Xiaomi's First Revenue Drop in Three Years Triggers HK$20B Buyback as EV Losses Deepen

Xiaomi's Q1 2026 revenue fell 11% to 99.1B yuan, net profit tumbled 57%; EV unit lost $5,600 per vehicle, triggering a $2.6B buyback and downgrades.

The Chinese tech giant has entered uncharted territory, posting its first quarterly revenue decline in nearly three years. Sales slumped 11 percent year-on-year to 99.1 billion renminbi in the first quarter of 2026, while net profit tumbled 57 percent to 4.7 billion yuan. Adjusted net profit came in at 6.1 billion yuan, a 43 percent plunge that still managed to beat market expectations by a whisker. Xiaomi's board responded with a HK$20 billion share buyback program set to begin on June 2 and run for twelve months, alongside a small initial purchase of 349,400 shares for HK$10 million on May 27.

The profit squeeze stems from two simultaneous pressures. On one side, soaring costs for DRAM and NAND flash memory chips — nearly doubling in price over recent quarters due to supply constraints and ravenous demand from AI data centers — have crushed operating margins within the core hardware business. Operating profit overall collapsed 70 percent. On the other side, the company's high-profile electric vehicle division continues to burn cash far faster than anticipated. Xiaomi delivered roughly 80,800 vehicles in the quarter, generating segment revenue of 19.9 billion yuan, but the operating loss reached 3.1 billion yuan. That works out to a staggering $5,600 loss per vehicle, up from just $900 in the same period last year.

Investors have taken a dim view. In Hong Kong on Wednesday, shares slid 4.57 percent to 28.40 Hong Kong dollars, and in Frankfurt the stock hit a 52-week low of 3.14 euros. The year-to-date decline now stands at around 30 percent, while the 12-month loss is roughly 47 percent. Jefferies downgraded the stock from "Hold" to "Underperform" with a new price target of 25.49 Hong Kong dollars, citing fading EV momentum, shrinking smartphone margins, and rising component prices. Goldman Sachs also trimmed its forecasts. The 52-week high of 6.69 euros in Frankfurt sits more than 50 percent above the current price, and even the relative strength index of 67, suggesting some buying pressure, has failed to break the overarching downtrend.

The EV business is Xiaomi's most compelling growth story and simultaneously its heaviest drag on earnings. The new SU7 generation has racked up over 80,000 firm orders since March, and the YU7 series has sold a cumulative 232,000 units over the past ten months. Yet the segment's gross margin has fallen from 23.2 percent to 20.1 percent. The company now operates 490 sales centers across 143 Chinese cities, providing ample capacity to scale, but the hoped-for cost benefits have not materialized fast enough to contain the losses.

The smartphone segment, still the company's core, generated revenue of 44.3 billion yuan. Global shipments slipped to roughly 33.8 million units, but a push into higher-end devices pushed the average selling price to a record high. The operating profit of the combined smartphone and AIoT business surged nearly 200 percent sequentially. Still, intense competition from Apple and Huawei in the domestic market is keeping margins under pressure. Research and development spending jumped 33.4 percent to 9.0 billion yuan, underscoring Xiaomi's heavy investment in custom chips, artificial intelligence, and its HyperOS operating system.

The company is betting that international expansion and the long-term promise of its "Human x Car x Home" ecosystem will eventually offset the current headwinds. For the immediate future, however, all eyes are on whether Xiaomi can meaningfully reduce the loss per electric vehicle in the coming quarters. The second-quarter results will be the first real test of whether scale and cost discipline can close the gap between robust demand and punishing unit economics.