Xiaomi EV Unit Posts Profit, but Smartphone Business Falters

1. Xiaomi Corporation's financial results for the year 2025 revealed a notable contrast between robust annual performance and challenges in the fourth quarter. For the full year, revenue rose 25% year-on-year to 457.3 billion yuan ($66.4 billion), and adjusted net profit surged 43.8% to 39.2 billion yuan. However, in the fourth quarter, revenue growth slowed to 7.3% (116.9 billion yuan), and adjusted net profit fell 23.7% to 6.3 billion yuan, although still exceeding analyst expectations. This was Xiaomi's first quarterly profit decline since late 2022[para. 1][para. 2].

2. The company has actively tried to support its share price, repurchasing HK$6.3 billion ($804 million) of stock in 2025 and HK$4.7 billion more in early 2026. Despite these efforts, Xiaomi’s stock price has dropped nearly 50% from its peak in late September, erasing more than HK$800 billion in market value[para. 3].

3. Xiaomi’s expansion into the automotive industry, particularly electric vehicles (EVs), has been a significant driver of growth. In 2025, its EV, AI, and new initiatives segment contributed 106 billion yuan in revenue (up 223.8% year-on-year), with operational profits reaching 900 million yuan for the first time. Xiaomi delivered around 411,000 vehicles, greatly surpassing its 300,000-unit target, with the SU7 sedan and YU7 SUV becoming market leaders in their segments. The average vehicle selling price rose 7.1% to 251,000 yuan, helping gross margins in this segment to reach 24.3%, higher than major Chinese EV competitors[para. 4][para. 5][para. 6][para. 7].

4. The EV division is facing heightened cost pressures due to rising prices for memory chips and raw materials such as lithium, copper, and aluminum, as well as the conclusion of national purchase tax exemptions for new-energy vehicles at the end of 2025. To sustain sales, Xiaomi introduced sales incentives, but these factors caused a quarterly drop in average selling price and gross margin in the fourth quarter[para. 8].

5. Xiaomi introduced an upgraded SU7 model in March 2026, raising the base price and receiving 30,000 orders within three days. However, analysts noted lower enthusiasm compared to previous launches[para. 9].

6. The core smartphone business is struggling, with 2025 revenue down 2.8% to 186.4 billion yuan and shipments falling 1.9% to 165 million units, yet Xiaomi remains the world’s third-largest vendor with a 13.3% share. The fourth quarter saw sharper declines, with revenue down 13.6% and profit margins dropping to near record lows, primarily due to soaring memory chip costs. The company expects these memory price hikes to persist, making future price increases for Xiaomi smartphones likely[para. 10][para. 11][para. 12][para. 13].

7. The Internet of Things (IoT) and lifestyle product segment achieved record revenue of 123.2 billion yuan in 2025 (up 18.3%), boosted by government-backed trade-in subsidies. However, when these subsidies ended, fourth-quarter revenue slumped over 20%. Xiaomi is investing in overseas markets, including Europe, and deepening manufacturing vertical integration, but faces formidable established competitors in major appliance categories[para. 14][para. 15][para. 16][para. 17].

8. Artificial intelligence is an increasingly crucial pillar of Xiaomi’s strategic direction, as the company transitions toward becoming an AI-driven organization. In March 2026, Xiaomi introduced three in-house AI models and rapidly integrated AI functions into cars and smartphones. R&D spending exceeded 33 billion yuan in 2025, with expectations to rise above 40 billion yuan in 2026—and 16 billion yuan specifically for AI. Over the coming three years, AI investments are forecast to reach 60 billion yuan[para. 18][para. 19][para. 20][para. 21].

9. Xiaomi’s AI-driven robots achieved a 90.2% operational success rate in manufacturing settings by March. The company expects to deploy robots in large numbers in its factories within five years, highlighting Xiaomi's strategic embrace of automation and intelligent systems[para. 22].