Xiaomi's Tuesday Report Card: A Delivery Slowdown Complicates an Already Fraught Earnings Picture

Xiaomi faces EV delivery shortfall and shrinking phone margins as Q2 results loom, with stock down 34% YTD and guidance at risk.

When Xiaomi steps up to present its second-quarter results on Tuesday evening Hong Kong time, the company will be defending two fronts at once. The smartphone margin squeeze that has dominated analyst commentary for months is one. But the quieter, arguably more consequential story is unfolding in the electric vehicle division, where July's delivery numbers have opened a visible gap between ambition and execution.

The market has already rendered its verdict ahead of the print. The stock has shed roughly 34 percent since the start of the year, and sits 56 percent below its 52-week high of 6.54 euros. At Friday's close of 2.84 euros, the shares have lost 51 percent over the past twelve months — a brutal stretch that suggests investors have priced in considerable downside before a single new data point lands.

The EV Math That Doesn't Quite Work

July deliveries came in at 31,267 vehicles. That represents a 2.68 percent improvement over the same month last year — but a nearly 10 percent decline from June's figure. For a company whose growth narrative increasingly rests on its automotive arm, the month-over-month reversal is the detail that matters most.

The arithmetic is unforgiving. To hit the official annual target of 550,000 units, Xiaomi would need to average roughly 66,700 deliveries per month from August through December — more than double July's output. Production ramp-ups can deliver such leaps, and it would be premature to rule out a sharp second-half acceleration. But the probability that guidance gets revised downward is substantial, and Tuesday's earnings call will likely force management to address the gap directly.

UBS has already signaled its view, trimming its price target in early August with reference to an anticipated profit slump. That call is now more than a week old and shouldn't be mistaken for a fresh consensus, but it aligns with a broader market mood that has shifted from growth optimism to risk management.

The Margin Squeeze in Phones

The smartphone division presents its own set of headaches. CICC, which reaffirmed its "Outperform" rating on August 3, projects second-quarter revenue of 107.14 billion yuan — a 7.6 percent decline year over year — and adjusted net income of 6.114 billion yuan, down 43.6 percent. That would mark a second consecutive quarter of steep profit erosion, albeit a softer fall than Q1's 56.8 percent plunge to 4.723 billion yuan.

The core tension sits in the gross margin. CICC expects smartphone gross margin to land at just 8.3 percent, a 3.2 percentage point contraction, even as the average selling price climbs to a record 1,340 yuan. In plain terms: Xiaomi is selling pricier devices while earning less on each one. Rising memory costs — which Jefferies flagged as roughly 100 percent inflation when it downgraded the stock from "Hold" to "Underperform" on May 27, cutting its target from 26.98 to 25.49 Hong Kong dollars — have squeezed the economics of the hardware business.

The bull case rests on whether that erosion is stabilizing. Monthly active users reached 746.2 million in Q1, up 3.8 percent, while the AIoT device base grew 18.5 percent. If user growth held up in Q2 and gross margin lands even slightly above CICC's estimate, it could signal that premium pricing is at least partially offsetting component cost pressures.

A Buyback Program Speaks Volumes

Management has been signaling confidence through the share register. Since early June, Xiaomi has executed 14 buyback tranches totaling roughly 100.7 million Hong Kong dollars, at prices between 25.82 and 28.65 Hong Kong dollars, under a new mandate of up to 20 billion Hong Kong dollars running through June 2027.

That program doesn't change the fundamental questions Tuesday's report must answer. But it does suggest the board sees value at current levels — a counterweight to the bearish narrative that has dominated recent trading.

The Stellantis Question and Other Strategic Loose Ends

Adding to the uncertainty is the unresolved question of a potential partnership with Stellantis. Reports of talks over EV technology sharing and platform integration surfaced in March, but neither company has officially confirmed the discussions. Without concrete progress, the EV growth story loses one of its more intriguing optionality angles.

Meanwhile, the operational machine keeps humming. Xiaomi has launched the Redmi K100 Pro and K100 Pro Max in China, starting at 3,699 and 4,199 yuan respectively, the latter featuring a 200-megapixel camera and Bose-tuned speakers. Routine security updates continue across device lines. None of this, however, addresses the central question investors are asking: can the EV business carry the growth narrative, or will 2026 become the year of the guidance cut?

What Tuesday Will Actually Tell Us

The consensus estimate calls for revenue of 116.84 billion yuan and a 55 percent EPS decline. The EV division posted an operating loss of 3.1 billion yuan in Q1, and any signal that this is widening will weigh heavily on the valuation.

The market's immediate reaction will likely hinge on two things: whether smartphone gross margin holds near that 8.3 percent threshold, and what management says about second-half EV delivery expectations. A margin figure comfortably above the CICC estimate combined with a confident reiteration of the 550,000 target could spark a relief rally. A miss on either front — or worse, both — would validate the skepticism that has driven the stock down by a third this year.

The buyback program offers a floor of sorts, but it cannot mask the underlying tension: a company selling more expensive phones at thinner margins, while its EV division struggles to translate production capacity into delivery momentum. Tuesday's numbers will show whether either trend is bending in the right direction.