Xiaomi’s net profit fell 37.6% year-on-year to RMB 14.2 billion in the first half of 2026, as revenue also declined 8.4% to RMB 208.06 billion. Adjusted net profit — Xiaomi’s preferred non-GAAP measure — dropped even further, down 42.8% to RMB 12.29 billion. The culprit behind both the revenue and profit slide is a global memory chip price crunch that has driven up the cost of DRAM and NAND flash across the entire smartphone industry, combined with continued losses in Xiaomi’s electric vehicle business.
This is not simply an EV story. Xiaomi’s core smartphone business — still the majority of its revenue — shrank in both sales and margin during the period, even as the EV segment kept growing.
Key takeaways
- Net profit: RMB 14.2 billion in H1 2026, down 37.6% year-on-year.
- Adjusted net profit: RMB 12.29 billion, down 42.8% year-on-year — a steeper drop than the headline number.
- Revenue: RMB 208.06 billion, down 8.4% year-on-year — revenue fell too, it did not grow.
- Q2 revenue specifically: RMB 108.9 billion, down 6.1% year-on-year and below analyst estimates of RMB 112.2 billion.
- Smartphone revenue (Q2): RMB 42.1 billion, down 7.5% year-on-year.
- Smartphone gross margin (Q2): fell to 8.5%, down from 11.5% a year earlier — the clearest single number behind the profit collapse.
- EV segment (Q2): the smart EV, AI and new-initiatives segment grew revenue 17.1% to RMB 24.9 billion, with the EV business alone contributing RMB 23.9 billion, up 15.9% year-on-year — growing, but Xiaomi’s EV unit has been reporting operating losses through 2026.
The real driver: a global memory chip price spike
The single biggest number in this result is the smartphone gross margin collapse — from 11.5% to 8.5% in a year. That is not a demand problem; smartphone shipment volumes were not the headline issue. It is a cost problem: DRAM and NAND flash memory, the chips every smartphone needs for RAM and storage, went through a sharp global price spike through 2026 as AI data-centre buildouts absorbed a growing share of the world’s memory chip supply, squeezing availability and pushing up prices for every device maker sourcing the same components.
Xiaomi’s smartphone business, like most of the industry, largely absorbed that cost increase rather than passing all of it on to consumers through higher retail prices — a strategy that protects market share in the short term but shows up directly in gross margin. The result: smartphone revenue fell 7.5% and the margin on what did sell fell by three full percentage points in a single year.
What’s actually growing: the EV business
Xiaomi’s H1 2026 net profit fell 37.6% to RMB 14.2 billion and revenue fell 8.4% to RMB 208.06 billion, driven mainly by a smartphone gross margin collapse from 11.5% to 8.5% amid a global memory chip price crunch — even as Xiaomi’s EV segment kept growing revenue and remains the company’s clearest long-term bright spot. In Q2 2026, the smart EV, AI and new-initiatives segment brought in RMB 24.9 billion, up 17.1% year-on-year, with the EV business itself contributing RMB 23.9 billion of that, up 15.9%.
Growing EV revenue is not the same as a profitable EV business, though. Xiaomi’s EV unit posted an operating loss in Q1 2026, driven in part by government subsidies the company itself absorbed on vehicle purchase tax and lower deliveries of its higher-margin SU7 Ultra model. The EV segment is scaling the way a young auto manufacturer typically does — rising volume, rising revenue, but not yet consistent profitability — while the smartphone business that was supposed to fund that expansion is going through its own margin squeeze at the same time.
Why this is a double squeeze, not a single cause
Two things are true about Xiaomi’s H1 2026 results simultaneously, and conflating them misreads the story. First, the smartphone business — still Xiaomi’s largest single segment — saw both declining revenue and a sharply compressed margin, driven by an industry-wide memory chip cost spike outside Xiaomi’s control. Second, the EV business is growing its top line but has not yet reached the scale or manufacturing efficiency to be reliably profitable, and continues to draw resources from the rest of the company while it gets there.
Individually, either pressure would be a manageable, cyclical story. Together, in the same two quarters, they compounded into a 37.6% profit decline that outpaced the 8.4% revenue decline by a wide margin — exactly what happens when a company’s cost base rises faster than its sales can, on two fronts at once.
Is the memory chip crunch temporary?
The memory chip price spike squeezing Xiaomi’s smartphone margins is an industry-wide supply dynamic, not a Xiaomi-specific problem — AI data-centre operators have been buying DRAM and high-bandwidth memory at a pace that has outstripped fab capacity additions through 2026, pulling supply away from consumer electronics and pushing prices up for phone makers globally — the same dynamic behind Samsung raising its own chip prices as AI fills its factory space, and part of why power-efficient AI infrastructure plays like Velaura AI’s $110 million raise are attracting capital right now. Whether that eases depends on memory manufacturers bringing on new fab capacity, a process that typically takes multiple quarters to show up in falling component prices — meaning Xiaomi’s smartphone margins may stay compressed for some time yet, independent of anything the company does differently.
This dynamic is also why Xiaomi’s results in 2026 have been volatile quarter to quarter rather than a smooth decline. Q1 2026 net profit had already fallen sharply year-on-year on the same memory-cost pressure, and Q2’s results show the squeeze continuing rather than easing. A supply-driven cost spike does not resolve on a predictable schedule the way a demand slowdown might — it resolves when new fabrication capacity actually ships, which is a manufacturing timeline measured in quarters, not a pricing decision any single phone maker can make unilaterally.
What’s not yet disclosed
- Full H1 2026 segment-level profit breakdown — how much of the RMB 14.2 billion net profit came from smartphones versus EVs versus other segments — was not published in the topline results reviewed for this article.
- Whether the EV segment reached operating profitability in Q2 2026 specifically has not been confirmed; Q1 2026 EV operations were loss-making.
- Forward guidance on when smartphone margins are expected to recover as memory prices normalize has not been given.
Frequently asked questions
Did Xiaomi’s revenue grow or fall in H1 2026?
It fell. H1 2026 revenue was RMB 208.06 billion, down 8.4% year-on-year — both revenue and profit declined together.
Why did Xiaomi’s profit fall faster than its revenue?
Because margins compressed sharply, mainly in smartphones: gross margin there fell from 11.5% to 8.5% in Q2 2026 as global memory chip prices spiked, on top of continued losses in the EV business.
Is Xiaomi’s EV business profitable?
Not yet on the evidence available. The EV segment’s revenue grew 15.9% year-on-year in Q2 2026, but the unit posted an operating loss in Q1 2026 and full H1 profitability has not been separately disclosed.
What caused the memory chip price crunch?
AI data-centre buildouts have significantly increased global demand for DRAM and high-bandwidth memory through 2026, tightening supply and raising component costs for every smartphone maker, not just Xiaomi.
Is this Xiaomi’s first weak quarter in 2026?
No. Xiaomi’s net profit had already fallen sharply year-on-year in Q1 2026 on the same memory-cost pressure, meaning H1’s decline reflects two consecutive quarters of margin compression, not a one-off dip.
The bottom line
Xiaomi’s H1 2026 results are not a story of strong sales undercut by an expensive EV bet — they’re a story of two segments under pressure at once: a smartphone business absorbing an industry-wide memory chip cost spike it didn’t cause, and an EV business still scaling toward profitability. Revenue fell. Profit fell faster. Both problems are structural enough that Xiaomi likely won’t grow its way out of either one within a single quarter.
Reported from Bloomberg, The Standard and other financial outlets, 18–19 August 2026, citing Xiaomi’s H1 2026 results.
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