Behind Xiaomi's Buyback Blitz: A 70% Profit Crash, $5,600 Loss per EV, and a Stock at 52-Week Low

Xiaomi has been pouring billions into its own shares under a record repurchase programme, yet the stock continues to slide. The disconnect between management’s confidence and the market’s verdict has never been starker. On Friday, the equity touched a new 52-week low of €2.34 before recovering slightly to around €2.41. Since the start of the year, the shares have surrendered roughly 46% of their value, and they now trade almost 64% below the 2026 peak of €6.69.

The real damage, however, lies in the income statement. In the first quarter, Xiaomi’s operating profit collapsed by 70% year-on-year, while adjusted net income fell 43.1% to 6.1 billion renminbi. Revenue dropped 10.9% to 99.1 billion yuan, missing the consensus estimate of 103.4 billion yuan. The core smartphone and AIoT business saw its gross margin shrink to 22.5%, weighed down by a near-doubling of DRAM and NAND flash memory costs—a direct consequence of the AI boom diverting chip supply to high-margin accelerator components.

The memory price shock is especially brutal for Xiaomi because roughly 60% of its phones sell for less than $200, leaving razor-thin margins. Management has set an ambitious target of an 8% smartphone gross margin, but Jefferies analysts describe the simultaneous goal of a 10% revenue decline as “challenging.” The group’s overall operating margin has already fallen to just 3%.

At the same time, the electric-vehicle division is bleeding cash. The unit posted an operating loss of 3.1 billion yuan in the first quarter—equivalent to roughly $5,600 for every car it delivered. The gross margin on EVs dropped from 23.2% to 20.1%, hurt by weakening sales of the higher-margin SU7 Ultra, rising component costs, and the expiry of government purchase-tax subsidies. Xiaomi delivered around 150,317 vehicles in the first five months of the year, a modest 13.5% increase year-on-year, and May shipments actually fell 11% month-on-month. The company’s full-year target of 550,000 units is looking increasingly shaky; Jefferies has already cut its own forecast to 495,000.

Should investors sell immediately? Or is it worth buying Xiaomi?

Analysts have taken notice. Jefferies downgraded the stock from “Hold” to “Underperform” and slashed its price target to 25.49 Hong Kong dollars, pointing to the memory cost surge and deteriorating EV sales. Goldman Sachs, while maintaining a “Buy” rating, lowered its target to 40.00 Hong Kong dollars and cut its earnings estimates for the next three years. The bank expects second-quarter profit to tumble 50% from a year earlier.

In a bid to counter the headwinds, Xiaomi is pressing ahead with new product development. Chinese regulator MIIT has approved production under the new Skynomad sub-brand, whose first model—the Kunlun N3—is a full-size SUV measuring over 5.3 metres with a combined range of roughly 1,500 kilometres. Priced at around 200,000 yuan, it undercuts rivals from Li Auto and Aito. The timing, however, is unpropitious: China’s extended-range electric vehicle market has contracted by nearly 25% recently.

Research and development spending rose 33.4% in the first quarter to 9.0 billion yuan, underscoring management’s determination to invest through the downturn. The buyback programme, authorised for up to 20 billion Hong Kong dollars, has so far retired about 30 million shares—a mere 0.12% of the total float. Even days when Xiaomi bought more than 100 million Hong Kong dollars of its own stock failed to stem the tide.

Xiaomi at a turning point? This analysis reveals what investors need to know now.

The next major test comes on 26 August, when the company reports second-quarter earnings. Technically, the stock is deeply oversold, with a relative strength index of 18.9, but a sustained bounce has yet to materialise. Until memory costs ease—analysts at Counterpoint do not expect relief before late 2027—and the EV division narrows its losses, the pressure on Xiaomi’s shares shows little sign of abating.

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