Xiaomi's Two-Sided Story: A Record Buyback and Lofty Phone Targets Mask a 43% Profit Slide

Xiaomi boosts 2026 smartphone shipment goal to 110M units amid memory chip cost relief, but Q1 revenue fell 10.9% and net profit dropped 43.1%. Auto division grows but posts $3.1B operating loss.

Xiaomi is sending mixed signals to the market. On Friday, the Chinese tech giant completed the buyback of 1.9 million of its own Class B shares for a total of 50 million Hong Kong dollars, part of a broader repurchase campaign that has seen the company scoop up 79.8 million shares since June 2026. At the same time, the group confirmed it has raised its 2026 smartphone shipment target to 110 million units, up from an earlier forecast of 90 million — a more than 20% jump driven by easing prices for DRAM and NAND memory chips, a cost factor that had been squeezing margins in its core handset business.

The bullish production goal, first flagged on Wednesday, stands in stark contrast to the financial results for the first quarter of 2026, which painted a far more sobering picture. Revenue for the period came in at 99.14 billion yuan, a 10.9% decline year-on-year, while adjusted net profit tumbled 43.1% to 6.07 billion yuan. The traditional smartphone and AIoT (AI-powered internet-of-things) division, which generated 79.28 billion yuan in revenue, saw sales drop 14.5% and handset shipments fall 19.2%. Gross margin in that segment slipped from 12.4% to 10.1%.

Yet within those weak headline numbers, there are pockets of strength. The average selling price of Xiaomi’s smartphones hit a record 1,310 yuan, and in China the company captured a 23.5% market share in the premium segment above 3,000 yuan — a sign that its push upmarket is gaining traction even as volume sales contract. The newly launched Xiaomi 17 series, starting at 999 euros for the base model and climbing to 1,999 euros for the Leica Edition, underscores that strategy with features like a 200-megapixel telephoto camera and a one-inch main sensor.

Auto Division Grows but Remains a Cash Drain

The electric-vehicle business, Xiaomi’s high-stakes bet for future growth, tells a similarly contradictory story. First-quarter automotive revenue rose 6.9% to nearly 19.9 billion yuan, with 80,856 vehicles delivered — a 6.6% increase. But the division posted an operating loss of 3.1 billion yuan, and the average selling price per car dipped 1.3% to 235,100 yuan. A sector analysis from mid-July also flagged a multi-billion-yuan investment gap versus US rivals in scaling global charging infrastructure, a factor that tempers the long-term ambition of Xiaomi’s automotive push.

On the European front, a parallel distribution channel has emerged. Specialized importer Auto China confirmed Friday that the SU7, SU7 Ultra, and YU7 models are available in Germany via an EU single-vehicle approval. Xiaomi itself, however, maintains its plan for an official European market entry only in 2027, meaning these vehicles are being sold outside the company’s formal sales network.

AI Spending Surges as Research Outlays Climb

Xiaomi is pouring money into research and development at an accelerating pace. First-quarter R&D spending jumped 33.4% to roughly 9 billion yuan, and the company now employs more than 26,000 people in research roles. For the full year, it plans to invest at least 16 billion yuan in artificial intelligence, with a three-year commitment exceeding 60 billion yuan. Its proprietary language model, MiMo-V2.5-Pro, tied for first place among open models on the Artificial Analysis ranking, and the AI segment contributed directly to revenue for the first time in the quarter. The group’s cash reserves stood at more than 220 billion yuan at the end of March.

Stock Recovers From Lows but Stays Deep in the Red

The buyback program and the raised phone target have helped stabilize sentiment in recent weeks. The stock, which closed Thursday at 2.99 euros in Germany, has gained 16.39% over the past 30 days. But it remains 54.13% below its 52-week high of 6.51 euros, reached in September 2025. When Xiaomi published its first-quarter results, the Hong Kong-listed shares fell 4.57% to 28.4 Hong Kong dollars.

For investors, the picture is one of opposing forces. On one side, aggressive share repurchases and a more optimistic sales forecast support short-term momentum. On the other, the structural challenges — a shrinking core business, persistent losses in the auto division, and the enormous capital required to compete in AI and EV infrastructure — remain unresolved. Xiaomi’s recovery, for now, is a story of two speeds.