Xiaomi Shares Drop After Weak Q1 Earnings Amid Rising Smartphone Costs

Xiaomi Corp (HK:1810) shares declined on Wednesday after the Chinese tech giant reported weaker-than-expected first-quarter earnings, pressured by rising component costs and intense competition in the smartphone market. The company’s stock dropped nearly 3% to HK$28.88, marking its lowest level in almost a month and weighing heavily on the Hang Seng Index, which fell 0.9%.

Xiaomi revealed that its first-quarter profit plunged 43% year-over-year to 6.1 billion yuan ($899 million). The sharp decline was mainly linked to soaring memory chip prices, which significantly increased costs in the company’s core smartphone division. The global surge in demand for AI-related technologies has continued to push memory prices higher, leaving little room for cost relief.

The smartphone maker is also facing growing pressure in China from major competitors such as Apple and Huawei. Increased rivalry in the premium smartphone segment has affected Xiaomi’s margins and overall market performance.

Although Xiaomi’s electric vehicle business posted strong sales growth, heavy investments and narrow profit margins in the EV segment also weighed on overall earnings. The company has been aggressively expanding its electric vehicle and artificial intelligence operations as part of a long-term strategy to diversify beyond consumer electronics.

To reduce pressure from rising domestic costs and stronger local competition, Xiaomi said it plans to accelerate expansion into overseas markets. The company believes international growth will help strengthen revenue streams and improve its competitive position globally.

Investors remain cautious about Xiaomi stock as the company continues balancing rapid expansion in EVs and AI with profitability challenges in its smartphone business. Rising chip costs, fierce market competition, and ongoing investments are expected to remain key concerns for the Chinese electronics giant throughout 2026.