What caused Xiaomi Corp.’s adjusted net income to plunge 43% to 6.22 billion yuan and revenue to fall 6.1% in the June 2026 quarter, how did the global memory-chip shortage, supplier priorities, higher component costs, weak demand, fierce competition, reduced mid- and low-tier sm

Xiaomi’s June-quarter decline was primarily a smartphone-margin and volume shock: scarce, more expensive memory raised handset costs just as demand weakened, while Xiaomi deliberately cut lower-margin mid- and low-end shipments. That combination reduced both revenue and operating leverage, producing its third consecutive profit decline. 34

• Memory squeeze: AI-related demand absorbed memory supply and pushed prices higher; globally, the resulting handset price increases helped drive an 11% year-on-year fall in second-quarter smartphone shipments. 510 Xiaomi faced higher costs for memory and other components, which compressed margins. 23

• Supplier priorities and pricing: Large AI-system buyers were able to secure capacity through premium-priced, multiyear arrangements, leaving consumer-device makers exposed to tighter availability and higher input prices. 10 Xiaomi had to lift prices and shift toward pricier phones, but that also weakened demand in its price-sensitive core customer base. 59

• Why Xiaomi’s shipments fell unusually sharply: Smartphone revenue dropped 7.5% to 42.1 billion yuan and unit shipments fell 26.5% to 31.2 million. Xiaomi said it had reduced mid- and low-end shipments; weak global demand, component inflation and intense rivalry compounded that intentional mix change. 4 The higher-end shift lifted average selling prices, but could not offset the lost unit volume. 24

• Broad-product strategy: help and burden: Xiaomi’s phones, AIoT devices and EV push diversify its revenue base and can create ecosystem cross-selling. But the strategy also leaves it funding a capital-intensive auto expansion while its historically high-volume, relatively low-price smartphone business is under pressure. 37

Investors appear to be looking through the weak quarter because the company has signaled that the steepest smartphone-cost pressure may be past as memory-price increases slow in the second half, while EVs are becoming a larger revenue contributor. 2 The premium-phone mix is improving, Xiaomi has held a global top-three smartphone position for 24 consecutive quarters, and Q2 EV deliveries reached 104,199, up 28.2% year on year. 26 Those factors plausibly explain optimism and the roughly 20% rise in its Hong Kong shares since end-June, though share-price performance also reflects expectations rather than proof of durable profitability.

What determines the next phase

• New smartphones: Strong sales of higher-priced models could protect revenue and gross margin even if total shipments stay subdued; renewed cost inflation or further price hikes would risk another demand setback. 24

• Hybrid/extended-range EVs and SkyNomad SUVs: The SkyNomad line broadens Xiaomi beyond battery-only cars into the large-family SUV segment, offering a potential new sales engine in a difficult domestic market. Xiaomi is also targeting a European launch next year. 17

• Upside case: Fast SkyNomad uptake, continued EV delivery growth and successful premium-phone launches could make EVs and premium hardware meaningful offsets to weaker low-end smartphones. Easing memory inflation would further improve margins. 24

• Downside case: China’s auto market remains fiercely competitive and domestic car sales had fallen for 10 consecutive months through July, increasing the likelihood of price competition and weaker vehicle margins. 18 Overseas expansion could diversify demand, but tariffs, local regulatory approvals, safety compliance and scrutiny of Chinese EVs can raise costs, slow launches and limit pricing flexibility. The available evidence does not establish the eventual financial impact of those obstacles on Xiaomi specifically.

In short, Xiaomi’s recovery now depends less on restoring low-end phone volume and more on proving that premium phones and a scalable, compliant EV business—especially SkyNomad and overseas sales—can grow revenue without sacrificing margins.