Xiaomi's Strategic Pivot: Record Annual Earnings Mask Fourth-Quarter Pressures

Xiaomi hits record 2025 revenue & profit, but Q4 profit fell 27% due to EV costs. The firm is investing 60B yuan in AI and targets 550k EV deliveries for 2026.

Xiaomi Corporation's latest financial results present a study in contrasts. The Chinese technology giant reported historic highs in both revenue and adjusted net profit for the full year 2025. However, investor sentiment remains cautious, with the company's shares hovering near a 52-week low, as a difficult final quarter and significant strategic investments cloud the otherwise stellar annual performance.

Annual Milestones and Quarterly Headwinds

The consolidated figures for 2025 underscore a year of robust growth. Company-wide revenue advanced by 25% to reach 457.3 billion yuan. More impressively, adjusted net profit surged 43.8% to 39.2 billion yuan, setting new company records.

This strong annual picture was tempered by a challenging fourth quarter. During this period, adjusted net profit contracted by 27% year-over-year to 6.54 billion yuan. Management attributed this decline to rising memory chip costs and the substantial capital requirements associated with scaling its electric vehicle (EV) operations. Furthermore, Xiaomi fell short of a key internal target, shipping 165.2 million smartphones against an ambitious goal of 180 million units for its core business.

Analyst commentary reflects this caution. J.P. Morgan recently downgraded its rating on the stock to "Hold." Meanwhile, Morgan Stanley has cautioned investors about persistent pressures from semiconductor pricing, which are expected to weigh on performance through the first half of 2026.

Doubling Down on AI and Automation

In response to these challenges, Xiaomi's leadership is accelerating its investment strategy. The company has earmarked over 40 billion yuan for research and development in 2026, with 16 billion yuan dedicated solely to artificial intelligence initiatives. This forms part of a broader three-year plan to invest approximately 60 billion yuan in AI development.

Tangible progress was demonstrated in mid-March with the launch of the "MiMo-V2" model family, a suite of AI systems designed for robotics, language processing, and agent-based applications. In a practical implementation, a humanoid robot is already performing assembly tasks at Xiaomi's EV factory with a reported success rate exceeding 90%.

The company's internet services segment provided a bright spot, achieving a record annual revenue of 37.4 billion yuan in 2025. This performance strengthens Xiaomi's ongoing transition into a broader platform-based business model.

Electric Vehicle Ambitions Gain Traction

A significant development for Xiaomi's future growth is the strong launch of its next-generation SU7 electric sedan. Deliveries of the new model, which features an upgraded chassis and a maximum range of 902 kilometers, commenced in Shenzhen on March 25. The vehicle garnered over 30,000 firm orders within its first three days of availability. For the full year 2026, the company is targeting 550,000 EV deliveries, representing a projected increase of roughly 34% year-over-year.

Structurally, the EV division reached an important milestone in 2025 by generating its first positive operating profit of 0.9 billion yuan. This indicates the segment is evolving beyond being a pure cost center, even though margins remain slim.

Building Confidence Amid Market Uncertainty

To bolster market confidence, Xiaomi's management has initiated a share buyback program and awarded incentives to nearly 1,000 key employees. Whether these measures, combined with the company's aggressive investment cycle, will be sufficient to lift the equity from its current lows will likely depend on the first-quarter 2026 results and any potential easing of semiconductor cost pressures in the coming months.