Xiaomi's HK$102 Million Buyback Fails to Mask 50% Profit Warning as Smartphone and EV Losses Mount

Xiaomi buys back HK$102M in shares before Q2 earnings expected to show 50% profit drop, as smartphone losses and EV cash burn pressure stock near 52-week low.

Facing a potential halving of adjusted net profit, Xiaomi has bought back 4 million of its own shares for HK$102 million in an attempt to steady nerves. The stock, which closed at HK$2.81, sits barely above its 52-week low, down roughly 38% since the start of the year. The buyback comes just weeks before the company is due to report second-quarter earnings on August 26, a report that Goldman Sachs forecasts will show a 50% year-on-year slump in adjusted net income.

The root of the pain is twofold. Xiaomi’s core smartphone business is expected to swing to an operating loss of more than 4 billion yuan, squeezed by brutal competition and rising memory-chip costs. At the same time, its fledgling electric-vehicle division burned through nearly 3.1 billion yuan in operating losses in the first quarter alone, while research and development spending jumped by a third to 9 billion yuan. The dual drag has left the group with little margin for error.

Xiaomi is not standing still. It has filed for regulatory approval of a new extended-range electric vehicle under the planned Skynomad sub-brand, the Kunlun N3 SUV, which is slated for a second-half launch. But the timing is treacherous. Sales of such range-extender models in China tumbled nearly 25% in May, and even market leader Li Auto has seen orders cool. The company’s ambitious target of delivering 550,000 vehicles this year looks increasingly shaky.

On the smartphone front, Xiaomi is fighting back with new hardware. The recently launched Redmi Turbo 5 features a silicon-carbon battery that the company claims can last more than two days, aiming to woo its 746 million global active users. However, Vice President Song Gang has warned that margins across the EV industry are exceptionally thin, and survival depends on supply-chain efficiency. Xiaomi is betting on deep vertical integration—including in-house chip and AI development—to drive down costs.

The market remains unimpressed. The stock’s relative strength index has fallen to 27.9, deep in oversold territory, and the share price is a mere 3% above its 52-week trough. Key support at HK$2.79 could break if earnings confirm the worst, accelerating selling pressure. Despite the gloom, Goldman Sachs retains a buy rating, arguing that Xiaomi is transforming from a pure hardware maker into a broader technology company.

For now, the buyback offers a temporary floor, but the real test comes with the August earnings. If the predicted 50% profit drop materializes and the EV division continues to burn cash, Xiaomi’s stock may face a fresh leg down—one that no amount of share repurchases can easily stop.