Xiaomi's Q1 Profit Plunges 57% on Higher Component Costs; Launches HK$20 Billion Share Buyback
Xiaomi (HKG:1810) reported a sharp decline in first-quarter profit as surging memory and component prices and weaker smartphone shipments weighed on its earnings.Net profit plunged 56.5% year over year to 4.73 billion yuan in the quarter ended March 31, from 10.89 billion yuan, according to an after-market Hong Kong bourse filing on Tuesday.Earnings per share likewise slipped to 0.18 yuan from 0.42 yuan.The Beijing-based tech company's revenue slumped 10.9% to 99.14 billion yuan from 111.29 billion yuan in the first quarter of 2025.The company attributed the decline to lower smartphone shipments, reduced national subsidies for IoT products in China, and intensifying industry competition."Looking ahead to the next five years in the short term, we face the challenge of a triple cycle of cost, demand, and competition," Xiaomi Partner and President William Lu said during the company's earnings call.Smartphone shipments in Q1 declined 19.2% year over year to 33.8 million units, which Xiaomi attributed to the optimization of its product portfolio and reduced shipments of its mid-range and low-end smartphones.However, the company said, citing data from research firm Omdia, that it maintained its ranking as the world's third-largest smartphone vendor for the 23rd straight quarter."We proactively controlled shipments of mid to low-end products and channel inventory. While our smartphone shipment declined, our ASP reached [a] record high," Lu added.Lu described the cycle of memory cost increase as "very long.""When it comes to cost increase and also cost for a smartphone, this is a very big challenge. Besides, it is not going to end here. This is a very long cycle. I think we have to look towards 2027 and 2028 in Q3," Lu told analysts.Analysts from Jefferies said in a note to clients on Monday, "We believe AIoT in 2026 would see more-than-expected headwind, owing [to] a very high base (driven by nationwide gov subsidies starting in 1Q25) and weak appliances demand.""The impact of sharply higher memory costs would expand in the next few quarters, given [a] one-quarter lag in cost recognition and smartphone price hikes starting in late 1Q26."Gross margin for the company's smartphone segment contracted to 10.1% from 12.4% last year, weighed down by higher component costs.Lu said the 10.1% margin "reflects the operational resilience brought about by our own capabilities."Revenue from smartphone sales declined to 44.3 billion yuan from 50.6 billion yuan a year prior."Our industry checks suggest Xiaomi's China smartphone sell-through fell ~30% [year-over-year] in [April], [versus the] 17% fall in 1Q26. In [March] 2026, we forecast [Xiaomi's] smartphone [volume] would fall 55% in 2026, based on our top-down framework," analysts at Jefferies added.Elsewhere, Xiaomi's IoT and lifestyle products segment saw revenue slide to 24.7 billion yuan from 32.3 billion yuan. Lu said the decline was due to the high base of national subsidy last year.Revenue from Xiaomi's smart electric vehicles, AI and other new initiatives rose to 19.9 billion yuan from 18.6 billion yuan. The company delivered 80,856 vehicles in Q1, up 6% year over year.However, the segment's gross margin shrank to 20.1% from 23.2% last year as it incurred an operating loss of 3.1 billion yuan.Separately on Tuesday, Xiaomi announced a new on-market share repurchase program, committing to buy back up to HK$20 billion worth of shares over the next 12 months."Since the beginning of 2026, our share buyback amount has reached about HK$8.4 billion, exceeding the total amount for the entire previous year, demonstrating the company's confidence in our long-term development," said Xiaomi Vice President and Chief Financial Officer Alain Lam during the company's earnings call.
