$1810.HK (Xiaomi Corp)
Why Xiaomi is worth attention today
Xiaomi has undergone a fundamental transformation in recent years. A company once seen primarily as a low-cost smartphone manufacturer is now operating on a much broader model. It combines hardware sales, a proprietary services ecosystem, and more recently, electric vehicles. As a result, the investment case is no longer tied to a single segment, but to a combination of multiple revenue and profit streams.
In 2025, Xiaomi generated approximately RMB 365.9 billion in revenue, representing strong year-on-year growth. Adjusted net profit reached RMB 27.2 billion (+41% YoY), while group gross margin improved to 22.3%. For a business combining hardware and services, this is a solid level of profitability.
From a structural perspective, Xiaomi is interesting because its segments have very different economics. Smartphones still account for the largest share of revenue (RMB 186.4 billion and around 165 million units shipped), but they primarily function as a distribution channel. Gross margins in this segment remain relatively low, in the low single-digit to low double-digit range. On their own, smartphones would not justify a strong investment case.
The key value lies in the second layer – services. The internet services segment (advertising, content, cloud, and digital services) operates with significantly higher margins, typically around 70% gross margin. This is where high-quality profit is generated. Xiaomi has hundreds of millions of monthly active users and over one billion connected IoT devices, creating a strong foundation for ecosystem monetization.
The most important recent development is Xiaomi’s entry into electric vehicles. In 2025, the Smart EV, AI and Other New Initiatives segment generated RMB 106.1 billion in revenue and achieved its first full-year operating profit. This is a meaningful milestone, especially considering how recently Xiaomi entered the automotive sector. The company has delivered its first hundreds of thousands of vehicles and remains in the early stages of scaling.
Xiaomi is gradually transitioning from a traditional hardware company into a model where devices serve as entry points, while profit is generated at the ecosystem and services level. The EV segment adds a new growth pillar. The “Human × Car × Home” strategy reflects an effort to integrate personal devices, mobility, and home infrastructure into a single ecosystem.
This does not mean the investment is without risk. Smartphones remain low-margin and highly competitive. The EV segment is capital-intensive, and its long-term profitability is not yet proven. The company is still in a transition phase, which naturally brings higher volatility.
From an investment perspective, Xiaomi is best viewed as a growth stock rather than a stable blue chip. Its valuation today is not based on what it has historically been, but on whether it can successfully scale its EV business while continuing to monetize its services ecosystem.
If this scenario plays out, Xiaomi has the potential for significant earnings and valuation expansion. If not, the market is likely to revert to valuing it primarily as a lower-margin hardware manufacturer.
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Not investment advice. The author may have financial interests in the mentioned instruments.
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