China’s Xiaomi (1810) posted a 43 percent drop in adjusted net profit to 6.07 billion yuan (HK$7 billion) in the first quarter, as memory chip shortages and intensifying competition eroded the phonemaker's profitability.
That compared with the average analyst estimate of 6.4 billion yuan, according to LSEG data.
Revenue slid 10.9 percent to 99.1 billion yuan in the three months, also slightly below the average analyst estimate of 103.4 billion yuan.
The company, also an electric vehicle maker, announced a HK$20 billion share buyback program following the results.
On a post-earnings call, Xiaomi said it would expand further in overseas markets as part of efforts to offset higher component costs and tougher competition.
Xiaomi president William Lu Weibing said the industry had to adapt to a "new normal" of higher memory costs, though the increase in memory costs is expected to narrow from the third quarter.
Xiaomi’s smartphone sales fell by 12.5 percent to 44.3 billion yuan. Gross profit margin for the segment also declined 2.3 percentage points to 10.1 percent.
The world's No 3 smartphone maker shipped 33.8 million smartphone units in the first quarter, down 19 percent from a year ago, marking the steepest decline among the top five global brands, according to research firm Omdia.
The smartphone market outlook for 2026 remains weak, as the memory chip crunch may last until late 2027 and the Middle East tensions also weigh on consumer sentiment, another research firm, Counterpoint Research, has said.
Sales of its smart EV, AI and other new initiatives segment grew by 6.9 percent to 19.9 billion yuan, but gross margin also dipped by 2.1 percentage points to 20.1 percent, primarily due to the lower contribution from deliveries of Xiaomi SU7 Ultra, subsidies for vehicle purchase tax, as well as the increased price of key components.
The loss from operations related to the segment reached 3.1 billion yuan.
In the first quarter, Xiaomi delivered 80,856 EVs, down 44.3 percent from 145,115 EVs in the fourth quarter. Deliveries were up 6.6 percent from a year earlier.
Last week, the company released a new, cheaper standard version of its flagship YU7 SUV series, starting at 233,500 yuan, about 8 percent lower than the previous version, stepping up pressure on Tesla in China's competitive but slowing car market.
Staff reporter and Reuters
