TLDRs
- Xiaomi revenue falls 11% as smartphone demand weakens globally
- Rising memory costs heavily compress Xiaomi smartphone profit margins
- EV and AI divisions continue posting operating losses amid expansion
- Company launches $2.55B buyback despite sharp earnings decline
Xiaomi’s latest quarterly results highlight growing pressure across its core smartphone business, as weakening global demand and rising memory costs weighed heavily on earnings.
The Beijing-based electronics giant reported a notable decline in both revenue and profit for the first quarter of 2026, underscoring the challenges facing mid-range Android manufacturers in a competitive and cost-sensitive market.
Despite continued expansion into electric vehicles and AI-driven services, Xiaomi’s traditional smartphone segment remains the company’s primary revenue engine, and its weakest point in the current cycle.
Revenue Slides Amid Weak Demand
Xiaomi reported total revenue of 99.1 billion yuan (approximately $14.6 billion), marking an 11% year-on-year decline. The drop was largely driven by weaker smartphone shipments and rising input costs, particularly in memory chips, which have become increasingly expensive across the global supply chain.
According to industry data, Xiaomi’s smartphone shipments fell 19.2% during the quarter, reflecting softer consumer demand and intensified competition across key emerging markets. However, the company did see a counterbalancing factor: its average selling price rose to a record 1,310 yuan ($190), suggesting a strategic shift toward higher-value devices.
Still, higher pricing was not enough to offset the volume decline.
Memory Costs Squeeze Margins
A key pressure point in the quarter was the sharp increase in memory-related costs. Supply constraints in the semiconductor market have pushed up component prices, disproportionately affecting mid-range Android smartphone makers like Xiaomi.
These higher costs compressed margins across the smartphone and AIoT division, which generated 79.3 billion yuan ($11.7 billion) in revenue but faced declining profitability. Industry analysts warn that memory shortages could continue to affect pricing structures and profit margins throughout the Android ecosystem, particularly for budget and mid-tier devices where cost sensitivity is highest.
EV and AI Losses Persist
While smartphones remain central to Xiaomi’s business, the company continues to invest heavily in its smart electric vehicle (EV), AI, and “new initiatives” segment. During the quarter, this division generated 19.9 billion yuan ($2.93 billion) in revenue but posted an operating loss of 3.1 billion yuan ($457 million).
The EV market remains highly competitive, with aggressive pricing strategies and government incentive reductions placing pressure on profitability across the industry. Xiaomi acknowledged that it does not expect its automotive gross margins in 2026 to exceed levels seen in 2025, signaling a cautious outlook for its long-term EV ambitions.
Despite losses, the company continues to position its EV and AI strategy as a critical pillar for future growth diversification.
Buyback Signals Confidence
In response to market volatility and earnings pressure, Xiaomi announced a share repurchase program of up to HK$20 billion ($2.55 billion) over the next 12 months. The move is widely interpreted as an effort to stabilize investor sentiment and signal confidence in the company’s long-term fundamentals.
The buyback announcement comes as Xiaomi’s net income fell 56.5% to 4.7 billion yuan ($695 million), reflecting the combined impact of weaker demand, higher costs, and investment-heavy expansion efforts.
At the same time, IDC cautioned that ongoing memory shortages could further strain low- to mid-range Android devices, potentially prolonging margin pressure for manufacturers like Xiaomi.
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