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Xiaomi Q2 2026 Results: Profit Falls 42.6% as Memory Costs Hit Smartphones
Xiaomi’s second quarter 2026 adjusted net profit fell 42.6% to 6.2 billion yuan and revenue dropped 6.1% to 108.9 billion yuan, both below expectations. Smartphone revenue fell 7.5% to 42.1 billion yuan, while gross margin dropped from 11.5% to 8.5% and shipments declined 26% to 31.2 million units.
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Key takeaways
- Xiaomi’s second quarter 2026 adjusted net profit fell 42.6% to 6.2 billion yuan and revenue dropped 6.1% to 108.9 billion yuan, both below expectations.
- Smartphone revenue fell 7.5% to 42.1 billion yuan, while gross margin dropped from 11.5% to 8.5% and shipments declined 26% to 31.2 million units.
- Xiaomi said new businesses contributed a larger share of revenue, with EV revenue rising 15.9% to 23.9 billion yuan, even as the handset market remained under pressure.
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openai.comCreate a landscape editorial hero image for this Studio Global article: What did Xiaomi report about its second-quarter 2026 financial performance and outlook, including the 42.6% year-on-year decline in adjusted. Article summary: Xiaomi reported a weaker-than-expected second quarter, as exceptionally high memory and component costs and tougher competition sharply compressed its core smartphone and tablet profitability. It argued that the worst sm. Topic tags: general, news, general web. Style: premium digital editorial illustration, source-backed research mood, clean composition, high detail, modern web publication hero. Use reference image context only for broad subject, composition, and topical grounding; do not copy the exact image. Avoid: logos, brand marks, copyrighted characters, real person likenesses, fake screenshots, UI text, readable text, watermarks, charts with fake numbers
Xiaomi’s second-quarter 2026 results showed how quickly higher memory and component costs can erode profitability in its core handset business. Adjusted net profit fell 42.6% year on year to 6.2 billion yuan, while revenue declined 6.1% to 108.9 billion yuan; both figures missed analyst expectations. 1
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The company’s response is a two-part recovery plan: wait for memory-price inflation to moderate while shifting more of its growth story toward electric vehicles, artificial intelligence and other new businesses.
Xiaomi’s headline Q2 results
The quarter was weaker than expected on both sales and adjusted earnings:
- Revenue: 108.9 billion yuan, down 6.1% year on year.
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- Adjusted net profit: 6.2 billion yuan, down 42.6% year on year.
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- Smartphone revenue: 42.1 billion yuan, down 7.5%.
- Smartphone gross margin: 8.5%, compared with 11.5% a year earlier.
- Smartphone shipments: 31.2 million units, down 26%.
The shipment decline marked Xiaomi’s second consecutive quarterly fall in handset volumes. 1 The figures indicate that the problem was not simply slower unit sales: the cost of serving the remaining smartphone business also rose sharply.
Why smartphone profitability deteriorated
Xiaomi said historically high memory and other component costs squeezed margins, while stronger competition made it difficult to pass all of those increases on to customers. Smartphone average selling prices may rise as the company moves toward higher-end products, but that benefit can be overwhelmed when storage and other component costs increase faster. 1
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Xiaomi is particularly exposed to memory inflation because more than half of its phones sell for less than $200, according to the reporting on its results. That leaves less room to absorb higher costs without either raising prices or accepting thinner margins. 1
The result was a substantial contraction in smartphone gross margin—from 11.5% in the comparable quarter to 8.5%—alongside lower revenue and shipments. 1
Management sees pressure easing in the second half
Xiaomi’s outlook was more constructive than the quarterly numbers. Management said the pace of memory-price increases should slow in the second half and argued that the most severe period of pressure on the smartphone business had passed. 1
The company said it had adjusted its product mix and launch timetable in response to the cost environment. Those changes could help it manage component availability and protect profitability, but the recovery still depends on whether memory costs actually stabilize and whether competition allows Xiaomi to preserve pricing.
That makes the second half a test of Xiaomi’s assumptions rather than a guaranteed rebound. The company has identified a potential source of relief, but its handset volumes and margins remain the clearest indicators of whether the pressure is genuinely receding.
EVs and AI become more important to Xiaomi’s growth strategy
Xiaomi is using newer businesses to reduce its dependence on a saturated smartphone market. The combined revenue contribution of EVs, AI and other new initiatives rose to 23%, from 18.3%, while smart electric vehicle revenue increased 15.9% to 23.9 billion yuan. 1
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That diversification gives Xiaomi additional growth avenues as it faces softer Chinese auto demand and increasingly aggressive overseas expansion by domestic rivals. 1 It also changes the way investors may evaluate the company: near-term smartphone weakness is increasingly being weighed against the scale and future potential of its EV and AI operations.
Xiaomi plans to enter Europe’s electric-vehicle market in 2027, extending that expansion strategy beyond its existing markets. 1 The move offers a longer-term opportunity, although it also places the company into a competitive and capital-intensive industry where scale, regulation and execution will matter.
What the results mean for Xiaomi
The quarter points to a business in transition rather than a simple collapse in demand. Xiaomi remains profitable, but its core smartphone operation absorbed a severe margin shock as memory costs rose and handset competition intensified. 1
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Its recovery case rests on three conditions:
- Memory-cost inflation moderates in the second half, as management expects.
- Product and pricing changes protect handset margins without causing another sharp fall in shipments.
- EVs, AI and other new businesses expand quickly enough to offset weakness in smartphones and connected devices.
For now, the evidence is mixed. Xiaomi’s headline profit and revenue declined significantly, and smartphone shipments fell for a second straight quarter. But the growing contribution from EVs and other initiatives gives the company a potential route beyond the saturated handset market. The next results will show whether easing component pressure can turn that strategy into a broader earnings recovery.
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Xiaomi’s second quarter 2026 adjusted net profit fell 42.6% to 6.2 billion yuan and revenue dropped 6.1% to 108.9 billion yuan, both below expectations.
What are the key points to validate first?
Xiaomi’s second quarter 2026 adjusted net profit fell 42.6% to 6.2 billion yuan and revenue dropped 6.1% to 108.9 billion yuan, both below expectations. Smartphone revenue fell 7.5% to 42.1 billion yuan, while gross margin dropped from 11.5% to 8.5% and shipments declined 26% to 31.2 million units.
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Xiaomi said new businesses contributed a larger share of revenue, with EV revenue rising 15.9% to 23.9 billion yuan, even as the handset market remained under pressure.