Xiaomi's Profitability Challenge Intensifies Ahead of Earnings

Xiaomi shares near 52-week low ahead of 2025 results. Concerns mount over EV profitability despite strong SU7 sales and smartphone margin squeeze.

As Xiaomi prepares to release its full-year 2025 financial results, investor sentiment has turned sharply negative, sending its shares into a sustained decline. The core concern revolves around the company's electric vehicle venture. Despite the SU7 model achieving remarkable initial sales, analysts fear the automotive division may become a significant drag on profitability rather than a growth engine.

Core Smartphone Business Faces Headwinds

Providing little counterbalance to these concerns, Xiaomi's foundational smartphone operations are themselves under pressure. During the fourth quarter of 2025, the company reported a contraction in handset shipments coupled with a decline in average selling prices. Compounding the issue, rising costs for DRAM memory components are further squeezing margins in this segment.

This challenging backdrop is reflected in analyst sentiment. Nomura maintains a "Neutral" rating on the stock and recently reduced its price target. The firm cautioned that elevated market expectations for the electric vehicle business could lead to disappointment if profitability remains weak.

The equity's performance underscores the market's apprehension. Shares are currently trading approximately 44% below their level from one year ago and are hovering near a 52-week low.

Electric Vehicle Ambition Meets Margin Reality

Xiaomi's entry into the competitive electric car market began with notable fanfare. Within the first 24 hours of the SU7 sedan's launch in March 2024, the company secured nearly 89,000 firm orders. Looking ahead, management has set an ambitious target of 550,000 vehicle deliveries for 2026.

However, the path to profitability appears fraught. The primary issue centers on the price-cost dynamic. The revised SU7 has a starting price of 219,900 yuan (approximately €27,000), which is only marginally higher than its predecessor. Market observers suggest that production costs per vehicle have increased, but these rises have not been passed on to consumers through corresponding price hikes. This scenario creates what is often termed a classic margin trap, where high sales volumes do not translate into healthy profits.

Tuesday's Earnings Report as a Critical Catalyst

All eyes are now on March 24, 2026, when Xiaomi will unveil its complete audited results for 2025. For the Smart-EV segment specifically, analysts are forecasting a substantial year-on-year revenue surge of 119% for the fourth quarter.

Yet, the top-line growth figure will not be the sole focus. The definitive test will be the underlying margin structure revealed in the financial details. Should the numbers confirm that the automotive unit is generating minimal profit despite record-breaking demand, sustained selling pressure on the stock is considered likely. The upcoming report is widely viewed as a litmus test for the viability of Xiaomi's capital-intensive automotive strategy.