Historically, the market has primarily viewed Xiaomi as a hardware manufacturer. However, its Q2 financial results reveal a significant transformation in its revenue structure, profit sources, and growth drivers.

On the evening of August 18, Xiaomi released its Q2 financial results, reporting quarterly revenue of RMB 108.9 billion and adjusted net profit of RMB 6.2 billion, both exceeding market expectations. Research and development investment reached RMB 9.2 billion, up 18.9% year-on-year.

At first glance, these figures appear to reflect stability. However, a deeper analysis within the context of industry cycles reveals a more compelling narrative behind the data.

Over the past six months, global memory chip prices have surged unprecedentedly, severely impacting the cost side of the mobile phone industry. Nearly all mobile phone manufacturers have found themselves in a profitability crisis. The true highlight of these financial results lies in the signals released amid this industry upheaval:

Having weathered the impact of rising storage costs, the market is now re-evaluating Xiaomi's operational resilience and its ability to deliver on new business ventures, with a performance inflection point on the horizon.

Over the past six months, global memory chip prices have undergone a rare "super cycle." Counterpoint's latest data shows that mobile phone memory prices surged by over 80% quarter-on-quarter in Q2 2026, leading to a significant increase in BOM costs across all price segments of mobile phones. In fact, from the end of 2025 to mid-2026, the average contract price of smartphone memory chips rose by more than 200%.

This price surge has dealt a severe blow to the cost side of the mobile phone industry. Not long ago, Apple CEO Tim Cook described the current memory cost pressures as a "flood of the century" during an earnings call and announced comprehensive product price hikes. In reality, nearly all mobile phone manufacturers have been dragged into a profitability crisis.

However, despite this industry-wide pressure, Xiaomi has remained resilient to cost shocks. Q2 revenue reached RMB 108.922 billion, surpassing the RMB 100 billion mark in a single quarter and exceeding market expectations of RMB 108.325 billion. Adjusted net profit reached RMB 6.219 billion, surpassing market expectations of RMB 6.159 billion, thereby stabilizing its core business.

It is worth noting that compared to Q1, revenue grew by 9.9% month-on-month, and adjusted net profit increased by 2.4% month-on-month. This indicates that while the impact of the storage price surge is inevitable, the most challenging phase may be passing.

A closer look at specific business segments reveals that Xiaomi has chosen not to sacrifice profitability for scale. Instead, it has stabilized its operational foundation by continuously optimizing its revenue structure.

The "Smartphone × AIoT" segment generated revenue of RMB 84 billion. Within this, smartphone business revenue reached RMB 42.1 billion, with global shipments of 31.2 million units. The "value content" per smartphone increased significantly, with the average selling price (ASP) surging by 25.9% year-on-year to RMB 1,351. In the domestic market, sales of models priced above RMB 3,000 accounted for 32.1% of total sales, both key metrics reaching all-time highs.

The commercial implications of this data are clear: Xiaomi is deepening its engagement with high-net-worth customers. In an environment where memory chip prices are soaring and BOM costs are rising, this strategy protects gross margins and avoids the passive situation of "losing money on every unit sold."

IoT and consumer lifestyle product business revenue reached RMB 31.3 billion, up 26.7% quarter-on-quarter. Internet services revenue reached RMB 9 billion, with a gross margin of 76.8%. These two high-margin, strong-cash-flow businesses act as an "operational safety net," effectively offsetting cost pressures from the hardware side.

More notably, Xiaomi's second growth curve has moved beyond the "storytelling" phase and officially entered the realization period.

Revenue from innovative businesses such as smart electric vehicles and AI reached RMB 24.9 billion, up 17.1% year-on-year and 25.3% quarter-on-quarter. Among this, smart electric vehicle revenue reached RMB 23.9 billion. It is reported that in Q2 2026, Xiaomi delivered 104,199 new vehicles, up 28.2% year-on-year.

At a time when the mobile phone industry is facing a cost storm, the revenue contribution and profit potential of new businesses are set to become key variables for capital markets in re-evaluating Xiaomi's value.

