Xiaomi Q2 2026 Results: Profit Falls 42.6% as Memory Costs Hit Smartphones

Xiaomi’s second-quarter 2026 results revealed a business moving in two directions. The company’s core smartphone operation was hit by higher memory and other component costs, weaker demand and lower shipments, while its newer electric-vehicle and AI businesses continued to expand but remained loss-making.

The headline numbers

For the quarter ended in June, Xiaomi reported revenue of RMB108.9 billion, down 6.1% year over year. Adjusted net profit fell 42.6% to RMB6.22 billion. Both figures missed market expectations: analysts had expected adjusted profit of about RMB6.6 billion, while one reported consensus estimate put revenue at RMB112.2 billion.

The result is more severe on an adjusted-profit basis than on Xiaomi’s reported net-income measure. Morningstar, citing the company’s results, reported net profit of RMB9.46 billion, down 20.5% year over year, while adjusted profit fell 42.6%.

Group gross margin also weakened to 19.8%, from 22.5% a year earlier. Higher component costs and intense competition were identified as important pressures on profitability.

Memory costs squeezed the smartphone business

Smartphone revenue fell 7.5% to RMB42.1 billion. Xiaomi shipped 31.2 million smartphones, a 26.5% year-over-year decline, partly because it reduced shipments of mid- and low-end devices. Weaker demand amid rising component costs also contributed to the decline.

The impact was especially clear in margins. Smartphone gross margin fell to 8.5%, from 11.5% a year earlier.

Xiaomi raised prices and moved its product mix toward more expensive devices, but that strategy did not fully offset the rise in memory and other component costs. Smartphone average selling price reached a record RMB1,351, up 25.9%, while premium smartphones represented 32.1% of Xiaomi’s smartphone sales in China.

That combination—higher average prices but fewer units and weaker margin—suggests that premiumization helped cushion revenue rather than reverse the underlying smartphone pressure. The supplied reporting identifies elevated memory costs as a key factor, but it does not independently establish how much of the shortage resulted from any particular memory manufacturer’s allocation decisions.

EVs and AI provide growth, but not yet profit

Xiaomi’s Smart EV, AI and Other New Initiatives segment generated RMB24.9 billion in second-quarter revenue, up 17.1% year over year. The figure included RMB23.9 billion from smart electric vehicles and RMB1.0 billion from other related businesses, including AI revenue associated with the Xiaomi MiMo large-language-model series.

The segment delivered 104,199 vehicles during the quarter. Cumulative deliveries of the SU7 series surpassed 500,000, according to the supplied earnings summary.

Growth came with continued investment costs. The segment recorded a RMB2.6 billion operating loss and a 19.2% gross margin. Because the segment combines vehicle sales with AI and other new initiatives, its operating loss should not be treated as a standalone measure of the automotive hardware business.

Management’s outlook

Xiaomi said the worst pressure on its smartphone business had passed and expected the pace of memory-price increases to slow in the second half of 2026.

The company was also pursuing a 550,000-vehicle full-year delivery target, according to reporting ahead of the results. Its SkyNomad SUV range, including the N70 Max and N90 Max, was expected to launch in September; Xiaomi’s official filing listed pre-sale prices of RMB259,900 and RMB299,900, respectively.

The outlook therefore depends on two variables: whether memory-cost inflation moderates enough to restore smartphone margins, and whether Xiaomi can convert EV delivery growth into sustainable profitability. The second-quarter figures show progress on scale, but not yet on segment operating profit.