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XIACY · Forward model · Internet services · Bull case

What has to happen in Internet services

Model as of

This page changes Internet services inside the complete XIACY model. Every other vertical, corporate programme and valuation assumption stays in the selected portfolio case.

XIACY forward model
Horizon
Consolidated fair value $35.18 all other verticals held in this portfolio case
Final-quarter revenue $2.34B 7% of company revenue
Explicit segment contribution $14.82B EBITDA less segment capex, before corporate items

Memory normalises inside two years, SkyNomad does to the SUV segment what SU7 did to the sedan segment, and the MiMo line becomes a third monetisation surface rather than a rounding error. Terminal revenue lands about 30% above base. State the gap honestly: even here the model does not reach a re-rating to the 3x revenue multiple Xiaomi carried before the memory squeeze - that would need the exit slider, not the drivers, and this case deliberately does not do it for you.

Internet services

Basis quarter$1.32B
Final quarter$2.34B
Implied CAGR+12%
Final revenue mix7%

The profit engine, and the reason the hardware margin can be as bad as it is. RMB9.0 billion of revenue in the June quarter at a 76.8% gross margin - 8.3% of revenue and, on gross profit, roughly 40% of everything the Smartphone x AIoT segment contributed. It scales with monthly active users, which reached a record 766.5 million, and it is monetised mostly through advertising, which grew 4.8%. This is the classic software-on-hardware conversion, and it is what funds the R&D that the other four verticals spend.

Last four quarters
2025 Q3 $1.31B Reported
2025 Q4 $1.40B Reported
2026 Q1 $1.37B Reported
2026 Q2 $1.32B Reported
AdvertisingGamingOther value-added servicesOverseas internet services
Subscribers 766.5M 38.3% of a 2.00B addressable base 766.5m global monthly active users at 30 June 2026, a record, up 4.8% YoY. Disclosed in the results announcement.
Addressable subscribers 2.00B the S-curve ceiling 2.0bn reachable devices - ours, not disclosed. Xiaomi reports 1.16bn connected IoT devices on top of the phone base.
Net adds 0/qtr ramping toward 0/qtr, throttled as the base approaches the TAM
Net-add ceiling 0/qtr what supply can deliver at full rate
ARPU $0.58/mo drifting +0.5% per quarter, floor $0.40 $0.575 a month is RMB3.91, from RMB9.0bn over 766.5m users over three months. Derived from two disclosed figures.
Non-subscriber revenue $0/qtr growing 0.0% per quarter Zero. Every dollar of this line is modelled through users and ARPU; nothing sits outside it.
Internet services

Latest: $2.34B (2031Q2E)

Period Value
2025Q2 $1.25B
2025Q3 $1.31B
2025Q4 $1.40B
2026Q1 $1.37B
2026Q2 $1.32B
2026Q3E $1.36B
2026Q4E $1.41B
2027Q1E $1.45B
2027Q2E $1.49B
2027Q3E $1.54B
2027Q4E $1.58B
2028Q1E $1.63B
2028Q2E $1.68B
2028Q3E $1.73B
2028Q4E $1.78B
2029Q1E $1.83B
2029Q2E $1.88B
2029Q3E $1.93B
2029Q4E $1.99B
2030Q1E $2.04B
2030Q2E $2.10B
2030Q3E $2.16B
2030Q4E $2.22B
2031Q1E $2.28B
2031Q2E $2.34B

Assumptions & reasoning

  • ARPU is derived, not disclosed. Xiaomi publishes internet services revenue and monthly active users separately and never divides them, so the $0.575 figure is our arithmetic on two reported numbers rather than a company metric.
  • The 76.8% gross margin is disclosed and is the highest in the company by a wide margin. The 50% EBITDA margin is ours - advertising carries real sales and platform cost that Xiaomi reports only at group level.
  • Terminal capex intensity rises rather than falls, which is deliberate: serving AI features into the OS costs compute that advertising in 2026 did not need.
  • Attach mode is used rather than net adds because the constraint is how much of an existing device base ever becomes active, not how fast Xiaomi can add users.
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