Xiaomi Faces Q2 2026 Earnings Slump Amid Memory-Chip Costs and Accelerated AI Spending

Xiaomi reported revenue of 108.9 billion yuan for the April-June period, a 6.1 % year-on-year decline. Adjusted net profit fell 42.6 % to 6.22 billion yuan, missing the consensus estimate of 6.6 billion yuan. On an unadjusted basis, net income dropped 20.5 % to 9.46 billion yuan. The smartphone segment’s revenue declined 7.5 % to 42.1 billion yuan, while handset shipments collapsed 26.5 % to 31.2 million units, compressing the segment’s gross margin from 11.5 % to 8.5 %.

Xiaomi's Two-Engine Strategy Hits a Speed Bump as Memory Costs Bite Xiaomi Scraps Its Ultra Flagship as Memory-Chip Inflation Collides With an EV Cash Burn South China Morning Post

Exploding DRAM and NAND prices forced Xiaomi to cut shipments of mid- and low-priced devices. The average selling price rose 26 % to a record 1,351 yuan, yet the premium could not offset component-cost inflation, leading to a sharp margin squeeze. The company also cancelled the planned “18 Ultra” flagship, replacing it with the “18 Pro Max,” a direct response to the deteriorating economics of high-end handsets.

Xiaomi Scraps Its Ultra Flagship as Memory-Chip Inflation Collides With an EV Cash Burn

R&D outlays rose 25.6 % year-on-year to 18.2 billion yuan, with AI-related inputs accounting for roughly 30 % of total spending. Xiaomi’s leadership emphasizes that the AI investment remains in a “large-scale input” phase and that short-term pressure will not alter the long-term strategy.

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The auto and AI segment grew 17.1 % to 24.9 billion yuan, with vehicle deliveries up 28.2 % to 104,200 units. Despite volume gains, the division posted an operating deficit of 3.1 billion yuan in Q1 and remains unprofitable. Xiaomi targets more than 500,000 vehicle deliveries for 2026, with an international launch slated for 2027.

Xiaomi's Two-Engine Strategy Hits a Speed Bump as Memory Costs Bite

Between June 3 and July 15, Xiaomi deployed about 100.7 million Hong Kong dollars across 14 tranches to repurchase roughly 79.8 million shares (?0.31 % of share count). A smaller buyback of 1.862 million Class B shares for about 50 million Hong Kong dollars occurred in early August. The lock-up period restricting new share issuance expired on August 14, 2026.

Xiaomi Scraps Its Ultra Flagship as Memory-Chip Inflation Collides With an EV Cash Burn

CFO Alain Lam indicated that AI spending is still in a “phase of large-scale input” and that the company is not rushing to monetize these investments. President Lu Weibing added that high memory prices and fierce competition create short-term pressure but will not change Xiaomi’s long-term strategy. Both remarks were made during the Q2 earnings call.

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• “Our investment in AI is currently still in a phase of large-scale input. However, as a large corporation, Xiaomi is in no rush to pursue immediate monetisation,” — Alain Lam, CFO

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• “The prices of memory are still high and the competition remains fierce. But the short-term pressure will not change our strategy for the long run,” — Lu Weibing, partner and president of Xiaomi, during the call

South China Morning Post

The board will consider declaring an interim dividend when it meets on the Tuesday following the earnings release. Analysts will watch whether the EV division can close the profitability gap and how the company balances continued AI investment against a weakening smartphone business.

Xiaomi's Two-Engine Strategy Hits a Speed Bump as Memory Costs Bite