Xiaomi's HK$20 Billion Stock Rescue Plan Arrives as Chip Prices Wipe Out 43% of Earnings
Published on 05/28/2026 at 18:43 | Redaktion boerse-global.de
Xiaomi is leaning hard on its balance sheet to steady a ship rocked by cost inflation. One day after the stock hit a 52-week low in Hong Kong, the company bought back 10.5 million Class-B shares on Thursday at prices ranging from HK$27.94 to HK$28.70, spending roughly HK$298 million in a single session. The move is the first deployment of a newly approved HK$20 billion buyback program — equivalent to about US$2.55 billion — authorised just two days earlier.
The urgency reflects the magnitude of the problem. Xiaomi’s adjusted net profit for the first quarter of 2026 collapsed 43% year-on-year to just 6.1 billion RMB, while revenue slid nearly 11% to 99.1 billion RMB. The primary culprit: a sharp increase in the cost of memory chips, which has compressed margins across the hardware business. Analysts expect the pressure to persist well into 2027.
The pain is most visible in the smartphone division, where gross margin fell to 10.1%. Even though Xiaomi shipped 33.8 million units and held onto its position as the world’s third-largest handset maker for the 23rd consecutive quarter, the average selling price climbed only to a record 1,310 RMB. That premium push has not been enough to offset the chip bill. The broader “Smartphone × AIoT” segment fared slightly better with a 22.5% gross margin, but that too is down from prior levels.
Should investors sell immediately? Or is it worth buying Xiaomi?
Research and development spending rose 33.4% to 9.0 billion RMB as Xiaomi doubles down on artificial intelligence and automotive technology. The spending splurge has drawn a cautious response from analysts. China Galaxy International Securities maintained its “Add” rating but slashed its price target from HK$44.70 to HK$36.70, citing higher AI investment costs along with a more cautious outlook for IoT devices and electric vehicles in the domestic market. The brokerage still sees international IoT growth and rising average selling prices as strengths.
Meanwhile, Xiaomi’s EV arm continues to burn cash while gaining traction. The YU7 SUV series has now accumulated 232,000 deliveries over the past ten months, ranking second in the domestic segment for electric SUVs priced above 200,000 RMB between January and April. In May, Xiaomi expanded the line-up with the YU7 Standard Edition and the high-performance YU7 GT, the latter priced at 389,900 RMB and capable of accelerating from zero to 100 km/h in 2.92 seconds. But the segment’s operating loss came in at 3.1 billion RMB for the quarter, even as revenue from the “Smart EV and AI” unit reached 19.9 billion RMB. The company now operates 490 sales and service centres across 143 Chinese cities.
The path to profitability in EVs remains long. Xiaomi has flagged an entry into the European market in the second half of 2027, with right-hand-drive markets to follow in 2028. Until then, the smartphone business must shoulder the investment burden.
In Hong Kong, the stock shed roughly 3% on the day of the earnings release. In Frankfurt, the shares trade at €3.16, barely above the 52-week low hit the previous day, and are down almost 30% since the start of the year. Whether the HK$20 billion buyback can reverse the twelve-month downtrend will depend on the next quarterly results — and on whether the chip cost cycle finally begins to ease.
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