Xiaomi Issues HK$1.5 Billion in Free Stock to Retain Talent as Shares Sink to Multi-Year Lows

Xiaomi awards HK$1.49B in zero-price shares to employees despite stock hitting 52-week low, as EV losses deepen and AI spending surges. Revenue and profit fell in Q1 2026; buybacks exceed HK$8B to counter dilution.

Xiaomi is betting heavily on its workforce even as its stock price collapses. The Chinese tech group awarded roughly 52.5 million shares to 3,626 employees and service providers on 27 May 2026, at an issue price of zero. Based on that day's closing price of HK$28.40, the awards carry a notional value of HK$1.49 billion — a rich incentive package that comes just as the stock touches its 52-week low.

The shares trade around €3.08 in Hong Kong, roughly 54% below the June 2025 peak, and have lost nearly 31% since the start of the year. Behind the slide lies a brutal earnings report for the first quarter of 2026. Revenue fell almost 11% year-on-year to 99.1 billion renminbi, while adjusted net profit plunged 43% to 6.1 billion renminbi — the first simultaneous decline in both top and bottom lines in several years. Xiaomi blamed rising memory costs, fierce competition in the electric-vehicle segment, and weaker global smartphone demand.

EV losses burn cash as AI investments surge

The electric-vehicle business remains a costly incubator. Xiaomi delivered 80,856 vehicles in the quarter, pushing segment revenue up nearly 7% to 19.9 billion renminbi. Yet the unit posted an operating loss of 3.1 billion renminbi. That capital drain coincides with a heavy push into artificial intelligence, where the company plans to invest at least 16 billion renminbi this year alone and more than 60 billion over the next three.

Research and development spending jumped 33.4% to 9.0 billion renminbi in the first quarter, and the number of R&D staff hit a record high of more than 26,000. The stock awards are designed to lock in key talent for projects spanning AI, smartphones, the AIoT ecosystem and electric vehicles. The grants are subject to a four-year vesting period ending in May 2030, performance rankings and clawback clauses for serious misconduct. Until the shares actually deliver, recipients hold neither voting nor dividend rights.

Share buybacks run in parallel to offset dilution

The dilution from the awards is limited but not negligible. The new shares represent about 0.20% of the weighted average outstanding common stock of roughly 25.77 billion shares. However, the underlying 2023 share plan has a total cap of nearly 2.5 billion shares, of which around 1.88 billion remained available for future grants at the time of the announcement.

Xiaomi has been leaning heavily on buybacks to counteract the dilutive effect. Since the start of the first quarter of 2026, it has repurchased more than 250 million Class-B shares for about HK$8.41 billion. In May alone, it bought back roughly 22.9 million shares for about HK$700 million, some of which have already been cancelled. The programme continues: at the end of May, another HK$298 million in stock was snapped up. Cumulatively, buybacks since the beginning of the year now exceed HK$8 billion — far outweighing the value of the latest awards.

Smartphone pricing climbs but chip costs bite

Despite the broader margin squeeze, there is a silver lining in the core handset business. The average selling price of Xiaomi smartphones rose to a record 1,310 renminbi per unit, signalling a successful shift toward the premium segment. Models such as the upcoming 17T series with a Leica telephoto lens aim to push that trend further. New wearables and smart-home devices — from mini-LED TVs to robotic vacuum cleaners — are also part of the "Human x Car x Home" ecosystem that Xiaomi is trying to deepen.

The company's new operating system, HyperOS 4, is scheduled to launch in July or August 2026 and promises deep AI integration. Its in-house language model, MiMo-V2.5-Pro, is already ranked as a leading open-source model. These software bets are central to Xiaomi's strategy to differentiate itself in a crowded market.

Technical signals hint at a potential bounce

From a chart perspective, the stock's relative strength index has climbed to 70, a level that typically suggests overbought conditions in the short term. While the shares are sitting at a 52-week low, that RSI reading could indicate that a technical rebound is building. Still, the fundamental picture remains mixed: the EV division is not yet a profit driver, and the combination of rising investment and falling earnings creates a precarious balancing act.

Whether Xiaomi's long-term AI and ecosystem bets can offset the near-term earnings drag will become clearer with second-quarter results — and the market reception of HyperOS 4 this summer.