Xiaomi Earnings Call: Record Growth Amid Cost Pressures

Xiaomi Corp Class B ((HK:1810)) has held its Q4 earnings call. Read on for the main highlights of the call.

Xiaomi’s latest earnings call struck an upbeat but cautious tone. Management highlighted record revenue and profit, expanding margins, rapid growth in IoT devices and EVs, and visible wins in premium smartphones and AI. At the same time, they warned that surging memory prices, heavy R&D and CapEx, and early‑stage AI commercialization could pressure margins and execution through 2025–26.

Record Revenue and Profitability Milestones

Xiaomi reported group revenue of RMB 457.3 billion for FY2025, up 25% year on year and above the RMB 400 billion mark for the first time. Adjusted net profit jumped to RMB 39.2 billion, nearly 44% higher, underscoring improved scale and operational efficiency across the portfolio.

Margin Expansion Across Core Segments

Overall gross margin reached 22.3%, rising 1.3 percentage points from a year earlier as the company optimized product mix and costs. The Smartphone x AIoT segment posted a record 21.7% gross margin, while IoT margins climbed to 23.1%, up 2.8 points, signaling healthier unit economics.

Smartphone Scale and Premiumization Strategy

Global smartphone shipments hit 165 million units, giving Xiaomi a 13.3% market share and keeping it firmly in the global top three. In Mainland China, premium models made up 27.1% of sales, and the company gained share in the RMB 4,000–10,000 ranges, driving smartphone revenue to RMB 186.4 billion, or about 41% of total.

IoT and Consumer Devices Fuel Diversification

IoT revenue passed the RMB 120 billion threshold for the first time, reaching RMB 123.2 billion, up 18.3% year on year. Large smart home appliances grew about 23%, tablets gained 25.2% in shipments, while Xiaomi held leading global positions in wearables, TWS earphones, and AI glasses.

EV Segment Scales Rapidly with Improved Profitability

The EV and AI/innovation segment produced RMB 106.1 billion in revenue, more than tripling year on year and representing 23.2% of group sales. Smart EV revenue reached RMB 103.3 billion as Xiaomi delivered 411,082 vehicles in 2025, helping the segment achieve its first positive annual operating profit and a 24.3% gross margin.

New SU7 Launch Highlights Strong EV Demand

The new generation SU7 launch generated more than 15,000 locked orders within 34 minutes and exceeded 30,000 orders in three days. Management emphasized that manufacturing and delivery capacity is ready to respond, with roughly 60% of buyers opting for paid upgrades, lifting average selling values.

AI and R&D Investments Build Long-Term Moat

R&D spending topped RMB 33 billion in 2025 and reached RMB 105.5 billion over five years, a 37.8% increase that underpins Xiaomi’s technology push. The company rolled out MiMo‑V2 foundation models, including a >1‑trillion‑parameter Pro version, and plans more than RMB 40 billion of R&D in 2026, with at least RMB 16 billion for AI and embodied intelligence.

Growing Internet Services and User Base

Global monthly active users grew to 750 million, with Mainland China MAU at 190 million, supporting a record RMB 37.4 billion in Internet services revenue. Advertising reached RMB 28.5 billion while overseas Internet revenue rose 15.2% to RMB 12.6 billion, reinforcing the higher‑margin services pillar.

Capital Allocation and ESG Commitments

CapEx jumped 73% to RMB 18.2 billion in 2025, with about two‑thirds directed to Smart EV and AI innovation. Xiaomi also stepped up shareholder returns via share repurchases and reported significant gains in green power usage and emissions reduction, earning a gold‑level sustainability rating.

Memory Inflation Adds Near-Term Margin Pressure

Management warned that industry memory prices have risen more and for longer than expected, driven by AI‑related demand. They expect this elevated pricing cycle to continue, squeezing margins on smartphones, tablets, and notebooks and potentially forcing handset price increases if costs cannot be absorbed.

Heavy Investment Weighs on Short-Term Margins

The company’s aggressive R&D and CapEx ramp, including a planned RMB 60 billion AI outlay over three years, is expected to pressure earnings in the near term. Executives framed these costs as strategic bets to secure long‑term competitiveness in AI, robotics, and EVs, but acknowledged higher short‑term margin volatility.

AI Monetization Still at an Early Stage

Despite notable technical progress in models like MiMo and in‑car cognitive systems, Xiaomi said it is too early to provide concrete revenue metrics for AI products. Management positioned AI today as an enabling layer across devices and services rather than a major standalone revenue driver.

Execution Challenges in Late 2025 and EV Outlook

Executives noted that the second half of 2025 was more challenging than the first, underscoring operational and market volatility even in a record year. They also cautioned that while the EV and new business segment has turned profitable, ongoing AI and innovation spending and a higher 2026 delivery target will keep execution risks elevated.

Macro and Supply Chain Risks Remain on Radar

Management pointed to geopolitical tensions and raw material and logistics swings as external risk factors, even though current impacts are limited. They flagged potential supply chain disruptions for inputs such as plastics, adding another layer of uncertainty to cost planning.

Guidance: Investment-Led Growth and EV Delivery Targets

For 2026, Xiaomi plans to lift R&D spending beyond RMB 40 billion, with more than RMB 16 billion earmarked for AI and embodied intelligence and a three‑year AI investment commitment of RMB 60 billion. The company reaffirmed its goal to deliver 550,000 vehicles in 2026, while continuing sizable share repurchases alongside its expanding revenue and user base.

Xiaomi’s earnings call painted a picture of a company moving quickly up the value chain, with record results and growing clout in EVs, IoT, and AI. Investors, however, will need to watch how the group navigates rising component costs, heavy investment, and the still‑uncertain monetization timeline for its AI stack over the next two years.