Xiaomi's Premium Push and SUV Gamble Collide With a 43% Profit Wipeout

Xiaomi's net profit tumbled 43% in Q1 as chip costs surged, even as it launched the flagship 17T smartphone and YU7 SUV. Smartphone shipments fell 19% while EV losses widened.

Xiaomi is fighting on two fronts this spring, rolling out its flagship 17T smartphone series and the new YU7 SUV at a time when its earnings are under siege. The company kicked off global sales of the 17T lineup in Vienna on 12:00 UTC, marking the earliest T-series launch in its history. At the same time, the YU7 went on sale in China on May 21 in two versions. Yet neither product introduction can mask the damage done by surging chip costs, a 43% plunge in net profit, and a core smartphone business that shipped 19% fewer devices in the first quarter.

A quarter that missed the mark

Xiaomi reported revenue of 99.1 billion yuan (roughly $14.6 billion) for the three months ended March, down 11% year-on-year. Adjusted net income fell 43% to 6.1 billion yuan, undershooting the average analyst estimate of 6.4 billion yuan. The gross margin in the smartphone × AIoT segment narrowed to 22.5%, while group EBIT collapsed 70%. The internet services division remained a bright spot with a gross margin of 76.1%, but that alone could not offset the drag from hardware.

The erosion is largely driven by memory-chip inflation. Contract prices for DRAM have jumped as much as 95%, while NAND flash has risen 55% to 60%, according to TrendForce. Analysts see high memory prices persisting into 2027, with costs in the second quarter alone expected to roughly double. For a company where roughly 60% of smartphone volume comes from devices below $200, passing on those costs is near impossible.

Xiaomi is leaning on premium models to counter the squeeze. The average selling price of its smartphones hit a record 1,310 yuan. The 17T series — featuring a Dimensity 8500 chip, 6,500 mAh battery and a Leica main camera on the base model — starts at 749 euros in Europe, while the Pro variant with a 144 Hz OLED panel and 100W charging goes for 999 euros. Leica branding, a first for the T-series, is meant to close the gap with Xiaomi’s more expensive offerings.

EV business: growth, but still in the red

Vehicle deliveries reached nearly 81,000 units in the first quarter, up 6.6% from a year earlier. Revenue from the electric vehicle business came in at 19 billion yuan, while the broader “Smart EV and AI” segment posted revenue of 19.9 billion yuan — and an operating loss of 3.1 billion yuan. After two consecutive profitable quarters, the EV unit swung back into the red. R&D spending surged 33% to 9 billion yuan, and the company now operates 490 service centers across 143 cities.

Xiaomi has set a target of at least 550,000 vehicle deliveries in 2026. European market entry is planned for the second half of 2027, followed by right-hand-drive markets in 2028. The YU7 SUV launch is pivotal: success there is widely seen as the key to making the auto business profitable. The company is also showcasing its full EV lineup at the Shenzhen Auto Show starting Friday.

Stock languishes near its low

The market has taken a harsh view of the gap between Xiaomi’s growth ambitions and its current profitability. The stock traded at €3.16, barely above its 52-week low, after gaining 0.48% on the day. Year-to-date, the stock has fallen 29.62%. It sits 28.05% below its 200-day moving average, a sign of how deep the selloff has run. In Hong Kong, shares gave up around 3% following the earnings release.

Xiaomi now has two fresh catalysts — the 17T series and the YU7 SUV — but both face headwinds. The smartphones must compete in a price-sensitive market where component costs keep climbing, and the EV unit needs to prove it can grow without burning through cash. The next quarterly report will show whether the early start to T-series sales and the first wave of YU7 deliveries can begin to reverse the trend.