Viomi Technology, a Xiaomi-backed Chinese startup mainly engaged in developing Internet of Things (IoT)-enabled smart home products, may have mixed feelings about its third-quarter results as the firm appeared to enjoy solid revenue growth despite suffering a big drop in profit.

During the three months through September, Viomi generated 1.5 billion yuan ($219 million) in net revenue, representing a year-on-year increase of 39%, about 71% of which came from sales of its IoT-powered home appliances such as sweeper robots and air conditioning systems, according to its latest earnings report released on Wednesday. The rest of the revenue was derived from sales of its domestic water solutions and consumables.

While its revenues grew, Viomi’s quarterly net profit fell to 34.9 million yuan from 72.9 million yuan a year ago, as the company grew its expenses on product development, marketing and administration by 22%, 34.2% and 70.3% year-on-year, respectively.

However, Viomi bets big on its business prospects with the rollout of 5G network across China, with its founder and CEO Chen Xiaoping saying that the 5G era will “create numerous monetization opportunities for us” as its next-generation IoT-powered products are expected to enable various applications including content, consumption, entertainment and lifestyle in the home environment.

The U.S.-listed company said it expects its fourth-quarter net revenue to reach between 1.9 billion yuan and 2 billion yuan, representing a year-on-year increase of 9.1% to 14.8%.

Viomi’s stock closed down 8.76% at $5.73 on Wednesday.

Contact reporter Ding Yi (yiding@caixin.com)

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