At the earnings announcement, Xiaomi President Lu Weibing stated that he expects the industry to enter a "slow growth" phase in the second half of the year but will remain at high levels overall. To adapt to rising storage costs, Xiaomi will continue to adjust its product mix in the second half of the year. However, he also noted that the most difficult moment for the industry has passed, and the storage industry as a whole has entered a relatively predictable and controllable stage.

In the fiercely competitive mobile phone market and new energy vehicle sector, price hikes are never a sustainable competitive advantage; low-price competition is the norm. So, how has Xiaomi managed to withstand this round of the "storage storm?"

A review of Xiaomi's operational strategies in recent years reveals that the company's resilience primarily stems from three structural factors: the price support from premiumization, market diversification through globalization, and user stickiness driven by the smart ecosystem. These three paths have all made visible positive contributions in Q2.

First, premiumization is transforming Xiaomi's revenue structure.

Taking smartphones as an example, the significant increase in ASP has effectively offset the impact of declining sales volume. In the past, when people thought of Xiaomi phones, "cost-effectiveness" might have been the first association. However, from current trends, this business is undergoing a structural shift toward "value-for-money," with brand premium capabilities gradually emerging.

The effects of premiumization are also evident in the brand momentum of the automotive business. In the first half of 2026, among pure electric sedans priced above RMB 200,000 in mainland China, the Xiaomi SU7 series ranked first in sales, with cumulative deliveries surpassing 500,000 units.

Second, Xiaomi's globalization is deepening and broadening. According to Omdia data, Xiaomi's smartphone shipments have ranked among the top three globally for 24 consecutive quarters. It ranks in the top three in shipments across 53 countries and regions and in the top five across 67 countries and regions. This global market presence effectively buffers risks from fluctuations in any single market.

At the channel level, Xiaomi has over 640 overseas retail stores covering Southeast Asia, Europe, East Asia, Latin America, the Middle East, and Africa. Combined with the significant year-on-year growth in overseas IoT and consumer lifestyle product business revenue in Q2, it is clear that Xiaomi's monetization capabilities in overseas markets are strengthening, with profit flexibility beyond hardware gradually being unlocked.

In September this year, Xiaomi's "Human-Car-Home Full Ecosystem" will make its debut at the International Consumer Electronics Show (IFA) in Berlin, Germany, with the Mijia brand also making its official appearance. Numerous products, including Xiaomi's major home appliances, will officially enter the European market at scale. This marks a further upgrade in Xiaomi's globalization strategy: shifting from outputting single product categories to the overall output of brand, ecosystem, and full-category capabilities.

Third, user stickiness driven by the smart ecosystem continues to strengthen. Data shows that as of June 30, 2026, Xiaomi's AIoT platform had connected 1.16 billion IoT devices, up 17.4% year-on-year. The number of users with five or more connected devices reached 24.6 million, up 20.2% year-on-year. User engagement within the ecosystem continues to rise, with Xiao Ai's monthly active users reaching 175 million, up 14.2% year-on-year, and the Mijia App's monthly active users reaching 124 million, up 9.7% year-on-year.

The value of the smart ecosystem lies not only in enhancing user stickiness and increasing user switching costs but also in providing foundational support for Xiaomi's long-term narrative of the "Human-Car-Home Full Ecosystem."

Whether the three paths of premiumization, globalization, and smart ecosystem can continue to deliver results in subsequent quarters remains to be seen. However, Q2 data at least shows that Xiaomi's structural adjustment direction is clear, and its anti-cyclical capabilities are strengthening.

After withstanding cost pressures, Xiaomi's growth logic is changing, and the market is beginning to re-evaluate Xiaomi's operational resilience and its ability to deliver on new business ventures.

In Q2, Xiaomi's R&D expenditure reached RMB 9.2 billion, up 18.9% year-on-year. H1 cumulative R&D investment reached RMB 18.2 billion. Against the backdrop of storage price hikes eroding industry profits, Xiaomi has not cut back on R&D but instead maintained investment intensity, trading short-term profits for long-term technological barriers.

A positive signal is that Xiaomi's core technologies in AI, OS, and robotics are shifting from continuous investment to a period of intensive realization.

On July 30, Xiaomi Auto officially launched its new product series, "Xiaomi Pengcheng (SkyNomad)," debuting two extended-range SUV models—the Pengcheng N70 Max and Pengcheng N90 Max—with pre-sale prices of RMB 259,900 and RMB 299,900, respectively.

