Xiaomi’s H1 Profit Drops 43% Amid Component Costs and Competition

Xiaomi Corporation’s adjusted net profit fell 43% year-over-year to RMB12.3 billion in the first half of 2026, according to its interim report. The decline reflects headwinds from geopolitical instability and significantly increased component costs, particularly for memory chips, alongside intensifying industry competition.

Total revenue for the period reached RMB208.1 billion, an 8.4% decrease compared to the RMB227.2 billion reported in the first half of 2025. Revenue from Xiaomi’s core Smartphone × AIoT segment decreased 12.9% to RMB163.3 billion. Within this segment, smartphone revenue experienced a decline, partially offset by contributions from IoT and lifestyle products. Internet services revenue, however, increased by 1.9% to RMB18.5 billion, driven by growth in advertising. A bright spot was the Smart EV, AI and Other New Initiatives segment, which saw revenue increase by 12.3% to RMB44.8 billion, fueled by a 17.7% rise in vehicle deliveries.

The company’s gross profit margin across its smartphone business decreased to 9.3% from 12.0% in the same period last year, primarily attributed to the higher price of key components. The gross profit margin of IoT and lifestyle products also decreased to 22.3% from 23.8% in the first half of 2025, impacted by reduced national subsidies in China and increased component costs. Despite these challenges, Xiaomi’s internet services maintained a strong gross profit margin of 76.4%, up from 76.1% in the previous year.

The financial report also details ongoing investigations by Indian authorities related to compliance with income tax, customs, and foreign exchange regulations. Approximately INR49,170,230,000 (equivalent to RMB3,535,831,000) of Xiaomi India’s bank accounts remain restricted as of June 30, 2026. Management believes Xiaomi India has valid grounds to respond to the allegations and has not made any material provisions as of the reporting date.

Xiaomi's results reflect the broader challenges facing consumer electronics companies, particularly those operating in China, amidst a complex macroeconomic environment. The combination of rising component costs, geopolitical tensions, and increased competition continues to pressure profitability, even as the company diversifies into new areas like electric vehicles and AI.