Xiaomi Q1 Forecast: Revenue and Profits Likely to Decline Amid Storage Price Hikes and Waning Subsidies

Xiaomi Corporation is set to release its financial results for the first quarter of 2026 on May 26th. Numerous brokerages anticipate that the company will face a dual decline in both revenue and profit, with the core pressures stemming from the soaring costs of memory chips and the waning effects of government subsidies.

Jefferies estimates that Xiaomi's EBIT for the first quarter will be about 35% lower than the market consensus. The firm believes that negative operating leverage coupled with high R&D spending will significantly drag on profits, and explicitly stated that "it's too early to bottom fish." Bocom International estimates that the total revenue for the first quarter will be around 98.2 billion yuan, a decline of approximately 12% year-on-year, with an adjusted net profit of about 6 billion yuan. CITIC里昂 also forecasts a year-on-year decline in total revenue and adjusted EBIT.

The divergence among institutions is primarily reflected in their judgment of profit margins. Bocom International believes that the gross margin of smartphones may be better than previously expected by the market, while Jefferies holds a more cautious attitude towards overall profitability.

Bocom International has lowered its target price for Xiaomi to 34.8 Hong Kong dollars, corresponding to a P/E ratio of about 25.8 times for 2026, maintaining a neutral rating. The firm also simultaneously lowered its revenue forecasts for 2026 to 2027 to 484.2 billion and 548.4 billion yuan respectively, with adjusted EPS forecasts lowered to 1.20 yuan and 1.37 yuan. Jefferies, on the other hand, believes that the current consensus expectations are still too high, and there is a downward risk in the valuation of electric vehicles.

Smartphones: The effectiveness of the strategy of trading price for volume remains to be verified

The pressure on the smartphone business is a consensus among the three institutions mentioned. Bocom International estimates a year-on-year decline in shipments of about 21% for the first quarter, mainly due to the high base brought about by last year's national subsidies and the suppression of terminal demand due to rising storage prices. CITIC里昂 notes that Xiaomi has actively reduced some low-end and non-profitable models.

In terms of response strategies, Xiaomi has chosen to raise prices and take a high-end route. Bocom International estimates that the average price of smartphones increased by about 8% year-on-year in the first quarter, corresponding to revenue of about 43 billion yuan. The price increase has somewhat offset the impact of rising storage costs.

Bocom International estimates that the gross margin of smartphones in the first quarter will be about 9.5%, and considers this level to be higher than the previous market expectations. However, Jefferies warns that rising storage costs will further squeeze profit margins.

Electric Vehicles: Short-term pressure, new models as key variables

Regarding the automotive business, all three institutions mentioned that approximately 80,000 vehicles were delivered in the first quarter. CITIC里昂 points out that deliveries dropped to about 20,000 in February and March, mainly due to reduced subsidies and discounts leading to weakened consumer purchasing intentions, but rebounded to over 30,000 in April with the launch of the new SU7.

Bocom International estimates that the gross margin for the automotive business and AI and other innovative businesses will be about 19.8% in the first quarter, while CITIC里昂 estimates it to be about 20%, a decline of about 3 percentage points year-on-year. The reduction of purchase tax subsidies and the rise in costs of batteries and storage raw materials are the main contributing factors.

Xiaomi maintains its delivery target of 550,000 vehicles for the whole year of 2026, but Bocom International states that the visibility of this target is currently low. Subsequent catalysts include the revised version of SU7, YU7 GT, and Kunlun as new models, with CITIC里昂 mentioning that Lei Jun stated that the new SU7 has already secured over 70,000 orders.

AIoT and Internet: High base effect dominates

The artificial intelligence Internet of Things (AI + IoT) business faces the high base pressure formed after last year's substantial sales increase due to the replacement subsidies. CITIC里昂 points out that overseas AIoT sales performance has been strong, partially offsetting the weakness in the domestic market. Bocom International estimates that AIoT revenue will remain flat on a sequential basis in the first quarter, with a gross margin of about 25%.

Regarding internet services, Bocom International estimates that revenue will grow by about 5% year-on-year in the first quarter,