Xiaomi (SEHK:1810) Stock Flat As Margin Holds And EV Losses Linger

Xiaomi stock closed at HK$27.44 after the Q2 2026 print, leaving investors to weigh a flat near term share price against earnings that were all about profit quality. The headline was simple: revenue reached RMB 108.9b while net income excluding extra items came in at RMB 9.5b. However, the real story sat in a group gross margin close to 19.8%.

For a consumer electronics and smart devices company that lives or dies on hardware economics, that margin outcome will matter more to your view on Xiaomi than any single earnings per share line. The rest of this report breaks down why.

Is Xiaomi a mispriced earnings story with improving profit quality, or does the mix of non cash earnings and softer net margin point to a value trap at HK$27.44? See how the stock screens on our valuation analysis for Xiaomi

Q2 2026 Earnings Summary

• Revenue, Q2 2026 vs. Q2 2025: RMB 108,921.609m vs. RMB 115,956.091m (down about 6.1%)
• Net Income (Excl. Extra Items), Q2 2026 vs. Q2 2025: RMB 9,462.405m vs. RMB 11,904.405m (down about 20.5%)
• Basic EPS, Q2 2026 vs. Q2 2025: RMB 0.368 vs. RMB 0.461 (down about 20.1%)
• Group Gross Margin, Q2 2026 vs. prior year Q2: about 19.8% vs. about 19.8% (broadly stable, reflecting a focus on profit quality over volume)

Prefer clean charts instead of combing through another earnings release for Xiaomi? See the company’s full visual financial picture, including how its margin profile fits into the bigger story, in our company report for Xiaomi.

Xiaomi’s Premium and Services Story Faces a Reality Check

Bulls argue Xiaomi can use premium smartphones, internet services and EVs to lift margins and reduce dependence on low margin hardware. Q2 gives mixed but important milestones. Group gross margin at about 19.8% held firm despite high memory costs, which supports the idea that product mix and pricing are doing some work. Smartphone average selling prices reached a record and the premium share in China rose to 32.1%, which is exactly the type of shift the bullish narrative requires.

The other leg of the thesis is higher margin, recurring services and new tech businesses. Internet services delivered RMB 9.0b of revenue with a 76.8% gross margin, and monthly active users climbed to 770m. That is consistent with a growing ecosystem argument. However, smart EVs and new initiatives still produced an operating loss of RMB 2.6b, so diversification is not yet easing earnings pressure.

Compare Xiaomi’s premium mix and services margin story with what institutional analysts are signaling on the stock. See the consensus price target analysis for Xiaomi to check how current price targets stack up against that narrative.

Xiaomi bears focus on profit quality and cash strain

The bearish narrative says Xiaomi is trapped between pressured smartphone economics and cash hungry EV and AI bets. Q2 gives that view some backing. Group gross margin held at about 19.8%, so fears of an immediate margin crack have not played out. However, adjusted net profit of RMB 6.2b and earlier first half drops in net income and EBIT show that higher memory costs and weaker handsets are still biting the income statement.

Bears worry that EVs consume cash without near term payoff. The smart EV and new initiatives unit delivered RMB 24.9b of revenue and a 19.2% gross margin, yet it still reported an operating loss of RMB 2.6b alongside R&D of RMB 9.2b and CapEx of RMB 3.6b. That mix supports concerns that new growth engines are not yet offsetting smartphone and cost headwinds.

After heavy R&D, CapEx and EV operating losses, are Xiaomi’s pressures contained or part of deeper structural issues? Review our risk analysis for Xiaomi which shows 1 important warning sign

Take Control Of Your Next Move

If Xiaomi’s mix of steady gross margins and cash hungry EV investment has your attention, register for free with Simply Wall St and add it to a Watchlist to track price against fair value and wait for a setup that fits your plan. After you take a position, use the Portfolio Command Center to cut through market noise and focus on alerts that actually matter for your holdings. For longer term context and fresh angles on Xiaomi and other stocks, tap into the crowd insights inside our Community. That way you can identify emerging catalysts and risks early and give yourself a better chance to stay ahead of the market.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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