Xiaomi's Profit Buckles as Memory Prices Soar — Update

By Jiahui Huang

Xiaomi had a rough start to the year, posting another profit drop as the memory crunch, stiff competition and soft demand hurt its businesses, from smartphones to electric cars.

The sluggish performance underscores the various challenges facing Xiaomi as it continues its pivot into electric vehicles and smart devices: As the artificial-intelligence boom keeps gobbling up memory supply, higher costs are eating into smartphone profit margins. At the same time, its auto segment is contending with an industry-wide slowdown in China, and its home-appliance business is facing weaker demand as the boost from government subsidies fades.

The Beijing-based company's net profit slumped 57% to 4.72 billion yuan in the first quarter, equivalent to $694.7 million. Revenue fell 11% to 99.14 billion yuan, it said Tuesday.

That undershot analysts' expectations for net profit of 5.64 billion yuan on revenue of 99.52 billion yuan, according to a Visible Alpha poll.

Revenue from its smartphone business fell 12.5% to 44.3 billion yuan during the three-month period, a result Xiaomi attributed to lower shipments despite higher average selling prices. Its smartphone gross margin deteriorated to 10.1% from 12.4% due to higher prices of key components and increased competition in its home market.

Its Internet-of-Things and lifestyle products segment--which includes washing machines, vacuums and other appliances--was the worst performer. Segment sales dropped 24% to 24.7 billion yuan despite higher revenue in overseas markets, as revenue from mainland China fell owing to a reduction in government subsidies, the company said. The division's gross margin was stable at 25.2%.

The company's EV business--its newest and fastest-growing division--fared better, with revenue rising 5.1% to 19.0 billion yuan, thanks to increased vehicle deliveries.

The average selling price of a Xiaomi EV fell 1.3% to 235,116 yuan in the first quarter, mainly due to purchase-tax subsidies and sales of in-stock vehicles with a lower price, the company said.

Overall gross margin for the first three months of 2026 fell to 22.0% from 22.8% a year earlier.

In March, the company launched its upgraded SU7 with a higher price tag than the first-generation model, raising investors' concerns about its sales potential, especially as China's auto industry faced a sector-wide slowdown in the first few months of 2026.

Xiaomi Chief Executive Lei Jun in January said the company targeted 550,000 vehicle deliveries this year--about 34% more than 2025.

To demonstrate the company's confidence in its business outlook, Xiaomi on Tuesday said it plans an on-market share buyback of up to 20 billion Hong Kong dollars, equivalent to $2.55 billion, over the next 12 months.

Amid the broad headwinds, shares in the company have continued to weaken this quarter, taking year-to-date declines to 24%. Analysts have said that investors' interest in Xiaomi could remain subdued until clearer evidence emerges that memory prices are peaking--or will stabilize.

Write to Jiahui Huang at jiahui.huang@wsj.com

(END) Dow Jones Newswires

May 26, 2026 08:17 ET (12:17 GMT)