Staff Reporter |
Editor | Wen Shuqi
On August 18, Xiaomi Group released its Q2 2026 earnings report. The numbers show total revenue of 108.9 billion yuan for the quarter—down 6.1% year-over-year but up 9.9% from the previous quarter. Adjusted net profit landed at 6.2 billion yuan, a 42.6% drop year-over-year, though it did tick up 2.4% sequentially.
Looking at the first half of 2026, Xiaomi’s total operating revenue came in at 208.063 billion yuan, down 8.4% year-over-year, while net profit attributable to shareholders was 14.186 billion yuan, a 37.86% decline compared to the same period last year.
“Q2 was honestly quite challenging. Costs for domestic consumer products were at historical highs, and competition was brutal,” said Lu Weibing, Xiaomi’s partner and Group President, summing up the quarter during a post-earnings interview.
For the quarter, Xiaomi’s gross profit stood at 21.61 billion yuan, down 17.2% year-over-year. Overall gross margin slipped to 19.8% from 22.5% a year ago, which the company attributes to rising core component prices and heavier promotional spending during the consumer sales season.
Lu, however, emphasized the relative stability of Xiaomi’s business mix. Despite the intense competition, he noted that the growing share of the EV and IoT segments has made the overall business structure more balanced, which helped offset some of the cost pressure weighing on smartphones and tablets.
Drilling into the numbers, the smartphone × AIoT segment generated 84.03 billion yuan in revenue, accounting for 77.1% of total revenue. Due to rising component costs, this segment’s gross margin was 20.0%, down 1.6 percentage points year-over-year. Within that, smartphone revenue reached 42.12 billion yuan, down 7.5%, with shipments of 31.2 million units—a 26.5% decrease from last year.
That said, according to Omdia data, Xiaomi still held onto the No. 3 spot in global shipments this quarter. On a brighter note, thanks to a higher share of premium devices, Xiaomi’s average selling price (ASP) for smartphones jumped 25.9% year-over-year to 1,351 yuan—an all-time high.
Storage costs are shaping up to be the big factor that’ll keep squeezing phone makers’ revenue and profits for the foreseeable future. Lu said Xiaomi’s forecasts on storage pricing were on the money, and that stable partnerships with the world’s top five memory suppliers helped secure better supply priority to keep runaway costs in check.
He expects storage prices to enter a phase of slowing increases in Q3 and Q4 this year, though the 2027 trend is still hard to call. But as more phone makers announce price hikes, he sees a positive signal: consumers are gradually coming around to the industry’s new reality and adjusting their expectations for future product pricing.
“I’m personally pretty confident about smartphone gross margins in the second half of the year,” Lu said. “The hardest stretches are probably behind us, and the business has entered a phase where things are both visible and manageable.”
Even though Xiaomi has been global for years, with this year’s domestic market being such a slugfest, overseas markets could be the company’s key breakthrough point for stabilizing revenue and chasing growth.
Lu told reporters that as of end of June, Xiaomi had over 640 new retail stores overseas, and that number is expected to approach 1,000 by year-end. The company is also starting to roll into new markets like Australia. The team has already done field research in multiple countries and will soon kick off another round of research trips across Europe to find more overseas partners who buy into Xiaomi’s new retail model.
He said two things are crystal clear right now: first, major home appliances will play a key role in the overseas push; second, the team is determined to bring Xiaomi’s new retail model—including its practices from the Chinese auto industry—to international markets, building a unified retail capability that supports the overseas expansion of phones, IoT devices, and EVs alike.
In Q2, Xiaomi’s R&D spending reached 9.23 billion yuan, up 18.9% year-over-year, with major investments flowing into smart EVs, AI infrastructure, and other core areas.
Earlier, Xiaomi’s self-developed Xiaomi MiMo-V2.5 base model actually hit No. 1 in weekly call volume on OpenRouter. As for AI, Xiaomi says it’s in no rush to chase short-term monetization, preferring to first connect the MiMo model with its existing product ecosystem.
Additionally, Lu revealed that the first-generation Xuanjie O1 chip has passed the 1-million-unit mark in volume validation shipments, and the flagship device powered by the latest fully self-developed Xuanjie chip is set to launch in September.
