(Yicai) May 27 -- First-quarter profit at Chinese consumer electronics and car producer Xiaomi more than halved from a year ago, pulled down by a fall in smartphone sales and rising component costs, while revenue from electric vehicles, artificial intelligence, and other new initiatives grew.

Net profit shrank 57 percent to CNY4.7 billion (USD699 million) in the three months ended March 31, the Beijing-based firm’s financial statement showed yesterday. Gross profit fell 14 percent to CNY21.8 billion (USD3.2 billion), with gross profit margin down to 22 percent from 22.8 percent.

Revenue declined 11 percent to CNY99.1 billion, with income from the smartphone and artificial intelligence of things segment dropping 15 percent to CNY79.3 billion.

Xiaomi's shares [HKG: 1810] closed 4.6 percent lower at HKD28.40 (USD3.63) in Hong Kong today amid a 1.1 percent pullback in the benchmark Hang Seng Index.

The company’s global phone shipments fell 19 percent to 33.8 million units in the quarter from a year earlier, with revenue down 13 percent to CNY44.3 billion and gross margin shrinking to 10.1 percent from 12.4 percent, as core component prices rose and competition intensified.

The average sales price for a Xiaomi phone rose 8.2 percent to a record CNY1,310 (USD193) per unit in the period, with premium handsets accounting for nearly 24 percent of shipments in China.

Memory chip price inflation is “going to be a super long cycle,” President William Lu said on Xiaomi’s earnings conference call, adding that the company will manage shipments of lower-end models and optimize its product mix to balance scale and margins.

Global smartphone shipments fell 4.1 percent in the quarter, ending 10 straight quarters of growth since mid-2023, according to International Data Corporation. Xiaomi ranked third globally, with an 11 percent market share, but it dropped out of the top five in China.

Revenue Growers

Meanwhile, revenue from smart electric vehicles, AI, and other new initiatives rose 6.9 percent to CNY19.9 billion.

The smart EV business achieved CNY19 billion in revenue in the first quarter, up 5.1 percent from the same period last year, as deliveries rose 6.6 percent to 80,856 units, boosted by the launch of the YU7 series, partially offset by lower sales of the SU7 series after the first generation was discontinued.

The average selling price of a Xiaomi vehicle fell 1.3 percent to CNY235,116 (USD34,660) because of purchase tax subsidies and a higher proportion of cheaper units.

The IoT and lifestyle products business posted revenue of CNY24.7 billion, with a gross margin of 25.2 percent. Overseas revenue reached a new record high.

AI

Xiaomi has released a series of foundation models over the past year, including a vision-language-action model and the XLA cognitive model, which can advance assisted driving from perception and imitation to understanding and reasoning, Lu said.

The company also integrated its on-device AI agent Miclaw with its Super Xiao Ai assistant, while Miloco is deepening the smart home agent experience, he noted, reiterating that Xiaomi plans to invest more than CNY60 billion in AI over the next three years.

“2026 will be a pivotal year for AI smartphones," Lu said. “AI phones are not simply adding AI features to existing smartphones, nor are they simply creating an agent app; instead, a shift from an app-centric interaction approach to an OS agent-centric interaction approach.”

Xiaomi's outlay on research and development surged 33 percent to CNY9 billion in the first quarter from a year ago.

The company also announced yesterday that it plans to buy back as much as HKD20 billion (USD2.6 billion) of its own Class B ordinary shares over the next 12 months. It has already repurchased 399.6 million, totaling HKD14.6 billion.

Editor: Futura Costaglione