There is a peculiar tension at the heart of Xiaomi’s current market narrative. Between early June and mid-July, the company quietly repurchased nearly 80 million of its own shares across fourteen tranches — roughly HK$100 million worth of stock. Buybacks are typically read as a management vote of confidence. Yet the timing here tells a more complicated story, because it lands in a stretch where the underlying numbers have been anything but reassuring.
That contradiction becomes sharper when placed next to the capital raise from March 2025, when Xiaomi placed 800 million new shares to fund growth and research. Dilute first, buy back later — the sequence is not inherently contradictory, but it does capture a company oscillating between expansion ambitions and share-price defense. Notably, the lock-up restriction on new share issuance only lifts on August 14, the very same day that China International Capital Corporation (CICC) published a notably weaker forecast for the second quarter.
The Numbers Tell a Pattern, Not an Outlier
CICC’s projection for Q2 2026 is stark: revenue down 7.6 percent to 107.14 billion yuan, with adjusted net profit sliding 43.6 percent to 6.114 billion yuan. The firm maintains its “Outperform” rating, but the expectation itself extends a trajectory already visible in the first quarter, when revenue fell 10.9 percent to 99.142 billion yuan, adjusted net profit dropped 43.1 percent, and GAAP earnings tumbled 57 percent. Smartphone revenue — historically the company’s backbone — contracted 12.5 percent in that period.
Lay CICC’s Q2 estimate next to those Q1 figures and the picture is not of a one-off stumble but of a sustained slide. The margin is eroding faster than revenue itself is shrinking — a pattern in consumer electronics that typically points to intensifying price competition and rising costs in newer ventures.
What keeps the story from being uniformly bleak is the ecosystem’s continued expansion. Monthly active users rose 3.8 percent to 746.2 million, and the AIoT device base grew modestly quarter over quarter. The platform keeps gaining traction even as profitability suffers — a structural tension that no single buyback can resolve.
The Margin Question Takes Center Stage
All of this converges on a specific date: August 18, when Xiaomi reports its second-quarter results. The consensus among analysts calls for earnings per share of 0.225 yuan on revenue of 116.84 billion yuan — notably more optimistic than CICC’s own numbers, which underscores how wide the range of expectations has become.
The core debate among investors is not about topline growth but about how deeply the electric vehicle business is cutting into group margins. Roughly two weeks ago, Xiaomi launched its SkyNomad hybrid SUV lineup — the N90 and N70 models priced aggressively at 259,900 and 299,900 yuan respectively. Since that announcement, the stock has shed around 16.4 percent. Analysts at Citi and Bernstein described the pricing as “disruptive” for the company’s own margins, while CCB International attributed the decline to profit-taking and broader concerns about margin pressure across the EV sector.
CICC’s research note from early August reinforced the view that the quarter is likely to be “rather weak,” with the EV segment as the primary culprit.
Should investors sell immediately? Or is it worth buying Xiaomi?
A Stock That Has Already Priced in Disappointment
The market’s skepticism is visible in the share price itself. The stock currently trades at roughly 2.85 euros, about 56 percent below its 52-week high from September 25, 2025. That distance reflects months of mounting uncertainty — and it is not just about the EV business.
Smartphone shipments in the Middle East reportedly fell by half in the second quarter, driven by price pressure in the entry-level segment. July EV deliveries came in at 31,267 units, down from the previous month. And this week’s unveiling of the HyperOS 4 interface drew criticism from tech media for its frosted-glass aesthetic, which many saw as an unapologetic nod to Apple’s iOS. That is a software story without immediate price impact, but it feeds into a broader narrative of questioned innovation.
The Bull and Bear Cases for August 18
If Xiaomi can demonstrate on the reporting date that margins held up despite the SkyNomad pricing offensive, that would be a meaningful signal of operational resilience. Supporting evidence exists: the confirmed rollout of over-the-air update 1.17 for the SU7 Ultra brings new parking-assist features and refined lane-selection logic, pointing to technical maturity in the EV division. The company’s eighth consecutive appearance on the Fortune Global 500 list, currently at rank 232, underscores its global scale. Revenue near the 116.84 billion yuan consensus with a positive margin surprise could spark a recovery from these depressed levels.
The bear case is equally clear. A miss on the 0.225 yuan EPS consensus would validate fears about EV margin erosion. Weak demand in emerging markets — the Middle East being the most concrete example — compounds the risk. If the SkyNomad pricing strategy proves structurally damaging to group margins without the smartphone business absorbing the blow, the negative trend of recent weeks could extend. The stock is already down 34 percent year-to-date, leaving little cushion for further disappointment.
A Bigger Strategic Question
Beyond the quarterly numbers lies a longer-term puzzle. Reports from Handelsblatt and Bloomberg indicate that Xiaomi is in talks with Stellantis about potential investments in European production capacity, possibly including stakes in brands such as Maserati. Nothing is finalized, but the direction is clear: a pivot from pure smartphone play toward a diversified technology conglomerate with a serious automotive arm.
That raises the fundamental question behind all the quarterly noise. Can a company whose core business shows shrinking margins simultaneously fund multi-billion-dollar bets in the auto industry?
The buyback may signal management’s belief in the underlying value. Whether it answers the structural questions about profitability is another matter entirely. August 18 will provide the next piece of evidence — and with the stock already trading at a fraction of its September peak, the market is not waiting for an answer before passing its own judgment.
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