Xiaomi's Stock Defies a 42% Profit Collapse — Here's What Investors Are Actually Buying

Xiaomi's Q2 net income fell 42.6%, but shares gained 6.8% weekly as investors focus on EV growth, AI model success, and premium phone strategy.

The arithmetic looks brutal on paper. Xiaomi's adjusted net income fell 42.6 percent year-on-year to 6.2 billion yuan in the second quarter, while revenue slipped 6.1 percent to 108.9 billion yuan. Yet the stock is climbing, closing Thursday at 3.05 euros and posting a 6.8 percent weekly gain. On a seven-day stretch, the advance reaches 10 percent, with a single session jump of 3.3 percent to 3.15 euros.

That disconnect between the income statement and the share price tells the real story: investors are pricing Xiaomi's future bets, not its current phone business.

The Premium Pivot Meets a Memory-Chip Squeeze

The smartphone division remains the company's biggest headache. Segment revenue contracted 7.5 percent to 42.1 billion yuan as global shipments fell to 31.2 million units, a 26.3 percent drop from a year earlier. Gross margin in the handset business compressed to 8.5 percent, squeezed by persistently elevated memory-chip costs.

But there's a counter-narrative buried in those numbers. Xiaomi's average selling price jumped 25.9 percent year-on-year to 1,351 yuan — a record, according to CFO William Lu. The company is selling fewer phones but charging more for them. Whether that premiumization strategy can permanently offset the memory-cost burden is the central question hanging over the recovery.

The market share picture is mixed. Xiaomi held onto third place globally with an 11.5 percent share, trailing Samsung at 22.3 percent and Apple at 20.3 percent — its 24th consecutive quarter in the top three. But at home, the erosion is starker: shipments in mainland China fell to 8.4 million units, with market share dropping from 16.8 percent to 14.2 percent.

The Bull Case: EVs, AI, and a Robot Debut

The optimists point to a rapidly diversifying growth engine. Xiaomi's electric vehicle business delivered 104,199 cars in the second quarter, marking its sixth consecutive year-on-year improvement. The flagship SU7 became the best-selling pure electric sedan above 200,000 RMB in the first half. The company's IoT and lifestyle segment posted a 20.1 percent margin, while internet services reached an eye-popping 76.8 percent.

Artificial intelligence adds to the momentum. Xiaomi's in-house language model, MiMo V2.5, topped the global open-source ranking in August by core volume, with usage multiplying more than sixfold in two months. The model is already generating revenue through API calls and token plans. Management also confirmed the public debut of Xiaomi's robot at the World Robot Conference in Beijing, running from August 19 to 23, with initial applications focused on intelligent manufacturing.

The buyback machine is running too. Through August 13, Xiaomi had repurchased roughly 377.5 million shares worth 11.7 billion Hong Kong dollars, providing a floor under the stock independent of operational performance.

The Bear Case: Red Ink in EVs and a Slowing Core

The counterarguments are equally compelling. The EV segment — grouped under Smart EV, AI, and other new initiatives — posted an operating loss of 2.6 billion yuan, still far from profitability. Management itself cautioned that consumer demand is recovering slowly and competition is intensifying, with operational headwinds expected to persist into the third quarter.

Research spending rose 19 percent to 9.2 billion yuan, and capital expenditures hit 3.6 billion yuan — necessary investments, but they weigh on near-term earnings. The company's global footprint remains broad, with top-three positions in 53 markets and top-five rankings in 67, yet the volume decline in its core business is hard to ignore.

Where the Stock Goes From Here

The technical picture offers limited clarity. The stock trades roughly 52 percent below its 52-week high of 6.54 euros, with a year-to-date loss of 27 percent. Thirty-day volatility sits at 60 percent, while the RSI of 56.5 signals neither overbought nor oversold conditions.

The key level to watch is the 50-day moving average at 2.89 euros. Holding above it, with the premiumization strategy gaining traction, could push the stock toward the 200-day average at 3.59 euros. A break below that line would likely hand control back to the downtrend that has been in place since September 2025, with the next downside target around the 2.34-euro lows.

The immediate catalyst is the third-quarter report, where investors will look for signs that memory-cost pressure is easing and that the SkyNomad SUV launch — scheduled for September, though final pricing remains undecided — can move the EV division closer to profitability. For now, the market is betting on the story rather than the spreadsheets.