.8 – while the fundamental picture remains under pressure. Whether the EV division can sustain the 30,000-delivery run rate into June and whether the chip ramp-up yields tangible margin improvement will determine if the bearish mood finally shifts. As one analyst put it, Xiaomi is building impressive pieces; the market is waiting for them to fit together into a profitable whole.