Xiaomi (小米集团): Fallen to the point of questioning life? The worst is over

Q1 results at a glance

Xiaomi Group (小米集团, 1810.HK) reported 2026 Q1 revenue of RMB 99.1 billion, down 11% year‑on‑year, as phone and traditional AIoT businesses dragged performance. Phone and AIoT together fell 14.5%. Gross margin slipped to 22% (‑0.8 percentage points) as both handset and auto margins weakened. Core operating profit for the group was RMB 2.9 billion and adjusted net profit RMB 6.1 billion. Short and blunt: the company is under pressure, but some stabilization signs appeared in the quarter.

Cars, chips and pockets

The Xiaomi auto unit generated RMB 19.86 billion in revenue with 81,000 vehicles shipped and an average selling price of RMB 235,000. Auto gross margin fell to 20.1% and, it has been reported that third‑party calculations (海豚君) put the auto segment’s core operating loss at about RMB 3.1 billion this quarter — partly due to Xiaomi’s purchase‑tax subsidies (roughly RMB 12,000 per YU7) and a higher share of lower‑ASP in‑stock sales. Handsets brought in RMB 44.3 billion (‑12.5%) with shipments down 19% but ASP up 8% as scarce memory was allocated to higher‑end SKUs. IoT revenue slid 24% to RMB 24.7 billion, hit by subsidy rollbacks and component tightness. Internet services remained a bright spot, rising 4% to RMB 9.5 billion on ad growth.

Can the recovery stick?

Markets have already punished Xiaomi: the stock has fallen from around HK$60 to about HK$30, pricing in storage headwinds, soft phone sales and a cooling auto story. Management still targets 550,000 car deliveries for the year — an ambitious goal after a 44% sequential drop in Q1 that requires heavy recovery in the months ahead. Global memory tightness, domestic subsidy policy shifts and broader trade frictions continue to complicate the outlook for China’s device makers. So, is the worst over? Maybe. April car sales and a sequential hardware margin rebound offer hope. But sustained recovery will depend on execution across cars, phones and IoT — and on whether component markets and policy signals cooperate.