Soaring memory prices, industry pressure, and shrinking profits—in the first half of 2026, nearly all smartphone manufacturers faced the same cost shock. Against this backdrop, Xiaomi delivered a Q2 financial report that demonstrated stability: revenue once again surpassed 100 billion yuan, adjusted net profit improved quarter-on-quarter, and none of the four major business segments collapsed.

However, stability is only half the story. While memory price increases are slowing, Pengcheng, AI, and self-developed chips are all set to launch in the same window. The real focus is not on this financial report itself but on the second half of the year.

—Introduction

Before discussing Xiaomi's Q2 financial report, it is essential to provide some industry context; otherwise, the numbers will lack a reference point.

In the first half of 2026, memory device prices surged: NAND flash memory prices rose more than 80% quarter-on-quarter, and DRAM prices followed suit. For smartphone manufacturers, the cost per unit sold increased dramatically, but terminal selling prices could not rise by 80%. The difference had to be absorbed by gross margins. This was not just a problem for Xiaomi but a collective pressure period for the entire industry.

Against this backdrop, Xiaomi's Q2 performance—revenue of 108.9 billion yuan, again surpassing 100 billion yuan, and adjusted net profit of 6.2 billion yuan, improving quarter-on-quarter—takes on a different significance.

Frankly, these figures are not stunning. However, maintaining revenue scale and improving profits quarter-on-quarter amid soaring costs is no easy feat and must involve proactive adjustments in business strategy.

Where were these adjustments made? Lu Weibing stated bluntly during the financial report conference call that in response to rising memory prices, Xiaomi made significant adjustments to its smartphone product mix and launch timelines, with some products seeing appropriate price increases, which proved effective.

Here, a concept must be mentioned: In Q2, Xiaomi's global average selling price (ASP) for smartphones—a core indicator of product mix and pricing power—increased by 25.9% year-on-year to 1,351 yuan, reaching an all-time high, while smartphone gross margins remained stable. Meanwhile, the proportion of smartphone models priced above 3,000 yuan in mainland China reached 32.1%, also a record high.

In other words, during the most cost-intensive period, Xiaomi neither reduced configurations to maintain prices nor cut prices to boost volume. Instead, it continued to push premium models and adjusted its product mix to protect profits. In Q2, smartphone shipments reached 31.2 million units, maintaining Xiaomi's position among the top three globally for 24 consecutive quarters—volume held steady, and prices continued to rise.

Making such choices during a pressure period requires confidence. The question that has been asked for many years—"Has Xiaomi succeeded in the premium segment?"—has been answered by this financial report.

The record-high ASP reflects the ability to "move upward" in product offerings; globalization data reflects the resilience to "expand outward." Together, they form Xiaomi's most critical assets for navigating through pressure periods.

According to Omdia, Xiaomi's smartphone shipments ranked among the top three in 53 countries and regions and among the top five in 67 countries and regions, with its overseas advantage regions continuing to grow quarter-on-quarter. Lu Weibing revealed a noteworthy development during the conference call: On September 4, Xiaomi's "Human-Car-Home Full Ecosystem" will make its debut at Germany's IFA show, and the Mi Home brand will officially enter the European market on a large scale.

Mi Home is celebrating its 10th anniversary this year, covering over 130 categories and 2,000 SKUs, with 110 million global users. It has more than 640 overseas new retail stores covering Southeast Asia, Europe, Latin America, the Middle East, and Africa. Preparations for automotive exports are also underway.

The rise in brand momentum is not surprising. Ultimately, brand momentum is about capturing user mindshare: reducing trust costs, enabling transaction premiums, and retaining core users. In this challenging fiscal quarter, Xiaomi's ability to maintain a relatively healthy revenue structure owes much to its brand strength. Notably, Xiaomi has been included in the Fortune Global 500 for eight consecutive years, ranking 232nd in 2026, up 65 places from the previous year, and second in Kantar BrandZ's ranking of China's Top 50 Global Brands.

Premiumization protects profits, and globalization protects scale. These two assets have prevented Xiaomi's fundamentals from deteriorating.

When smartphones are under pressure, a company's business structure health is most evident. Xiaomi's IoT and Internet segments this quarter provide an answer to this question.

Revenue from IoT and lifestyle consumer products reached 31.3 billion yuan, up 26.7% quarter-on-quarter, with overseas IoT revenue growing rapidly year-on-year—this is two sides of the same coin as global channel expansion. Key categories performed strongly in global markets: tablets ranked among the top five globally for nine consecutive quarters, with overseas tablet shipments and revenue reaching all-time highs; wearable wristband devices and TWS earphones both ranked second globally in shipments.

Internet services continued to serve as a "high-margin buffer": revenue reached 9 billion yuan, with a gross margin of 76.8%, up 1.4 percentage points year-on-year. Global monthly active users (MAUs) increased to 767 million, with 198 million in mainland China. Overseas Internet revenue reached 2.9 billion yuan, accounting for 32.1%. In a quarter where rising memory prices squeezed hardware gross margins, an Internet gross margin of nearly 77% provided tangible support for overall profitability.

What binds these two segments together is the stickiness of the smart ecosystem itself. The AIoT platform now connects 1.16 billion devices, with 24.6 million users owning five or more devices. Monthly active users for Xiao AI and the Mi Home app increased to 175 million and 124 million, respectively.

