For Xiaomi, a Record $2.6 Billion Buyback Is No Match for a 70% Profit Collapse and a Bleeding EV Division

The market’s shrug is deafening. Xiaomi has launched the largest share repurchase program in its history, authorising up to HK$20 billion (roughly US$2.6 billion) in buybacks of its Class-B shares, yet the stock continues to slide. At HK$2.43 — within a whisker of the 52-week low of HK$2.34 — the equity has shed nearly 46% since the start of 2026 and more than 63% from its year-high of HK$6.69. The buyback has so far scooped up around 30 million shares, representing just 0.12% of the outstanding capital. Even a single-day spend of over HK$100 million has failed to rekindle investor confidence.

The problem lies squarely in Xiaomi’s twin Achilles’ heels: a memory-chip cost surge that is gutting its core smartphone business and an electric-vehicle division that burns through cash far faster than it can sell cars. DRAM and NAND flash prices have all but doubled over the past year, driven by hyperscalers such as Microsoft, Google and Amazon that are vacuuming up capacity at Samsung, SK Hynix and Micron for AI workloads. Smartphone memory chips have increased fivefold, TV chips tenfold. Xiaomi, unable to pass on the full cost, has seen its smartphone and AIoT gross margin shrink to 22.5% in the first quarter of 2026. Smartphone shipments dropped 19% year-on-year — the steepest decline among the world’s top five handset vendors.

The financial fallout was brutal. Revenue for the first quarter fell 10.9% to RMB 99.1 billion, undershooting the consensus estimate of RMB 103.4 billion. Adjusted net profit tumbled 43.1% to RMB 6.1 billion, while operating profit collapsed 70%. Analysts had expected net income of RMB 6.4 billion. The pain is not over: Goldman Sachs forecasts a 50% profit decline in the current second quarter. Jefferies, meanwhile, downgraded Xiaomi from “Hold” to “Underperform” and slashed its price target to HK$25.49, citing memory price increases of as much as 100% in the second quarter. The bank considers the management’s target of an 8% smartphone gross margin “challenging” given the cost environment, and models a 10% revenue drop for the full year.

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

Xiaomi’s fledgling EV business compounds the misery. The auto segment posted an operating loss of RMB 3.1 billion in the first quarter, or roughly US$5,600 for every vehicle delivered. That marks a sharp reversal from two quarters earlier, when the division had approached breakeven. The gross margin in EVs slid from 23.2% to 20.1%, pressured by lower sales of the higher-margin SU7 Ultra, rising component costs, and government purchase-tax subsidies that squeeze pricing. The company’s target of 550,000 deliveries for 2026 looks increasingly distant: only 150,317 vehicles were handed over in the first five months, implying a monthly run-rate of about 57,500 for the rest of the year — nearly 15% above the current record of 50,000. Jefferies has already trimmed its own estimate to 495,000.

As a countermeasure, China’s industry ministry has approved production of an extended-range electric vehicle (EREV) under the new Skynomad sub-brand. The first model, codenamed Kunlun N3, is a full-size SUV exceeding 5.3 metres in length, offering a combined range of around 1,500 kilometres, and is priced at roughly RMB 200,000 — undercutting rivals from Li Auto and Aito. Yet the timing is inauspicious: China’s EREV market has contracted by nearly 25% in recent months.

Xiaomi is not pulling back on long-term investment, however. Research and development spending rose 33.4% year-on-year to RMB 9.0 billion in the first quarter, part of a five-year, RMB 200 billion commitment of which over RMB 60 billion is earmarked for artificial intelligence. The relative strength index has dropped to 18.9, signalling deeply oversold conditions. Whether that technical signal translates into a real rebound depends on what happens on 26 August, when Xiaomi reports second-quarter results. Investors will be watching for any sign that smartphone margins can stabilise despite the chip crunch and whether the EV division can resume its march toward profitability. Until then, even the biggest buyback in the company’s history may remain a footnote.

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