Market expectations for this earnings report have already been pushed significantly lower. Bloomberg consensus forecasts show Xiaomi’s first-quarter revenue is expected to decline approximately 11% year-on-year, representing the company’s first quarterly revenue decline since mid-2023. However, supported by product price increases, gross margin is expected to improve sequentially to around 21.4%.

Looking at major investment bank forecasts, the overall direction remains highly consistent. Goldman Sachs expects total revenue of RMB 98 billion, down 12% year-on-year, with adjusted net profit of approximately RMB 5.42 billion, representing a 49% decline. China Securities Co. (CSC) forecasts revenue of RMB 98.9 billion and adjusted net profit of RMB 6 billion, down 44% year-on-year. According to estimates referenced by East Money Securities, the average forecast from multiple research institutions is approximately RMB 99.56 billion in revenue, down 10.54% year-on-year, with EPS projected at RMB 0.17, representing a 59.52% decline. CLSA forecasts revenue of approximately RMB 99.4 billion, while adjusted EBIT is expected to decline around 41%. BOC International remains relatively more optimistic, forecasting adjusted group-level net profit of approximately RMB 5.5 billion, above broader market expectations.

Overall, institutional profit forecasts imply declines ranging from 41% to 59%. However, there are also some positive signals. BOC International, JPMorgan, and Bank of Communications International all noted that smartphone business margins could potentially outperform expectations.

The Two Biggest Concerns for Investors

Smartphones: Selling Fewer Units, But at Higher Prices

The smartphone business remains the core source of earnings pressure in the first quarter. Rising DRAM and NAND memory chip prices have directly squeezed Xiaomi’s profitability base. Low-end smartphone models already operate on extremely thin margins, leaving Xiaomi trapped between two difficult choices: maintain prices and absorb losses, or raise prices and risk losing customers.

Xiaomi’s response has been clear: sell fewer entry-level devices and focus more heavily on mid-range and premium models. According to Omdia data, Xiaomi’s global smartphone shipments in Q1 totaled approximately 33.8 million units, down 19% year-on-year. Within mainland China, shipments reached approximately 8.7 million units, down 35% year-on-year, while market share fell to 12%, dropping Xiaomi to fifth place nationally. Counterpoint data similarly showed that among the world’s top five smartphone brands, only Apple achieved positive shipment growth, while Xiaomi experienced the largest decline.

Shipment volumes fell 19%, but average selling prices continued rising. CSC expects Xiaomi’s Q1 smartphone ASP to rise approximately 7% year-on-year to above RMB 1,300, potentially reaching a new historical high. The benefits of this strategic shift are beginning to appear in gross margins. Multiple institutions expect Q1 smartphone gross margins to reach approximately 9.5%–10%, exceeding previous bearish market expectations. However, concerns remain. JPMorgan noted that memory prices could still rise another 40%–60% sequentially in Q2, meaning cost pressures have not yet eased. After actively reducing exposure to low-end Redmi devices, whether Xiaomi’s premiumization strategy can sustainably offset declining shipment volumes will likely remain the market’s core question over the next several quarters.

Automobiles: The 550,000 Delivery Target Is Under Intense Pressure

Xiaomi’s automotive business remained in a transitional phase during the first quarter. The original SU7 gradually entered phase-out mode, while the next-generation SU7 was only officially unveiled on March 19 and began deliveries on March 23, with March deliveries exceeding 7,000 units. Throughout the first quarter, the YU7 remained the clear sales pillar, with January deliveries alone approaching 38,000 units. Ultimately, Xiaomi delivered approximately 80,000 vehicles during Q1, representing a sequential decline of more than 40% compared with the explosive growth recorded in Q4 last year.

The company’s full-year target remains 550,000 vehicle deliveries. First-quarter completion represents only around 14% of that annual target. This means Xiaomi now needs to average more than 52,000 deliveries per month over the remaining nine months of the year. The pressure becomes even greater after May, because cumulative deliveries during the first four months totaled only around 110,000 units — roughly 20% of the annual target.

JPMorgan explicitly warned that risks surrounding a potential downward revision to Xiaomi’s full-year delivery guidance are rising due to production-capacity constraints. Whether deliveries accelerate meaningfully during Q2 will become a key market focus. BOC International also described the 550,000-unit target as “challenging,” while warning that operating losses within the automotive segment are likely to continue due to underutilized capacity and intensifying market competition. On the product side, the launch of the YU7 GT has expanded Xiaomi’s pricing range further upward, with a starting price of RMB 390,000 targeting higher-end market segments. Additional momentum is expected later this week, as Xiaomi prepares to unveil a new vehicle model at the Shenzhen Auto Show on Friday.

How Is the Capital Market Positioning This?

At this stage, investors should focus on two key questions.

First: can smartphone gross margins survive the second quarter’s continued memory-price inflation? Q1 was likely the peak period of cost pressure. If smartphone gross margins truly reach 9.5%–10%, it would suggest Xiaomi’s premiumization strategy is working more effectively than markets previously expected.

Second: will Xiaomi maintain its full-year 550,000 delivery target — or eventually be forced to lower guidance? If management maintains the target, markets will need to see monthly deliveries accelerate sharply from the current sub-50,000 level toward more than 60,000 units during the second half of the year. That would require clear evidence of production-capacity ramp-up. Management’s wording during the earnings call will therefore become especially important.

With Xiaomi now heavily targeted by short sellers, another important technical factor has emerged: if earnings exceed expectations, aggressive short covering could potentially trigger a sharp short-squeeze rally. However, if earnings confirm market concerns, Xiaomi shares could potentially break below the HK$28.80 52-week low.