Xiaomi’s Japan IoT Offensive Fails to Lift Stock as Profit Slump Deepens and EV Ambitions Strain Balance Sheet

Xiaomi’s stock hit a fresh 2026 low of €2.97 on Friday before closing at €3.05, down 2.37%, as a brutal profit collapse and mounting EV spending overwhelmed any cheer from the company’s product push. The shares have shed roughly 32% since the start of the year, leaving the technology group in a deep technical hole.

The adjusted net profit tumbled 43.1% year-on-year to 6.1 billion RMB in the first quarter, with diluted earnings per share landing at just 0.18 CNY. Revenue slumped 10.9% to 99.14 billion RMB — a clear sign that the aggressive expansion into electric vehicles is coming at a heavy cost to the bottom line. Jefferies has already flagged the margin squeeze, while Goldman Sachs set a target price of 40 HKD for the Hong Kong-listed stock in late May.

Yet the operational picture is far from uniformly bleak. Xiaomi’s IoT division — wearables, smart home devices and the broader ecosystem — delivered revenue of 24.7 billion RMB in the first quarter, with a gross margin of 25.2%, far outpacing the smartphone segment. That business just got a fresh boost in Japan, where Xiaomi’s local unit started selling the Watch S5 smartwatch and Buds 6 wireless earbuds earlier this month. The Buds retail for around 15,800 yen, while the Watch S5 commands up to 27,800 yen depending on colour. The company is pricing aggressively to grab market share from established rivals.

The smartphone engine, meanwhile, continues to sputter under cost pressure. Despite shipping nearly 34 million units in the quarter, handset margins shrank to just 10.1%, squeezed by rising storage-chip prices. That makes the IoT business all the more critical as a profit anchor. By the end of March, Xiaomi counted over one billion connected IoT devices globally — excluding phones and laptops — illustrating how deep its ecosystem has become.

Should investors sell immediately? Or is it worth buying Xiaomi?

On the EV front, ambitions are soaring. Xiaomi delivered 80,856 cars in the first quarter and has accumulated over 80,000 firm orders for the SU7 model. The company now targets 550,000 vehicle deliveries by 2026 — a 34% jump from the prior-year plan, and a number that puts it ahead of what Mercedes-Benz and BMW expect to produce locally in China. Monthly deliveries already exceed 30,000 units, and in December 2025 battery-electric vehicles grabbed a 59% share of the Chinese auto market, underscoring the tailwind Xiaomi is riding.

But the capital intensity is brutal. The EV spending spree meets a smartphone segment stuck with rising input costs. And broader market sentiment turned hostile on Friday after robust US jobs data revived interest-rate fears. The Nasdaq dropped 4.2%, dragging high-growth tech names down with it. Xiaomi is caught in a double bind: its valuation suffers alongside other momentum stocks, while hardware costs remain exposed to tightening financial conditions.

On the product front, Xiaomi is preparing the 18-series flagship smartphones for the second half of 2026, which are expected to be among the first devices to use Qualcomm’s Snapdragon 8E6 chip. Fabricated on a 2nm process with clock speeds up to 5 GHz, the chip is designed to power on-device AI workloads — a key growth vector for the next generation of handsets.

Technically, the chart remains in the grip of a powerful downtrend. The stock is now over 29% below its 200-day moving average, and the relative strength index sits at 37, offering no clear signal of a reversal. The 50-day average at €3.38 is the first hurdle any bounce must clear; a fall back below the €2.97 year low would confirm further downside risk. The EV ramp may be the story the market is watching most closely, but until profitability stops sliding, the stock looks likely to stay under pressure.