Xiaomi’s Two-Front Offensive Hits a Wall of Analyst Skepticism as Chip Costs and EV Losses Deepen

Jefferies cuts Xiaomi to Underperform, citing 43% profit drop, surging memory costs, and EV cash burn. Smartphone shipments fell 19% amid margin compression.

Xiaomi is juggling a packed calendar of product launches this week — the global rollout of its 17T premium smartphones in Hong Kong and a full EV lineup display at the Shenzhen Auto Show — but the narrative has been hijacked by a stark downgrade from Jefferies that exposes the structural drags on the company’s profitability.

The bank cut its rating on Xiaomi to “Underperform” and slashed the price target to HK$25.49 from HK$26.98, implying a potential 14% decline from current levels. The justification: shrinking smartphone margins, surging component costs, and an electric vehicle business that continues to burn cash at an alarming rate.

First-quarter earnings reveal the scale of the squeeze

Xiaomi’s latest quarterly report, covering the three months through March 2026, laid bare the strain. Revenue fell 11% year on year to 99.1 billion yuan, while adjusted net income tumbled 43% to 6.1 billion yuan. Operating profit collapsed by roughly 70%, according to Jefferies’ calculation, landing well below consensus estimates.

The EBIT margin — a key measure of operational efficiency — shrank to just 3.0%, down from 9.0% a year earlier. That compression reflects how quickly rising costs are crushing the leverage that Xiaomi once enjoyed in its core handset business.

Memory-chip inflation hits hardest at the low end

The most aggressive headwind comes from memory components. Prices for LPDDR5 DRAM surged 151% year on year, while NAND flash jumped 360%. The impact is especially severe for Xiaomi because roughly 60% of its smartphone shipments are priced below the $200 mark, where passing on cost increases is virtually impossible.

Smartphone revenue dropped 12.5% to 44.3 billion yuan as the company shipped 33.8 million units — a 19% decline from the prior year. According to Omdia, that was the steepest volume drop among the five largest handset makers. Jefferies expects elevated memory-chip pricing to persist well into 2027.

EV segment grows but remains deep in the red

Xiaomi’s electric-vehicle unit is expanding but still losing money operationally. First-quarter segment revenue rose 6.9% to 19.9 billion yuan, and the gross margin held at 20.1%. Yet the operating loss stood at 3.1 billion yuan, underscoring the challenge of scaling profitability amid model transitions and price competition.

Vehicle deliveries fell to 81,000 units from 145,000 in the prior quarter. Management cited the model changeover and slower sales of the YU7 SUV. While the company reaffirmed its full-year target of 550,000 vehicles, Jefferies forecasts only 495,000. At the Shenzhen Auto Show, Xiaomi unveiled two new YU7 variants, including a standard version priced at 233,500 yuan ($34,320) — a 7.88% discount to the previous entry point.

17T series launches amid the turmoil

Against this difficult backdrop, Xiaomi has pushed ahead with the commercial release of its 17T series in Hong Kong and Europe. The lineup — which includes both the 17T and 17T Pro — marks the first time the T-series has offered two screen sizes. Both models feature a Leica Summilux 5x telephoto lens, a 1.5K AMOLED display with eye-comfort certification, and MediaTek’s latest chips: the Dimensity 8500-Ultra for the standard version and the Dimensity 9500 for the Pro.

The 17T Pro is distinguished by a 7,000 mAh silicon-carbon battery, a capacity rare even in the premium segment. The base model in Hong Kong starts at HK$3,999 (12GB/256GB), while the Pro with 1TB storage runs HK$5,999. European pricing begins at €749 for the 17T, with the Pro ranging from €899 to €1,099 depending on configuration.

Xiaomi also took the opportunity at its global launch event in Vienna on May 28 to showcase new wearables, smart-home devices and televisions, reinforcing the breadth of its ecosystem. The company invested 9.0 billion yuan in research and development during the quarter, with 26,048 staff now dedicated to R&D.

Stock hits a fresh 52-week low

Investor sentiment has turned decisively negative. The shares fell 2.74% to €3.08 on Friday, marking a new 52-week trough. Year to date, the stock is down 31.50%, and over the past twelve months the loss stands at 46.49%.

The next catalyst will be whether the Shenzhen Auto Show generates sufficient orders for the lower-priced YU7 and whether the 17T series can revive momentum in Xiaomi’s smartphone business. If customer response falls short, Jefferies’ core critique will remain front and center: the company is gaining ground in EVs but giving up margin and earnings across the rest of the group.