Xiaomi's Q1 Operating Profit Crumbles 60% as Soaring Memory Costs and EV Losses Nullify Record Buyback
Published on 07/01/2026 at 03:54 | Redaktion boerse-global.de
The disconnect between Xiaomi’s operational reality and its stock-market ambitions has never been starker. The Chinese tech giant posted an operating profit of just 5.3 billion renminbi for the first quarter of 2026 — a 60% collapse from the 13.1 billion renminbi recorded a year earlier. Revenue slid 11% to 99.1 billion renminbi, hammered by a 19% drop in smartphone shipments to 33.8 million units. Yet executives have launched the company’s largest-ever share buyback, a 20 billion Hong Kong-dollar programme, hoping to arrest a slide that has wiped almost half the stock’s value off since January.
The buyback has so far fallen flat. Xiaomi repurchased 30.1 million of its own shares starting June 2, but the stock has lost another 22% since then and now trades at HK$2.45, barely above the 52-week low of HK$2.34. The company already spent HK$8.4 billion on buybacks across the first half, but short sellers have built positions equivalent to roughly 9% of the free float, overwhelming the repurchase effort. An automated tranche of up to HK$4 billion, launched June 19 under a special exemption from Hong Kong exchange rules, allows purchases even during blackout periods, but it has done little to stem the bleeding.
The heart of the problem lies in two high-cost ventures. Memory chip prices for smartphones have quintupled, while TV-chip costs have risen tenfold, crushing margins on a product line where 62% of devices sell for under $200. Xiaomi's management expects the memory cost pressure to persist until at least 2027 or 2028. Meanwhile, the electric-vehicle division burned through 3.1 billion renminbi in operating losses during the first quarter on revenue of 19.9 billion yuan. With 80,856 vehicles sold, that works out to roughly $5,600 lost on every car delivered. The SUV YU7, once a bright spot, saw monthly deliveries collapse from nearly 38,000 units in January to fewer than 10,000 in April. Total EV deliveries stood at about 150,000 by end of May, far below the full-year target of 550,000. To hit that goal, Xiaomi would need to ship 57,500 vehicles a month from June through December — 15% more than its record 50,000.
Should investors sell immediately? Or is it worth buying Xiaomi?
The company is trying to counter the gloom with a packed product pipeline. HyperOS 4 is slated for a July or August launch in China, followed by a global rollout weeks later, and the flagship Xiaomi 18 Pro should appear in China this September, though international markets may have to wait until early 2027. In a retail push, Xiaomi opened its largest store in Singapore — 221 square metres in VivoCity Mall, its 18th outlet on the island — with plans to exceed 20 by year-end. A separate gaming smartphone, the Redmi K90 Ultra, features an active air-cooling system that can drop temperatures by up to 10°C in 100 seconds, though it remains China-exclusive for now. The company is also ploughing at least 16 billion renminbi into AI this year, with a cumulative 60 billion renminbi earmarked over three years.
Technically, the stock is deeply oversold: its relative strength index hovers around 20.2, a level that has historically preceded bounces. But with the 200-day moving average roughly 39% above the current price, any recovery faces stiff resistance. All eyes now turn to August 26, when Xiaomi reports second-quarter results. Analysts have already slashed their forecasts, so the bar for a positive surprise is low — but with memory costs still surging and the EV unit bleeding cash, the operational hurdles remain formidable.
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