Xiaomi Corp.'s profit in the first quarter tanked more than analysts had expected, as sharp increases in memory prices exacted a heavy toll on the Chinese firm's smartphone business.
Net income in the first three months of 2026 tumbled 57% to 4.72 billion yuan ($695 million), double the drop in the fourth quarter last year and worse than the average analyst projection of 52%. Revenue fell 11% — the first quarterly decline in nearly three years — to 99 billion yuan, roughly in line with analyst expectations.
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Beijing-based Xiaomi has been the biggest casualty among the world's top smartphone makers in the ongoing global memory chip crunch. Leading suppliers including Samsung Electronics Co. and SK Hynix Inc. have prioritized manufacturing of advanced memory used in data centers for AI work, sparking a shortage of conventional memory products and skyrocketing costs. Meanwhile, founder Lei Jun's pivot to electric vehicles and China's ultra-competitive auto market has become an additional drag on Xiaomi's bottom line.
Xiaomi's shares have fallen by half from an all-time high in July, making them among the worst performers on the Hang Seng Tech Index during the period. Traders pushed bearish option bets on Xiaomi to a record ahead of earnings.
The sharp spike in memory cost could weigh on margin and smartphone volume, while it's also becoming harder for Xiaomi to make a cut above the rest in China's highly competitive EV market, Jefferies analysts said in a research note on Monday.
Xiaomi's global smartphone shipments fell 19% in the first quarter this year amid a broader market decline of 2.9%, as it strategically cut volume of low-end devices to counter rising memory costs, according to market tracker IDC. The drop in the March quarter is just “a mild precursor for what lies ahead in 2026,” IDC said, warning of further shipment declines and more pressure on companies like Xiaomi with substantial exposure to the budget segment of the market.
Photo Credit: Bloomberg
The company looks to its EV division to drive more growth. Xiaomi pushed into China's EV sector at a time when domestic brands were locked in a fierce price war. It has delivered more than 600,000 cars since announcing the EV foray in 2024. Lei has set a target to deliver 550,000 cars for this year and the company also aims to sell cars in Europe next year.
Xiaomi expanded its EV line up last week with the launch of a performance version of its YU7 SUV and has introduced a cheaper entry level variant of the SUV to better compete against Tesla's Model Y. Analysts rated the new products favorably, expecting the attractive pricing and features to boost sales. But outlook for the EV business is also bleak as China's EV market has been hit by a scaling back of subsidies and competition remains fierce.
Automakers face fresh pressure this year from rising costs for chips and raw materials for batteries, while the end of consumer incentives is expected to weigh on demand in China.
Xiaomi has not neglected AI. The company released an update to its AI model MiMo earlier this year, with development led by researcher Guo Fuli, poached from the company behind China's leading AI model DeepSeek. Xiaomi also showcased to investors in April a humanoid robot and has been working on an AI model to make its robots more capable of handling complex tasks in the real world.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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