Xiaomi Profit Crashes 57% on Chip Costs, Stock Falls 5.3% May 27

Xiaomi reported Q1 2026 net profit fell 57% to 4.72 billion yuan, worse than analyst expectations of a 52% drop. Revenue fell 11% to 99 billion yuan, the first decline in nearly three years. The stock dropped 5.3% to HK$28.40 on May 27. Rising memory chip costs and weak smartphone shipments drove the decline, though the company announced a HK$20 billion share repurchase program.

Memory Chip Crisis Hits Smartphone Sales

Global memory chip shortages pushed production costs higher as manufacturers redirected supplies to artificial intelligence data centers. Xiaomi’s smartphone shipments fell 19% in Q1 2026 while the overall market declined 2.9%. The company cut production of budget models to limit margin pressure from rising chip prices. IDC forecasts continued difficulty through 2026, especially for companies selling low-cost phones.

Electric Vehicle Business Adds to Losses

Xiaomi’s EV division posted a 3.1 billion yuan loss in Q1 2026 despite delivering over 600,000 cars since launch in 2024. The company aims for 550,000 deliveries in 2026 and plans European market entry next year. Xiaomi expanded its EV lineup with a high-performance YU7 SUV variant and a budget model to compete with Tesla. The EV business continues to drag on overall profitability.

Buyback Program Signals Management Confidence

Xiaomi announced a HK$20 billion on-market share repurchase program effective June 2, 2026, following expiry of the current program. The company has already repurchased 399.6 million Class B shares worth HK$14.6 billion under the existing program. Cash reserves stand at 220.6 billion yuan, providing financial flexibility. The board believes the company’s financial position remains solid despite Q1 earnings pressure.

Stock Valuation and Analyst View

Meyka rates 1810.HK a B+, suggesting neutral positioning with a 12-month price target of HK$66.36, 134% above the current price. The stock trades at a PE ratio of 16.53 and a price-to-book ratio of 2.58. Technical indicators show the RSI at 39.40, indicating oversold conditions. With Meyka’s forecast and the buyback announcement, the stock may offer value for patient investors.

Final Thoughts

Xiaomi faces near-term headwinds from chip costs and smartphone weakness, but the HK$20 billion buyback and strong cash position suggest management sees long-term value. Investors should monitor Q2 results and chip price trends before committing capital.

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