Xiaomi Corporation · Q2 2026

The quarter in short

Revenue $16.01B, down 0.1% year over year and up 11.8% on the quarter. ADJUSTED PER ADS EPS $0.26. GAAP EPS $0.26. Free cash flow $26M, down 99.0% year over year. ADJUSTED PER ADS EPS beat consensus by 63%. Rule of 40 score 0.

What we learned

1. Xiaomi raised phone prices 25.9% and the margin still fell to 8.5%. Average selling price reached an all-time high of RMB1,351 on a smartphone business that turned over RMB42.1 billion in the quarter. Premiumisation worked exactly as designed and did not hold the line.
2. Reported profit fell 20% and adjusted profit fell 43%. The gap is a RMB6.5 billion fair-value gain on financial instruments — Xiaomi holds stakes in roughly 410 companies and they marked up.
3. Group gross margin of 19.84% is the weakest in the twelve quarters we track, below even the 20.4% of September 2024.
4. The company names memory in its own first paragraph. Lu Weibing on the call: "Memory costs increased. There is no way for us to just pass on the whole cost increase to our consumers." The response was to push price and actively adjust shipment cadence — a deliberate retrea…
5. The phone-adjacent business is where the profit actually is. Internet services turned over RMB9.0 billion at a 76.8% margin — 8% of revenue but roughly 40% of the Smartphone × AIoT segment's gross-profit contribution — with global monthly active users at a record 766.5 million.

Read moreRead callRead preview