On August 19, Xiaomi Corporation (01810.HK) reported its Q2 2025 results: revenue reached RMB 116.0 billion, up 30.5% year over year, a record high; adjusted net profit was RMB 10.83 billion, up 75.4% and above market expectations. Management said the smartphone and AIoT foundations remained solid, while smart electric vehicles and new AI-driven businesses made a notable contribution. Group gross margin was 22.5%. Xiaomi’s shares closed down 1.2% at HK$52.4 on the day, but are still up more than 50% year to date.

(Image: Xiaomi Q2 earnings)

Overview: Better-than-expected mix and volume, healthy margins

Revenue of RMB 116.0 billion topped the consensus estimate of RMB 114.7 billion; adjusted net profit of roughly RMB 10.8 billion also surpassed the c.RMB 10.1 billion market forecast. Management attributed the beat to market-share gains in smartphones overseas, scaled growth in IoT home appliances such as air conditioners and refrigerators, and robust orders in smart EVs. Group gross margin stood at about 22.5%, indicating product mix and scale effects are intact.

Business breakdown: share gains despite handset pressure; IoT and Internet “fund the core”; autos shine with volume

Smartphones delivered Q2 revenue of RMB 45.5 billion, down 2.1% year over year due to lower ASPs and promotions, but shipments rose to 42.40 million units (+0.6%). Global share reached 14.7% (top three worldwide), ranking first in Southeast Asia and second in Europe—evidence that share and channel quality are improving even as near-term margins are pressured. Segment gross margin was about 11.5%.

IoT and lifestyle products sustained strong growth, with revenue of RMB 38.7 billion (+44.7%) and a gross margin of around 22.5%. White-goods categories—air conditioners, refrigerators, and washing machines—grew rapidly; air-conditioner shipments exceeded 5.4 million units in the quarter, making the segment a key pillar for growth and margin. Internet services remained resilient, generating RMB 9.1 billion (+10.1%) with a gross margin of roughly 75.4%, contributing high-quality cash flow.

Autos and new initiatives were the quarter’s highlight. Smart EV revenue reached RMB 20.6 billion, with 81,302 deliveries; segment gross margin was about 26.4%, and operating loss narrowed to RMB 300 million, a clear improvement versus Q1. Xiaomi unveiled its second model, YU7, at end-June and began deliveries in July; contributions are not yet fully reflected in Q2, but order momentum underpins a stronger H2 ramp.

Market reaction and investor takeaways: post-print digestion; watch guidance reset and capacity ramp

The modest share pullback likely reflects profit-taking after a strong run and digestion of high expectations; year-to-date performance remains robust. Street focus centers on three threads: (1) auto losses keep narrowing while segment gross margin rose to ~26.4%; if capacity and model mix progress as planned, monthly or quarterly profitability in H2 is achievable; (2) full-year smartphone shipment target was trimmed to 175 million units (from 180 million), with a strategy of premiumization and channel optimization to offset ASP pressure; (3) IoT and Internet form a stable base—white-goods scale and product laddering support core margins, while Internet’s high margin bolsters cash-flow flexibility.

Near-term trading will hinge on the auto delivery curve and capacity ramp. The release cadence at the second plant, the speed of YU7 order conversion, and the mix shift toward higher-end trims will shape the slope of the auto profit curve; concurrently, smartphones must balance promotions with structural upgrades amid a tepid global recovery.

Management commentary and outlook: cash-flow foundation + auto growth curve

Management noted that global smartphone growth in 2025 may be close to zero; Xiaomi will stick to premiumization and multi-category synergy. For autos, leadership remains confident about achieving monthly or quarterly profitability in H2, while acknowledging heavy cumulative investment (R&D exceeding RMB 30 billion) and key variables across capacity, supply chain, and delivery rhythm. In sum, “Smartphones × AIoT” provide the cash-flow and profit moat, while autos and AI supply the incremental growth—this is set to define Xiaomi’s narrative over the coming quarters.

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