Previously, the SU7 had validated Xiaomi's vehicle manufacturing capabilities and brand appeal in the pure electric sedan market priced above RMB 200,000. However, the pure electric sedan market has relatively limited capacity, while extended-range SUVs target the larger family user market, which is also the main battleground for brands like Li Auto and AITO.

The pure electric sedan market is relatively limited in scale, but extended-range SUVs cater to a broader family user market—precisely the main battleground for Li Auto and AITO. The launch of the Xiaomi Pengcheng series signifies that Xiaomi Auto is beginning to expand from a single model to a multi-category matrix.

At the earnings announcement, Lu Weibing revealed that pre-orders for the Xiaomi Pengcheng series are better than expected, with sufficient production capacity to ensure immediate delivery upon launch. From pure electric to extended-range, from sedans to SUVs, Xiaomi Auto's second growth curve is unfolding.

In terms of AI, Xiaomi explicitly disclosed for the first time in its financial results the revenue contribution from innovative businesses such as AI. Q2 revenue from "other related businesses" reached RMB 1 billion, up 56.5% year-on-year, including AI business revenue generated by the Xiaomi MiMo large model series.

In terms of model performance, the Xiaomi MiMo series has achieved some industry-recognized results in inference speed and usage volume: the Xiaomi MiMo-V2.5-Pro-UltraSpeed mode, launched in June, is the world's first trillion-parameter model to achieve an inference speed exceeding 1,000 tokens/s on general-purpose GPUs, setting a new global record for the fastest inference speed among flagship models. In July, MiMo-V2.5 topped both the weekly and monthly global large model usage volume rankings on OpenRouter.

Lin Shiwei, Xiaomi's Vice President and CFO, stated that as usage of the MiMo large model continues to grow, API calls and Token Plans have begun contributing revenue at a very rapid pace, indicating that the path for AI business to move from technological investment to commercial realization is opening up.

In terms of chips, Lu Weibing revealed that the Xuanjie O1 chip, launched last year, has surpassed 1 million cumulative shipments across three terminal devices, achieving scaling validation of flagship chips. A new generation of Xiaomi Xuanjie chips is also set to be released. The integration of self-developed chips with HyperOS and AI large models will create deeper software-hardware synergy across smartphones, vehicles, and IoT scenarios.

At the operating system level, HyperOS 4 Beta has been released, featuring the MiMo large model and AI-transformed "Super Xiao Ai 2.0," further enhancing cross-device interoperability.

Additionally, Xiaomi's robotics business has made phased progress. The new-generation humanoid robot has achieved a 98% success rate in operations across multiple workstations at Xiaomi Auto's factory, with its self-developed embodied model ranking highly in various evaluations.

In response, Goldman Sachs analyzed in a research report that Xiaomi has completed the preliminary integration of robotics frameworks in hardware, data, and models, with the potential to form a self-reinforcing closed loop and move toward general-purpose industrial and home automation.

Historically, the market has primarily viewed Xiaomi as a hardware manufacturer. However, its Q2 financial results reveal a significant transformation in its revenue structure, profit sources, and growth drivers.

Smartphone premiumization is expanding profit margins, globalization is diversifying geographical risks, and the smart ecosystem is enhancing user stickiness. Meanwhile, new businesses such as AI, OS, and robotics are moving from the investment phase to the realization phase. These changes did not happen overnight, but the direction is now clear.

Public reports reveal that over the past 90 days, 12 investment banks have issued a 'buy' recommendation for Xiaomi, setting an average target price of HKD 42.01. Guotai Haitong Securities anticipates that the latter half of the year will 'usher in a fundamental turning point,' whereas Huatai Securities forecasts that the automotive segment will emerge as the 'primary growth driver.'... Summing up the perspectives of institutional investors, a consensus is taking shape: the toughest phase is behind us, and the opportunity for future strategic positioning has now arisen.

At present, Xiaomi is at a pivotal juncture in terms of performance. Whether it can tap into fresh avenues for growth beyond this inflection point will be determined by its forthcoming financial outcomes.