Xiaomi’s Push Into AI and Cars Faces a Reality Check as Goldman Sees Profits Halved

Xiaomi announces HyperOS 4, robotic EV charger and AI tools, but Goldman Sachs forecasts 50% adjusted net profit drop; stock near 52-week low amid smartphone decline and EV losses.

A flurry of technological announcements from Xiaomi — the impending launch of HyperOS 4, a robotic EV charging arm, and a fresh wave of on-device AI tools — paints a picture of a company in overdrive. Yet even as the Chinese electronics giant races to reinvent itself, Goldman Sachs has warned that its next quarterly report could deliver a brutal 50% slump in adjusted net profit, leaving the stock clinging to its 52-week low.

Shares in Xiaomi currently trade at €2.88, less than two percent above the trough of €2.82. Over the past twelve months, the equity has shed more than half its value, and it now sits roughly 32% below its 200-day moving average. The company’s leadership has responded with an aggressive buyback programme — on a single trading day it repurchased 3.6 million shares for HK$98 million, part of a record HK$20 billion buyback envelope. Investors, however, have largely shrugged off that show of confidence.

The pressure on the stock is rooted in a deteriorating core smartphone business. Xiaomi shipped just 33.8 million handsets in the first quarter of 2026, a 19% decline year-on-year — the steepest drop among the top five manufacturers. The culprit is rising memory-component costs that are squeezing margins on the budget devices that make up more than half of its sales volume. Efforts to push into higher price brackets remain a slow grind, leaving the smartphone division to fund a transformation that is consuming cash at an alarming rate.

That cash burn is most visible in the electric-vehicle segment. After a brief run of momentum late last year, the EV division swung to an operating loss of 3.1 billion yuan (roughly €400 million) in the first quarter of 2026. Xiaomi blames rising component costs and weaker delivery numbers. The company is applying the same playbook it used in smartphones — selling hardware at a loss today to build market share tomorrow — but the capital requirements in the auto industry are vastly bigger. Its annual sales target of 550,000 vehicles appears increasingly ambitious: in the first five months of the year, Xiaomi delivered only around 145,000 cars, implying a monthly pace of 29,000 units. To hit the target, it would need to more than double that to over 55,000 vehicles every month, a level it has never achieved.

Goldman Sachs’ analysis of the upcoming second-quarter numbers underscores the depth of the challenge. While group revenue is forecast to edge up 1% year-on-year, stripping out the EV and AI segments reveals a 9% decline in the underlying business. The bank projects adjusted net profit will tumble 50% to 5.4 billion yuan. Despite that grim outlook, Goldman maintains a “Buy” rating, signaling that it considers the long-term strategy viable — even if the near-term pain is acute.

The technological roadmap is indeed ambitious. HyperOS 4, which replaces the venerable MIUI interface after 16 years, is set to debut in August, built on the Flutter and Rust frameworks for leaner, more secure code. Xiaomi is betting heavily on on-device artificial intelligence — tools for image editing and transcription will run locally, without cloud dependency — and the new operating system will seamlessly connect smartphones, wearables, and EVs. A robotic charging arm that automatically plugs into the vehicle was also unveiled, projecting a future in which hardware and software are tightly integrated.

Research-and-development spending this year exceeds 16 billion yuan, and the company has already allocated 80 of a planned 100 trillion tokens to its AI model infrastructure. In a separate move to broaden its ecosystem, Xiaomi has launched a crowdfunding campaign in China for lifestyle products, including its first portable espresso machine under the Mijia brand. The diversification is striking, but profit pools remain tiny compared with the cash required to sustain the EV venture.

The next crucial test comes on August 26, 2026, when Xiaomi reports second-quarter earnings. If the Goldman forecast proves accurate, the €2.82 support level will face a stern examination. The buyback programme may provide a temporary floor, but with the smartphone margin erosion and EV losses mounting, structural questions about the company’s turnaround are getting harder to ignore.