Xiaomi's Largest-Ever Buyback Fails to Lift the Gloom as Goldman Warns of 50% Profit Halving

Goldman Sachs forecasts Xiaomi's Q2 adjusted net profit to drop 50% to 5.4B yuan, stock languishes near 52-week low despite record HK$20B buyback.

Goldman Sachs has delivered a stark verdict on Xiaomi’s near-term prospects, forecasting a 50% plunge in second-quarter adjusted net profit to just 5.4 billion yuan — half the year-ago level. Even as the broader market has been buoyed by AI hype, Xiaomi’s stock continues to languish near its 52-week low of 2.82 euros, closing at 2.89 euros. The bank slashed its full-year earnings estimate by 12% to 32.8 billion yuan but maintained a buy rating and a Hong Kong dollar price target of 40.

The warning comes as Xiaomi pursues the largest share buyback in its corporate history. On June 2, the company launched a new mandate to repurchase up to HK$20 billion in Class-B shares, replacing an earlier program that had already retired some 399.6 million shares for roughly HK$14.6 billion. In its very first session under the new authority, Xiaomi bought back 10.5 million shares at prices ranging from HK$27.94 to HK$28.70, spending about HK$298 million.

Yet the market has remained conspicuously unimpressed. On one day alone — June 11 — Xiaomi repurchased 7.8 million shares, and the stock still finished at its 52-week trough. Over the past twelve months the equity has lost roughly half its value.

The buyback is unfolding against a punishing operational backdrop. In the first quarter, Xiaomi’s total revenue fell 10.9% year-on-year to 99.1 billion yuan, while adjusted net income slumped 43.1% to 6.1 billion yuan. The main culprit: a massive spike in memory-chip prices. DRAM contract prices for smartphones have quintupled, and TV memory costs have risen tenfold. CEO Lei Jun warned the pressure will persist for at least another two years.

The electric-vehicle division is exacerbating the pain. Xiaomi’s EV segment posted an operating loss of 3.1 billion yuan in Q1 on revenue of 19.9 billion yuan — a loss of roughly $5,600 per vehicle delivered, reversing the brief profitability seen in the prior-year period. The unit’s mounting red ink is eating into margins elsewhere.

Management has set a 2026 delivery target of 550,000 vehicles, but only around 140,000 to 150,000 units were handed over in the first five months. Monthly YU7 sales have fallen sharply from 37,869 in January to 9,876 in April. In April total deliveries did climb 71.2% month-on-month to 36,702 vehicles, and May crossed back above the 30,000 mark. Even so, the pace appears insufficient to hit the annual goal.

Xiaomi is not cutting investment. Despite the profit squeeze, R&D spending jumped 33.4% in Q1 to 9.0 billion yuan, with 26,048 staff now dedicated to research and development. The message from management is clear: invest through the downturn.

The stock’s relative strength index stands at 32.6, signalling oversold conditions. All eyes now turn to August 26, when Xiaomi is due to report second-quarter results. If Goldman’s forecast proves accurate, the support zone near the 52-week low will face an intense test — with or without a record buyback.