Xiaomi Q1 2026 Profit Slumps 43% as EV Losses and Memory Costs Bite; AGM Greenlights $20B Buyback and Dilution Mandate

At the same time, shareholders passed a 20% share issuance mandate that allows the board to issue new Class B shares or sell treasury shares of up to 20% of the issued share capital . The combination of buyback authority and issuance authority gives management significant financial flexibility but also creates a dilution overhang for existing shareholders .

Q1 2026 Earnings: The Numbers

Xiaomi reported unaudited results for the first quarter ended March 31, 2026, that showed broad-based pressure across revenue and profit .

• Total revenue fell 10.9% year-on-year to RMB 99.1 billion, down from RMB 111.3 billion a year earlier . One source noted this was Xiaomi’s first year-on-year revenue decline in nearly three years .
• Adjusted net profit (non-IFRS) came in at approximately RMB 6.1 billion, down 43.1% from the prior-year quarter, and below the average analyst estimate of roughly RMB 6.4 billion .
• Statutory net profit fell 57% to about RMB 4.72 billion, worse than some analyst expectations .
• Gross margin across the group was 22.0%, down 0.83 percentage points year-on-year .
• Segment highlights:
  • Smartphone revenue: RMB 44.3 billion, down 12.5% year-on-year, with 33.79 million units shipped globally and a record average selling price (ASP) of RMB 1,310 . Smartphone gross margin was just 10.1%, reflecting cost pressure .
  • IoT and lifestyle products revenue: RMB 24.7 billion, down 23.7%, partly reflecting reduced government subsidies in mainland China .
  • Smart EV, AI, and other new initiatives: Revenue approached RMB 19.9 billion, with a gross margin of 20.1% but an operating loss of RMB 3.1 billion .

Stock Performance and Analyst Reaction

Xiaomi’s Hong Kong-listed shares were priced at HK$28.04 as of June 1, 2026, representing a one-year decline of roughly 45.82% . The stock fell approximately 5.3% to HK$28.40 on May 27 alone, the first trading day after the Q1 release .

The most prominent downgrade came from Jefferies, which cut Xiaomi to Underperform from Hold and lowered its price target from HK$26.98 to HK$25.49, citing a Q1 miss concentrated at the EBIT level . CLSA had warned before the earnings release that adjusted EBIT would likely fall about 41% to around RMB 6.5 billion . Arete Research analyst Shawn Yang said the company was “facing a lot of challenges” and that smartphone sales remain key to business profitability .

Despite the negativity, revenue slightly exceeded the market consensus of roughly RMB 98.85 billion, and the stock saw some stabilization around the HK$28–29 range in the days after the initial sell-off .

Key Headwinds Pressuring Xiaomi’s Outlook

1. EV Division Losses Are Persistently High

Xiaomi’s smart EV and AI segment generated RMB 3.1 billion in operating losses in Q1 2026 despite bringing in nearly RMB 19.9 billion in revenue . The company entered a product transition phase with new SU7 and YU7 models already launched, but EV losses continue to be a material drag on near-term profitability .

2. Rising Memory Chip Costs Are Gutting Margins

Surging memory chip prices — driven in part by AI data center demand — compressed margins across Xiaomi’s smartphone, TV, and home appliance businesses . The company’s smartphone gross margin of 10.1% was described as resilient given the cost environment, but the overall adjusted net profit drop of 43.1% shows how heavily component costs are weighing on the bottom line .

3. Smartphone and IoT Revenue Are Under Pressure

Smartphone revenue declined 12.5% year-on-year, with mid-to-low-end shipments deliberately pulled back . IoT revenue fell 23.7%, influenced in part by the reduction of China’s national subsidy programs . Arete Research analyst commentary flagged smartphone sales as the critical variable for sustained profitability .

4. Top-Line Contraction Erodes the Earnings Base

The 10.9% total revenue decline, compared to a record Q1 2025 base, is a clear signal that Xiaomi’s core hardware business is navigating a tough cycle of lower volumes and weaker pricing power . The smartphone × AIoT segment posted RMB 79.3 billion in revenue, while the innovative business segment added RMB 19.9 billion, but neither grew fast enough to offset the overall top-line slide .

5. Capital Allocation Creates Dilution Risk

While the HK$20 billion buyback signals management’s intent to defend the stock, the 20% issuance mandate introduces tangible dilution risk. The board can now issue or sell treasury shares equal to one-fifth of the company’s existing share base, which could weigh on the stock if exercised aggressively .

6. Intense Competition and Uneven Analyst Sentiment

Analyst reactions remain split. Jefferies is Underperform with a target implying downside from the June 1 price, while the average analyst price target across the street remains around HK$41.78, signaling a potential upside based on the overall consensus . The wide dispersion in analyst views reflects genuine uncertainty about how quickly Xiaomi can scale its EV business profitably while defending its smartphone margins.