Xiaomi's Stock Halved: Is the $5,600 EV Loss and Smartphone Squeeze Structural or Cyclical?

Xiaomi's stock has approximately halved from its 52-week peak — down about 56% from its IPO price and trading near a 52-week low of €2.76 — driven by a structural margin squeeze across both its core smartphone business and its capital-intensive EV startup division . The August 18 earnings release will test whether this erosion is cyclical (reversible with component cost relief) or structural (a permanent shift in Xiaomi's profit profile).

Four key drivers of the stock halving

1. Revenue shrinking faster than costs can adjust. Q1 2026 revenue fell 10.9% year-on-year to RMB 99.14 billion, but net profit collapsed 57% to RMB 4.72 billion — a disconnect that signals structurally impaired operating leverage, not just a soft sales cycle . The gap between GAAP net income and adjusted net profit (which fell a still-steep 43.1%) is itself a red flag for investors .

2. EV division burning ~$5,600 per vehicle. Xiaomi's smart EV and innovation segment posted an operating loss of $457 million (RMB 3.1 billion) in Q1, equating to a ~$5,600 deficit per vehicle delivered — on a base of 80,856 deliveries in the first five months of 2026 . This is a startup-scale cash burn layered onto a mature hardware business. CEO Lei Jun warned that memory-chip cost pressure would persist for 'at least two more years' .

3. Smartphone shipments declining faster than the market. Xiaomi's global handset shipments fell 26% year-on-year in Q2 2026 to 31.2 million units, versus a 6% contraction for the overall market, according to Omdia . The company is losing market share even as the market shrinks. Smartphone gross margin compressed to 10.1% in Q1 from higher levels a year ago .

4. Memory-chip cost inflation is compressing margins. Surging prices for DRAM and NAND flash — key smartphone components — are squeezing gross margins. Xiaomi cannot fully pass these costs to consumers in a price-competitive environment, compressing its smartphone gross margin .

5. Share buybacks failing to support the stock. Despite aggressive buyback programs, the stock continued sliding, indicating that investors see the margin erosion as fundamental rather than a temporary dip .

6. Target price downgrades from major sell-side firms. JPMorgan trimmed its target to HK$31 on August 4, citing lackluster expectations; CICC forecasts Q2 adjusted net profit down 43.6% year-on-year; and Goldman Sachs earlier projected a ~50% profit plunge .

What the August 18 report will test: structural vs. cyclical margin erosion

The central question is whether margin compression is a temporary function of the memory-chip cycle and EV ramp-up costs (cyclical), or a permanent degradation of Xiaomi's earnings power (structural).

The table below sets out the competing arguments:

Pressure point	Cyclical argument	Structural argument
Smartphone gross margins	Memory-chip prices will ease in H2 2026, restoring margins	Market share losses and price competition are permanent; 10.1% gross margin may be the new normal
EV unit losses	Losses will shrink as the SU7 and Skynomad SUV scale toward annual targets (~550K vehicles)	Xiaomi lacks EV scale advantages vs. dedicated players; $5,600/vehicle burn may persist for years
Q2 earnings expectations	Revenue may stabilize sequentially (+3.9% qoq per UOB Kay Hian)	YoY revenue still seen falling 3.4%–11.2%, with adjusted net profit down 40–44%
Buyback efficacy	Buybacks signal management confidence and support the floor	The stock kept falling through buybacks, suggesting the floor is lower

The consensus previews for Q2 paint a picture of continued pain: revenue estimates range from RMB 107 billion (down 7.6% YoY) to RMB 116.8 billion, while adjusted net profit is forecast at RMB 5.9–6.16 billion, down 43–44% year-on-year . Even if memory costs ease later in 2026, the simultaneous loss of smartphone market share and heavy EV cash burn create a two-front squeeze that looks more structural than cyclical — and the stock price suggests the market has already priced in that verdict.