Xiaomi’s Connected Ecosystem Tops 1.1 Billion Devices, But Earnings Paint a Different Picture

Xiaomi's connected IoT devices hit 1.12B, up 18.5%, but Q1 revenue fell to 99.1B yuan and net profit dropped 43%. EV segment lost 3.1B yuan, while internet services posted a 76.1% gross margin.

Xiaomi’s sprawling hardware ecosystem now encompasses 1.1187 billion connected IoT devices — excluding phones, tablets and laptops — marking an 18.5 percent year-on-year surge. The number of users engaging with five or more devices jumped 22.3 percent to 23.6 million, while the Xiaomi Home app clocked 117 million monthly active users in March and the AI assistant reached 169.3 million. Yet this deepening platform stickiness did little to shield the company from a punishing first quarter, where core hardware margins eroded and a heavily subsidised electric vehicle business bled cash.

Revenue for the three months ended March 2026 fell to 99.1 billion yuan, down from 111.3 billion yuan a year earlier. Adjusted net profit dropped to 6.1 billion yuan from 10.7 billion yuan, a decline of roughly 43 percent. Research and development spending, however, surged 33.4 percent to 9.0 billion yuan, with headcount in that division reaching 26,048 — a clear signal that the “Human × Car × Home” strategy remains a multiyear bet despite near-term pain.

The smartphone division, which still accounts for the bulk of group revenue, shipped 33.8 million units in the quarter. Average selling prices rose to 1,310.1 yuan, but that was not enough to offset lower volumes and mounting input costs. Smartphone gross margin contracted sharply to 10.1 percent, squeezed by pricier memory chips and fierce competition in China. Xiaomi expects memory cost pressures to ease only from the third quarter. Meanwhile, the IoT and lifestyle products segment generated 24.7 billion yuan in revenue, with a gross margin of 25.2 percent, weighed down by reduced government subsidies in China.

The star performer — in margin terms, if not scale — remains internet services. Segment revenue rose 4.3 percent to 9.5 billion yuan, delivering a stunning 76.1 percent gross margin. Advertising was the driver, with ad revenue climbing 7.8 percent to 7.1 billion yuan. Internet services now account for just 9.6 percent of total sales, far too slender to offset the drag from hardware and EVs. Outside China, the services business contributed 3.0 billion yuan, or 31.4 percent of segment sales.

Xiaomi’s automotive gambit is consuming capital at a rapid clip. The smart EV segment — including AI and other new initiatives — posted revenue of 19.9 billion yuan, of which 19.0 billion came from vehicles. It delivered 80,856 cars, a 6.6 percent increase year on year but a steep sequential drop from the 145,115 units shipped in the fourth quarter of 2025. The segment incurred an operating loss of 3.1 billion yuan on a gross margin of 20.1 percent, hurt by higher component costs and government purchase-tax subsidies that compressed net pricing.

On the technology front, Xiaomi took a significant open-source step in April 2026, releasing the MiMo-V2.5 model series under an MIT license after a public beta. The AI assistant Xiaomi miclaw also expanded into a limited beta on PCs and the Xiaomi Smart Home Screen, extending its reach across device categories. These moves underscore the company’s ambition to build a sticky, AI-driven ecosystem, but they have yet to translate into earnings relief.

The stock market took the quarter badly. Shares lost 2.5 percent on Wednesday, closing at 29.02 Hong Kong dollars in Hong Kong and 3.29 euros in Germany — roughly 27 percent below the start of the year and more than 51 percent off the 52-week high of 6.69 euros. With the share price sitting just 3.25 percent above the April trough of 3.17 euros, the market is clearly pricing in a prolonged period of investment before any payoff from the car business or the platform strategy materialises.