Xiaomi's Margin Puzzle: Record Prices, Falling Profits and a Robot That Can't Lift the Stock
Published on 08/19/2026 at 14:22 | Redaktion boerse-global.de
The humanoid robot that Xiaomi showcased at the World Robot Conference in Peking can assemble components with a 98 percent success rate in the company's own car factories. Yet for all its precision, it has failed to assemble a convincing case for investors. The stock closed Tuesday down 2.8 percent at EUR 2.79, extending a 12-month slide that has erased 51 percent of the share price and left the equity trading 23 percent below its 200-day moving average.
The disconnect between technological ambition and market reality is stark. Xiaomi's second-quarter numbers, released earlier this week, laid the problem bare: adjusted net profit tumbled 42.6 percent to 6.2 billion yuan, while revenue slipped 6.1 percent to 108.9 billion yuan. Both figures missed Reuters consensus estimates. Management blamed persistent price pressure on memory chips and other components — a cost environment the company has flagged as a burden without offering a timeline for relief.
A Premium Brand That Earns Less
The irony is that Xiaomi is finally succeeding at its premium push. Average selling prices for smartphones hit record levels in the quarter, driven by flagship devices, and the company raised its full-year smartphone shipment target to roughly 110 million units. But the profitability picture tells a different story: margins in the core handset business have slipped into single digits as memory-chip costs eat into gains. Xiaomi is selling more expensively and earning less — the central tension of the current investment case.
The EV division, meanwhile, delivered what should have been a bright spot. Second-quarter deliveries exceeded 100,000 vehicles, with cumulative SU7 deliveries now past the half-million mark — a milestone the company cites as proof of its mass-manufacturing capability. New models, including the SkyNomad SUV series, are expected to bolster the second half. Yet the segment's contribution to group revenue has climbed to roughly 23 percent, up from 18.3 percent a year earlier, and that growing share raises a nagging question: is it adding profit or merely shifting the mix toward a business whose margins remain opaque?
The Two Scenarios Investors Are Weighing
For bulls, the arithmetic is straightforward. If the EV and new-initiatives segment keeps gaining revenue share while smartphone margins stabilize, Xiaomi's transformation from hardware maker to mobility-and-technology group becomes demonstrable. The stock, trading near its 52-week low of EUR 2.34 and roughly 55 percent below its 52-week high, would look like an entry point for a medium-term recovery. The shares have drifted slightly higher since the earnings release but remain well under their 50-day average of EUR 2.88.
The bear case is equally clear. A profit decline of more than 40 percent alongside falling revenue is not a marginal issue — it shows how forcefully component costs are hitting the bottom line. And a rising revenue share for EVs does not automatically translate into a rising profit contribution. The muted post-earnings reaction suggests the market does not view the auto division's announcements as sufficient compensation for weak core metrics. Add to that the structural overhang of founder Lei Jun's roughly 23 percent economic stake in the company, as reported by Reuters in a recent analysis of Chinese taxation, and the governance picture adds another layer of caution — even if it has no immediate bearing on quarterly operations.
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What Comes Next
The stock has fallen 31 percent since the start of the year, with annualized volatility of 59 percent — a risk profile that keeps it firmly in speculative territory. The company's market capitalization stands at roughly EUR 72.63 billion, and the shares sit just 19 percent above their 52-week low, a cushion that underscores how fragile investor confidence has become.
Two concrete tests loom in the coming weeks. In September, Xiaomi plans to introduce its MIJIA smart-home brand at IFA 2026 in Berlin, part of a push to deepen the integration of appliances, vehicles and robotics across its "Human x Car x Home" ecosystem. The second test is whether memory-chip costs ease in the second half of the year. Only if both come together — the ecosystem story gaining traction and the cost pressure abating — can the stock plausibly stabilize. Until then, Xiaomi remains a smartphone maker with an expensive side project in cars, and a robot that, however skilled, cannot yet fix the margin math.
