Xiaomi's Triple Test: Buybacks, Recalls, and a Silicon Pivot
Published on 08/26/2026 at 07:52 | Redaktion boerse-global.de
The 30-day volatility reading of 61 percent tells the story better than any single headline. Xiaomi is simultaneously projecting confidence, absorbing a quality-control blow, and repositioning its technological foundations — and the market is struggling to price the net effect.
The most concrete signal of management's conviction arrived this week in a Hong Kong exchange filing: the company repurchased 1.8 million Class-B shares. It's a gesture that carries extra weight given the stock's trajectory. Tuesday's close of €3.08 marked a modest 0.3 percent daily gain, but the longer view is sobering — a 29 percent decline since the start of the year and a 48 percent slide from twelve months ago. The shares still sit 53 percent below the 52-week high of €6.54 reached last September.
A Recall That Tests the EV Narrative
The buyback lands in the same week that Xiaomi announced a recall of roughly 390,000 vehicles in China. That's part of a broader industry-wide action — Reuters reports that several manufacturers are recalling approximately 4.3 million vehicles in total over potential emergency door issues.
For Xiaomi, the timing is awkward. The Smart EV, AI and new initiatives segment grew 17.1 percent to RMB 24.9 billion in the second quarter of 2026, with electric vehicle deliveries continuing to climb. The segment's operating loss narrowed sequentially from RMB 3.1 billion to RMB 2.6 billion, edging the business closer to cost coverage. A recall of this scale doesn't immediately dent the balance sheet, but it tests buyer trust in a division the company has explicitly designated as its next growth engine — especially while the traditional smartphone business contends with elevated memory and component costs.
The Silicon Counterweight
Against those headwinds, Xiaomi is pushing forward on a technological front that could reshape its cost structure. The company announced the start of series production for its internally developed smartphone processor, the Xring-O3, manufactured by TSMC using a 3-nanometer process. Reuters reports that Xiaomi has set ambitious targets of 200,000 to 300,000 deliveries for the chip.
The strategic logic is straightforward: reducing dependence on external chip designers like Qualcomm. It's a pattern visible across Chinese technology companies increasingly unwilling to accept geopolitical supply-chain risks as a given. The company itself argues that the sharpest phase of smartphone price pressure has passed, with memory price increases expected to moderate in the second half of the year.
Reading the Quarter Behind the Headlines
The chip news provides essential context for the second-quarter results published just over a week ago — numbers that initially looked discouraging but have since driven the stock up 9.8 percent. Group revenue fell 6.1 percent year-on-year to $16.0 billion. Yet the average selling price per smartphone jumped 26 percent to $188, and smartphone gross margin held at 8.5 percent despite persistent component costs.
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Adjusted net profit rose 2.4 percent quarter-on-quarter to RMB 6.2 billion. The headline earnings decline that concerned some observers stems from deliberate investments: $532 million plowed into AI infrastructure and electric vehicle development. That's the trade-off — sacrificing near-term profitability for long-term positioning, a calculus familiar across China's tech sector.
A Founder Under Scrutiny
A third narrative thread involves the person at the top. Reuters has reported that founder Lei Jun's economic stake in Xiaomi is held through offshore structures that could gain political and legal significance amid China's tightened tax enforcement. No concrete consequences have been confirmed, but the matter adds another layer of uncertainty at a moment when the company is already under intensified public scrutiny.
Where Analysts Land
On the day of the earnings release, two major US houses weighed in. JP Morgan identified the third quarter of 2026 as the trough for corporate earnings, while Morgan Stanley emphasized the resilience and growth potential of the smartphone division. Both assessments, dating to the results day, reflect expectations that the investment phase will translate into improved earnings in the foreseeable future.
Technically, the stock has stabilized above €3.00, with the next resistance level at €3.50. The latest close of €3.06 sits roughly 5.5 percent above the 50-day moving average but remains 14 percent below the 200-day average. Year-to-date, the buyback program has already reached HK$11.7 billion — surpassing the full-year 2025 total — a further indication that management considers the current valuation compelling.
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The central question isn't whether Xiaomi can deliver a better quarter anytime soon. It's whether the bets on proprietary silicon, AI infrastructure, and electric vehicles pay off before the competition closes the gap. That answer won't come from a single earnings cycle — it will take years to render a verdict.
