Xiaomi's Stock Paradox: Record Profits and a Sinking Share Price

Xiaomi posts record profits driven by surging EV sales, but stock nears 52-week low as smartphone margin pressures weigh on investor sentiment.

A curious divergence is unfolding for Xiaomi. As the Chinese tech giant delivers its first 5,000 SU7 electric vehicles to customers, its stock chart tells a contradictory story. Despite posting record annual profits and steering its nascent auto division into the black, investor sentiment remains decidedly bearish, seemingly overlooking the company's successful pivot from smartphone maker to a broader mobility provider.

Strategic Shift Bears Fruit in Financials

The company's fiscal 2025 results underscore a fundamental transformation. Revenue climbed 25% to 457.3 billion RMB, while adjusted net profit surged by nearly 44%. This robust growth was powered overwhelmingly by the Intelligent Electric Vehicle and AI segment, where sales exploded by 223.8% to 106.1 billion RMB. Notably, this division reported its first-ever positive operating result and contributed almost one-third of total revenue in the fourth quarter alone.

Core Business Challenges Weigh on Sentiment

Market indifference to this fundamental strength appears rooted in pressures facing Xiaomi's traditional core. In the final quarter of 2025, rising memory chip costs significantly compressed the gross margin of the smartphone business. This headwind is reflected directly in the weak equity performance. Shares closed at 3.59 euros on Friday, leaving them down approximately 20% since the start of the year. The current price is hovering perilously close to the 52-week low of 3.44 euros marked in early March.

Billion-Dollar Bet on Automotive Future

Management is aggressively countering its reliance on the smartphone market. The launch of the new SU7 generation provided a powerful start, securing over 30,000 firm orders within days. Consequently, Xiaomi has raised its delivery target for 2026 to 550,000 vehicles. To maintain this momentum, the company is channeling over 40 billion RMB into research and development in the current year alone.

The strategic reorientation away from the volatile smartphone sector is now clearly evident on the balance sheet. If Xiaomi achieves its ambitious delivery target this year while simultaneously stabilizing margins in its auto business, the fundamental rationale for its current, historically low market valuation will increasingly erode.