Xiaomi's share price has staged a modest recovery this week, climbing from a low of HKD 25.32 on August 18 to around HKD 28.45. The bounce follows the release of the company's second-quarter earnings, which underscored persistent challenges in its core smartphone business.
Q2 earnings highlight smartphone weakness
The Chinese tech giant, which ranks as the world's third-largest smartphone maker behind Apple and Samsung, reported a 26.3% year-over-year decline in smartphone shipments to 31.2 million units in Q2. In contrast, Apple's shipments rose 5.3% to 60.5 million, while Samsung saw a 23% increase to 55.1 million. Xiaomi also lagged smaller rivals like OPPO and Vivo.
Total revenue fell to 108.9 billion yuan from 116 billion yuan in the same period last year. The smartphone and IoT segment contributed 84 billion yuan, down from 94 billion yuan a year earlier. This decline was partially offset by a rise in electric vehicle revenue, which reached 24.9 billion yuan.
Margins under pressure
Gross margin contracted to 19.8% from 22.5% in the prior-year quarter, and net profit dropped to 6.2 billion yuan from 10.8 billion yuan. The company has been forced to raise prices due to surging costs for memory and chips, a trend driven by the global AI boom.
Samsung's recent announcement of semiconductor manufacturing price hikes could further squeeze Xiaomi's margins. While Samsung is not a direct chip supplier to Xiaomi, the move may prompt other manufacturers like TSMC and MediaTek to follow suit, keeping input costs elevated.
Outlook and valuation
Given these headwinds, Xiaomi's turnaround is likely to take longer than many investors hoped. The stock's price-to-earnings ratio has fallen to around 16, compared with Apple's 35, reflecting the market's cautious stance.
From a technical perspective, the weekly chart shows Xiaomi's share price has been in a steep downtrend, dropping from a year-to-date high of HKD 61.5 to current levels. It has broken below the 61.8% Fibonacci retracement and remains under the 50-week and 100-week exponential moving averages, indicating bearish control. The recent rebound may be a dead-cat bounce, with the next key support at the year-to-date low of HKD 21.44. A break below that level could signal further downside.
Investors are also watching broader market dynamics, including Samsung's foundry price hikes and their implications for the semiconductor supply chain. Meanwhile, Apple's AI strategy shift could intensify competition in the premium segment.
For now, Xiaomi's stock remains under pressure, and the company faces an uphill battle to regain momentum in a highly competitive market.
This article is for informational purposes only and does not constitute financial advice.
