MiMo V2.5 Pro

Summary

Xiaomi Corporation (HKEX: 1810) operates a multi-segment consumer electronics and smart manufacturing model anchored by (1) smartphones, (2) AIoT / lifestyle hardware, (3) high-margin internet services (ads, content, services), and (4) “Smart EV, AI and other new initiatives.” The core competency is scale manufacturing + channel execution paired with a large installed base that can be monetized through services, while extending the ecosystem into cars and home devices (“Human × Car × Home”). (ir.mi.com) Market position remains strong in global smartphones: in Q2 2026 Xiaomi shipped 31.2m units and maintained a top-3 global ranking for the 24th consecutive quarter (per Omdia, as cited by the company). Ecosystem scale continues to expand: connected IoT devices (excluding phones/tablets) reached 1,160.8m (+17.4% YoY) and global MAU reached 766.5m (+4.8% YoY). These metrics support recurring monetization, reflected in internet services gross margin of 76.8% in Q2 2026. (ir.mi.com) Recent months were defined by margin pressure from higher component costs (notably memory) and intensified competition. In Q2 2026, revenue was RMB108.9bn (-6.1% YoY; +9.9% QoQ) and adjusted net profit was RMB6.2bn (-42.6% YoY). For 1H 2026, revenue was RMB208.1bn (-8.4% YoY) and adjusted net profit RMB12.3bn (-42.8% YoY). Overall gross margin was cited at ~19.8% for Q2 2026. Segment mix shows EV/new initiatives becoming material: Q2 2026 revenue split was RMB84.0bn (smartphone × AIoT) and RMB24.9bn (EV/AI/new initiatives). (ir.mi.com) Operationally, Xiaomi is leaning into R&D: Q2 2026 R&D expense was RMB9.2bn (+18.9% YoY), with >47,000 patents disclosed. Capital return is also active: a new on-market share repurchase program up to HKD20bn was adopted (effective June 2, 2026), and the company disclosed ~HK$11.7bn repurchased year-to-date as of mid-August 2026. (ir.mi.com) Valuation (EUR framing): current price is HKD25.66 as of Oct 27, 2026; using a simple spot conversion assumption (1 HKD≈0.118 EUR), that implies ~€3.03 per share (illustrative only; FX not verified). Market multiples from market data sources show P/E around ~17x (Investing.com) and forward P/E around ~18.8x (Yahoo Finance). Near-term outlook is constrained by component cost headwinds and competitive pricing, while medium-term upside depends on stabilizing hardware margins, continued high-margin internet services growth, and scaling EV deliveries (Q2 2026 deliveries 104,199, +28.2% YoY) without sustained profitability dilution. (investing.com)

Key Takeaways

1. Earnings momentum weakened in 1H 2026: revenue -8.4% YoY and adjusted net profit -42.8% YoY, indicating margin compression rather than demand collapse. (ir.mi.com)
2. Internet services remains the quality engine: Q2 2026 internet services gross margin 76.8%, supporting resilience even when hardware margins compress. (financialfilings.com)
3. Ecosystem scale continues to expand: 1,160.8m connected IoT devices (+17.4% YoY) and 766.5m global MAU (+4.8% YoY), which underpins monetization potential. (ir.mi.com)
4. EV/new initiatives are now a meaningful revenue contributor (RMB24.9bn in Q2 2026) and deliveries grew +28.2% YoY, but segment margin has declined versus prior year mix. (ir.mi.com)
5. Capital allocation is shareholder-friendly via buybacks: up to HKD20bn program adopted (effective June 2, 2026) and ~HK$11.7bn repurchased YTD as of Aug 13, 2026. (hkexnews.hk)

Action Ideas

Contrarian Insights

• • Consensus often frames Xiaomi primarily as a low-margin hardware vendor; however, disclosed internet services gross margin of 76.8% indicates a structurally different earnings quality layer that can become more important as MAU and premium mix rise. (financialfilings.com)
• • EV expansion is frequently treated as a pure upside option; the 1H 2026 data show EV/AI/new initiatives already sizable in revenue (RMB44.8bn in 1H 2026) while segment gross margin declined versus 1H 2025, implying that scale alone does not guarantee near-term margin accretion. (financialfilings.com)