A perfect storm of surging memory costs, a stalling EV business, and a broader market downturn is bearing down on Xiaomi. Goldman Sachs has flagged that adjusted net profit for the current quarter is on track to tumble by half, landing at 5.4 billion yuan, while revenue growth grinds to a near halt at just 1%. Without the contributions from the electric-vehicle and AI segments, the top line would actually contract.
The bleak outlook has left the stock clinging to EUR 2.72 — barely above its year low — after a 39% rout since January. A relative strength index reading of 26.3 points to deeply oversold territory, but a newly activated buyback programme has done little to restore confidence. The first tranche allows for the repurchase of up to HK$4 billion in Class-B shares, part of a HK$20 billion framework approved by management, yet the market has shrugged.
Jefferies has already pulled the trigger, downgrading the stock to Underperform with a price target of HK$25.49, a level that implies further downside. The root cause lies in Xiaomi’s core smartphone business: the cost of handset memory chips has quintupled, and TV storage chips have jumped tenfold. Chief executive Lei Jun expects this price pressure to persist for at least two more years.
The company’s electric-vehicle ambitions, once seen as a growth lifeline, are also running into trouble. Xiaomi delivered roughly 150,000 cars in the first five months of this year, a modest uptick from the same period last year. But the annual target of 550,000 units now appears increasingly unrealistic. To hit that goal, monthly deliveries would need to average 57,500 from June through December — a daunting leap given the current record of just 50,000 vehicles in one month.
Sales softened in May after a strong April, and the broader extended-range electric vehicle (EREV) market is contracting sharply. Wholesale volumes for EREVs plunged nearly 25% in May, marking the steepest monthly decline in half a decade. Even industry leader Li Auto is feeling the heat.
Should investors sell immediately? Or is it worth buying Xiaomi?
In a countermove, Xiaomi has obtained approval from China’s Ministry of Industry and Information Technology to produce vehicles with range extenders, breaking away from its previous focus on pure battery-electric cars. The new sub-brand, Skynomad, will debut with the Kunlun N3, a full-size SUV measuring more than 5.3 metres long. The car is expected to offer a pure-electric range of up to 500 kilometres and will be priced at around 200,000 yuan — undercutting comparable models from Li Auto, which typically start above 250,000 yuan.
Yet the timing is precarious. Xiaomi is entering a shrinking niche late, and the factory floor is under strain. The company has ramped up research spending to 9 billion yuan this spring, employing over 26,000 staff in R&D, further weighing on the balance sheet.
On the software front, Xiaomi plans to unveil HyperOS 4 this summer, based on Android 17. The development team has discarded legacy code and is using the Rust language for core applications to improve memory security and unify the design. A global rollout could begin in October.
Investors will get the next batch of data points in the coming days: official details on the Skynomad brand, June delivery figures to gauge whether the EV target is still viable, and — most critically — second-quarter results on 26 August. Until then, the buyback programme remains the only visible buffer against further erosion.
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