Xiaomi's Buyback Blitz Can't Mask the Margin Erosion Ahead of Q2 Results
Published on 08/12/2026 at 21:11 | Redaktion boerse-global.de
The numbers tell a story of a company spending heavily to defend its stock while the underlying business loses ground at an accelerating pace. Xiaomi's shares have shed roughly a third of their value since the start of the year, and the selloff shows no signs of abating as investors brace for second-quarter earnings due August 18.
The stock slipped another 2.1 percent in Thursday's session to hover around EUR 2.92, extending the week's decline to nearly 5 percent. The equity now trades about 20 percent below its 200-day moving average of HKD 3.66 — a technical signal that the medium-term downtrend remains firmly intact, with the 50-day average of HKD 2.90 just barely within reach.
The Profit Squeeze Is the Real Story
While the share price gets the headlines, the fundamental picture is far more concerning. In the first quarter of 2026, Xiaomi reported revenue of CNY 99.142 billion, down 10.9 percent year over year. But the damage to the bottom line was far more severe: net profit collapsed to CNY 4.723 billion from CNY 10.924 billion in the year-ago period — a plunge of roughly 57 percent. Adjusted net income fared little better, falling 43.1 percent.
The China International Capital Corporation (CICC) expects the second quarter to extend that painful trajectory. The brokerage projects revenue to decline 7.6 percent to CNY 107.14 billion, with adjusted net profit falling another 43.6 percent to CNY 6.114 billion. If those forecasts prove accurate, the margin compression isn't a one-off blip — it's a structural problem driven by soaring memory chip costs and the losses incurred from ramping up the electric vehicle division.
Buybacks: Confidence or Cosmetic?
Xiaomi has been aggressively repurchasing its own shares even as earnings deteriorate. The company launched a new buyback program worth HKD 20 billion, executing 14 tranches between June and July. The repurchases started at HKD 28.65 per share and most recently executed at HKD 25.82 on July 15, totaling HKD 100.7 million in buyback volume.
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Under the mandate dated June 2, which authorizes the repurchase of up to 2.58 billion shares, Xiaomi has so far retired 79.8 million shares — representing just 0.31 percent of the outstanding float. An earlier tranche in August saw the company acquire 1.862 million shares for approximately HKD 49.95 million.
The optics are mixed. Management is signaling confidence in the long-term value of the stock while simultaneously reaffirming its 2026 delivery target of 550,000 electric vehicles — a 34 percent increase year over year. But the net effect is diluted by the 824,000 new shares flowing in from employee stock programs during the same period. The buyback, in practical terms, barely moves the needle on share count, making the gesture feel more symbolic than transformative.
EV Ambitions Face Mounting Skepticism
The core of investor doubt centers on the EV division's ambitious delivery goals. JP Morgan has grown increasingly cautious, cutting its price target to HKD 31.00 and flagging concerns about Xiaomi's ability to hit its 550,000-unit delivery target for 2026. The US investment bank has also warned of only "mediocre" financial results for the second quarter.
The SU7 and YU7 models are expected to drive growth, and the company launched two new SUV models in late July with extended range and competitive pricing for the Chinese market. Yet the skepticism persists. CICC had already cautioned in early August about potentially weak results, though it maintained its rating on the stock ahead of the earnings release.
Not every institution shares the same level of concern. Daiwa trimmed its price target only modestly to HKD 32.00 while keeping a "Buy" rating — a notable divergence from JP Morgan's more bearish stance.
Product Pipeline Offers Counterweight
On the product front, Xiaomi remains active. The company unveiled the Redmi K100 Pro Max flagship smartphone today, along with a standard edition of the Redmi K100. Earlier this month, it raised prices on several models — including the Xiaomi 17 series and the Redmi Turbo 5 — by up to 13 percent, a move analysts attribute to global shortages of memory components driven by surging demand for AI servers.
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Looking ahead, a new flagship 18-series lineup is expected in China in September, which could provide fresh momentum in the smartphone segment. Reports that Stellantis held talks with Xiaomi and Xpeng in the spring about potential cooperation also suggest the company is being taken seriously as an automotive player — though such discussions remain speculative until confirmed.
The August 18 Verdict
The upcoming earnings release will be the decisive test. The question isn't whether Xiaomi beats or misses consensus estimates — the market already expects weakness, with analysts forecasting earnings per share of CNY 0.225 versus HKD 0.500 a year earlier, on revenue of CNY 116.84 billion. The real question is whether the margin deterioration stabilizes or accelerates.
With the stock down 33 percent year to date and 49 percent over the past twelve months, and volatility running at 60 percent, the market has already priced in considerable pessimism. The buyback program, the product launches, and the EV ambitions are all real — but they need time to show up in the financials. Until they do, the stock's persistent slide below its key moving averages suggests investors remain firmly in wait-and-see mode.
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