Thus, users do not simply buy a Xiaomi product and leave; they remain engaged within the ecosystem—IoT drives scale, Internet services monetize, and the ecosystem retains users, creating a virtuous cycle. This is the practical meaning of the term "ballast."

Compared to the strategic adjustments under smartphone pressure, the automotive segment represents the clearest growth logic in this financial report.

Revenue from smart electric vehicles and innovative businesses such as AI reached 24.9 billion yuan, achieving double-digit growth year-on-year and quarter-on-quarter. In Q2, over 104,000 vehicles were delivered, up 28.2% year-on-year. The SU7 secured the sales crown for sedans priced above 200,000 yuan for four consecutive months in the first half of the year—competing head-on with the Tesla Model 3 and BYD Han in this price segment, Xiaomi has firmly established itself in its second year of car manufacturing, which is no small feat.

The biggest growth variable in the second half of the year is Pengcheng. Lu Weibing revealed during the conference call that pre-orders for the two new models have exceeded expectations. More critically, he signaled that deliveries will begin immediately upon launch, with sufficient production capacity and rapid delivery speeds.

It should be noted that the user base for extended-range electric vehicles (EREVs) is far larger than that of battery electric vehicles (BEVs). The addition of Pengcheng means Xiaomi Automotive is transitioning from a single-model validation phase to a multi-category matrix covering the market.

If the previous questions addressed "how Xiaomi performed this quarter," the R&D line addresses "what lies ahead for Xiaomi."

This is also the part of the financial report I believe is most worth paying attention to.

Q2 R&D investment reached 9.2 billion yuan, up 18.9% year-on-year, with cumulative investment for the first half of the year surpassing 18.2 billion yuan. Increasing R&D spending amid profit pressure is itself a signal. More importantly, years of sustained investment are now entering a period of concentrated fruition.

AI progress has been most significant. In June, MiMo-V2.5 became the world's first trillion-parameter model to achieve inference speeds exceeding 1,000 tokens per second on general-purpose GPUs. In July, it topped both the weekly and monthly global usage rankings on OpenRouter, gaining widespread recognition from developers worldwide.

CFO Lin Shiwei revealed during the conference call that MiMo's Token Plan has begun generating revenue, with rapid growth, and the first personal desktop application is set to launch soon. However, he also acknowledged that AI business remains in a large-scale investment phase and is not yet primarily focused on monetization. The next-generation MiMo model is under training and is expected to be released soon.

Chip development has also seen substantive progress. Lu Weibing disclosed that the Xuanjie O1 chip, released last year, has shipped over one million units across three terminal devices, completing large-scale validation as a flagship chip—meaning self-developed chips have moved beyond the "can it be used" stage. The next-generation Xuanjie chip is set to be released, and September will see a dense (intensive) period of new product launches for Xiaomi.

In terms of OS, HyperOS 4 Beta has been released, with the "Super Xiao AI 2.0," powered by MiMo's large model, enabling cross-ecosystem and cross-device collaboration. In robotics, the success rate of humanoid robot operations at Xiaomi's automotive factory has risen to 98%, and its self-developed embodied model ranked first globally on WorldArena.

These lines—AI, chips, OS, and robotics—may seem independent, but they share a nested relationship: self-developed chips provide the underlying computing power, determining how deeply on-device AI can run; AI serves as the capability layer, integrated via the OS to permeate every terminal, including smartphones, automobiles, and IoT devices. The Xuanjie O1's shipment of over one million units indicates that the chip has passed its validation phase; the Token Plan's revenue contribution shows that AI monetization has begun; HyperOS 4 ties everything together. When these capabilities align in the same window, the "Human-Car-Home Full Ecosystem" gains, for the first time, a technological foundation spanning from the bottom layer (bottom layer) to the application layer (application layer).

This is the true significance of September's dense (intensive) launch period: not just a series of product launches but a concentrated showcase of Xiaomi's technological stack.

Finally, let's return to the memory price theme.

Lu Weibing judged during the conference call that the memory industry will enter a "slow growth" phase in the second half of the year, remaining at high levels overall but entering a "relatively predictable and controllable" stage. NAND prices have shown signs of weakness, and Changxin Storage's domestic LPDDR6 production capacity is being released. Barclays research also indicates that memory prices are expected to stabilize and decline in the short term.

For Xiaomi, once memory costs ease, pressure on its smartphone, IoT, and automotive hardware lines will simultaneously lift. When prices rise, all three lines bear the burden; when prices fall, all three lines benefit—this synergistic effect represents a structural advantage that pure smartphone manufacturers lack.

Among institutions, BOC International believes Xiaomi's fundamentals have bottomed out and are set for a gradual recovery. Goldman Sachs is also bullish on Xiaomi's potential to navigate through cycles, particularly optimistic about the incremental space brought by AI layout (AI layout ) and Pengcheng's new models.

This Q2 financial report records Xiaomi's successful capability validation during a cost-pressure period: fundamentals have stabilized, structural indicators are improving, and R&D momentum has not slowed due to short-term pressures. The external turning point of "slow memory price growth" and the internal rhythms of Pengcheng's launch, AI monetization, and the next-generation Xuanjie chip release are converging in the same direction.

Xiaomi's toughest phase is passing. The real focus lies in the second half of the year and beyond.