Xiaomi's Stock Plunges to 52-Week Low as YU7 SUV Debuts Amid a 43% Profit Drop and Rising Chip Costs

Xiaomi shares tumble 29.96% after Q1 revenue falls 10.9% and net income plunges 43.1%, dragged by rising memory-chip costs and heavy EV investment losses.

Xiaomi investors are facing a stark reality check. The Chinese technology group’s shares have tumbled to a 52-week low of €3.15, marking a 29.96% slide since the start of the year. The sell-off comes despite the launch of a highly anticipated electric SUV and a fresh wave of share buybacks — a clear sign that markets are losing patience with the gap between Xiaomi’s growth narrative and its bottom-line performance.

A painful quarter on every front

For the first quarter of 2026, Xiaomi reported a 10.9% decline in revenue to 99.14 billion renminbi, down from 111.29 billion a year earlier. The damage was far worse on the profit side: adjusted net income crashed by 43.1% to just 6.07 billion renminbi. The culprit, analysts say, is a surge in memory-chip costs that has squeezed margins across Xiaomi’s core smartphone-and-AIoT segment, pushing its gross margin down to 22.5%. That cost pressure is expected to linger deep into 2027.

The smartphone business, still Xiaomi’s largest revenue generator, brought in 44.3 billion renminbi during the quarter. Global shipments held steady at 33.8 million units, keeping Xiaomi in the No. 3 spot worldwide for the 23rd consecutive quarter. The company managed to push its average selling price to a record 1,310 renminbi, reflecting a shift toward premium devices — but that could only partially offset the chip-driven margin erosion.

EV growth accelerates — but at a steep price

Xiaomi’s electric-vehicle division is the company’s most dynamic growth engine, yet it remains a heavy drain on earnings. The group delivered 80,856 vehicles in the first quarter, an increase of 6.6% year-on-year. Segment revenue reached 19.9 billion renminbi, with pure EV sales contributing 19 billion. The unit’s gross margin stood at a respectable 20.1%, but an operating loss of 3.1 billion renminbi underscored the high cost of scaling up.

Research and development spending jumped by 33% to 9.0 billion renminbi in the quarter, and the company has built a network of 490 service centres across 143 cities. All that investment is being funded largely by the smartphone business — a model that looks increasingly fragile as chip costs eat into the latter’s profitability.

YU7 arrives as the make-or-break model

On 21 May, Xiaomi launched the YU7, its second electric vehicle model, in two versions. The SUV — especially its GT variant, which lapped the Nürburgring Nordschleife in 7:22.755 minutes — is designed to compete with premium European brands. The company is already laying groundwork for a European push: a new research-and-development centre is being set up to recruit talent from Porsche and Mercedes-Benz, with an official market entry slated for the second half of 2027. Right-hand-drive markets are expected to follow in 2028.

Xiaomi’s medium-term target remains 550,000 vehicles delivered in 2026. Cumulative deliveries had already surpassed 600,000 by mid-February, suggesting the company has momentum — but it needs to prove it can turn that volume into sustainable profits.

Buybacks send a signal, but can’t fix the fundamentals

Days after the earnings release, on 27 May, Xiaomi bought back 349,400 B-shares for 10 million Hong Kong dollars, with plans to cancel the stock. That brings the total repurchase spending for the year to roughly 4.7 billion Hong Kong dollars. The gesture is a clear vote of confidence from management, which believes the market has overreacted to the near-term earnings slump.

Yet investors in Hong Kong reacted with a roughly 3% decline in the stock after the results, reflecting scepticism that buybacks alone can address the deeper structural issues. The company’s “Human x Car x Home” ecosystem — spanning smartphones, electric vehicles and smart-home devices — requires heavy continuous investment. Xiaomi plans to spend more than 40 billion renminbi on R&D for the full year, with 16 billion dedicated to artificial intelligence and embodied intelligence.

The next key test will be whether the YU7 can generate enough sales to narrow the EV division’s losses, and whether smartphone margins can stabilise as chip costs eventually ease. Until then, the stock is likely to remain under pressure — with the buyback providing a floor, but not a catalyst.