Xiaomi Bets Billions on AI and Europe to Power Its Next Chapter

The image of Spanish Prime Minister Pedro Sánchez taking a selfie with Xiaomi CEO Lei Jun on the company's Beijing campus was more than a diplomatic photo op. It was a strategic signal: the Chinese tech giant is officially targeting Europe for its next major expansion, with plans to launch its electric vehicles there by 2027, starting in Spain. This European ambition forms one pillar of a massive, multi-billion dollar transformation as Xiaomi navigates a challenging hardware market.

To fund its future, the company is aggressively buying back its own stock, a move typically signaling management's belief that shares are undervalued. In just three days between April 13th and 15th, the company spent over 510 million HKD to acquire approximately 16.6 million of its own B-shares. This program, authorized in June 2025, allows for repurchases of up to ten percent of the issued share capital.

The financial muscle for this ambitious pivot comes from a robust 2025 performance. The company closed the year with a nearly 44 percent surge in profit, reaching 39.2 billion Yuan, while revenue grew by 25 percent. This strong footing supports a parallel, colossal investment in artificial intelligence. Xiaomi has committed to ploughing at least 60 billion Yuan into AI development and integration over the next three years, aiming to enhance smartphone interfaces and advance autonomous driving features in its EVs.

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The electric vehicle division is rapidly becoming the group's growth engine, even as its core smartphone business faces headwinds. In March, Xiaomi EV delivered 21,440 vehicles, comprising the updated SU7 sedan and the YU7 SUV. The refreshed SU7 proved particularly popular, attracting 15,000 firm orders within 34 minutes of its March launch, with total pre-orders for the new generation exceeding 40,000. For the full year 2026, the company is targeting 550,000 vehicle deliveries, a significant jump from the previous year's figure of over 410,000.

However, the path is fraught with challenges. The core smartphone and IoT business is under margin pressure from rising costs for DRAM and NAND memory chips, a particular problem for a volume player with strength in the budget segment. While the premium tier, led by the Xiaomi 17 series in China, shows growth, the overall hardware margin squeeze is a persistent concern. The EV segment itself, though growing, operates in China's brutally competitive market where price wars are constant. While it achieved an impressive 15.4 percent margin in Q2 2024, maintaining that profitability is a key question for investors, with quarterly results due in late May set to provide clarity.

Beyond hardware, Xiaomi's AI capabilities are gaining global recognition. Its MiMo-V2-Pro model is currently the world's most-used AI model on the OpenRouter platform, processing a staggering 4.79 trillion tokens weekly—triple the volume of any OpenAI model. It ranks eighth globally on the Artificial Analysis Intelligence Index. To monetize this technology, Xiaomi entered the API market in early April with its TokenPlan subscription, offering tiers from 39 to 659 Yuan per month.

The Sánchez visit underscores Xiaomi's established presence in Europe, where it already holds the number three spot in the smartphone market with a 16 percent share, largely driven by its Redmi series. The company is already collaborating with Spanish automotive and manufacturing firms. Yet, the success of its 2027 European EV foray will heavily depend on the European Union's evolving trade policy towards Chinese automakers. For now, Xiaomi is deploying capital and diplomacy in equal measure, betting that its dual offensive in AI and automobiles will redefine its value far beyond the smartphone.

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