Xiaomi's Q1 Profit Plunges 57% as Chip Costs Become 'New Normal'; EV Losses Deepen Despite Record Buyback

Xiaomi's stock has fallen to a 52-week low of €3.08 in Frankfurt, wiping out nearly a third of its value since the start of the year and over 46% over the past twelve months. The rout comes despite a massive HK$20 billion share repurchase program—the largest in the company's history—as the Chinese tech giant confronts twin headwinds of exploding memory-chip costs and deepening losses in its electric-vehicle venture.

The scale of the damage was laid bare in the first-quarter earnings report. Net profit collapsed by 57% to 4.7 billion renminbi, while adjusted earnings, stripping out one-off items, fell 43% to 6.1 billion renminbi—both well short of analyst estimates. Revenue slipped 11% to 99.1 billion renminbi. The culprit: a near doubling of DRAM and NAND flash prices, driven by insatiable demand from AI data centers.

"We see this cost pressure persisting for roughly two more years," CEO Lei Jun warned on the earnings call, offering little relief to investors. President William Lu Weibing described the situation as "the new normal," though he flagged potential easing from the third quarter.

The smartphone business, Xiaomi's core revenue engine, took the hardest hit. Shipments fell 19% year-on-year to 33.8 million units—the steepest decline among the world's top five handset makers. The segment's gross margin shrank to 10.1%, a razor-thin level that leaves little room to absorb further input cost increases. With traditionally low operating margins, Xiaomi is more exposed to component inflation than rivals who can more easily pass on costs to consumers.

Should investors sell immediately? Or is it worth buying Xiaomi?

In response, management has turned to aggressive share buybacks to signal confidence. On May 27-28, Xiaomi repurchased 10.85 million Class B shares for a total of HK$308 million. Then, after the stock hit a 52-week low in Hong Kong, the company deployed its newly approved HK$20 billion repurchase program for the first time, buying 10.5 million shares in a single session at a cost of HK$298 million. The program runs for 12 months starting June 2 and is the clearest signal yet that the board considers the stock undervalued.

So far, the buyback has failed to stem the slide. In Frankfurt, the shares closed at €3.08, a 52-week low that translates to a year-to-date loss of 31.44%. The decline reflects deeper worries about the company's ability to protect margins in an increasingly competitive smartphone market.

Meanwhile, Xiaomi's electric-vehicle ambition continues to burn cash. The EV unit delivered 80,856 cars in the first quarter, up 6.6% from a year earlier, but swung back to an operating loss of 3.1 billion renminbi after having posted a full-year profit in 2025. Management remains bullish on the segment, targeting 550,000 deliveries for 2026—a 34% increase. The next growth catalyst is expected from Europe: Xiaomi plans to enter the market in the second half of 2027, starting with Germany. Right-hand-drive markets, including the UK, Japan, Australia, and India, will follow in the first half of 2028.

Xiaomi at a turning point? This analysis reveals what investors need to know now.

The EV pivot is meant to reduce Xiaomi's heavy reliance on the smartphone cycle, but it requires substantial capital and time to deliver returns. With memory-chip costs expected to stay elevated for at least another two years, the margin squeeze on the core business will persist. Whether the record buyback and long-term EV strategy can eventually lift the stock from its lows depends on how quickly the chip-cost cycle turns—and how well Xiaomi navigates the competitive landscape on both fronts.

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