Xiaomi’s Profit Surge Driven by Electric Vehicle Momentum and Strategic Shifts

Xiaomi Corporation has delivered a robust set of quarterly results, showcasing a dramatic leap in profitability. The figures, however, were met with a muted stock market response amid broader sector uncertainty, raising questions about the sustainability of the company's current growth trajectory.

For the third quarter of 2025, the Chinese technology giant reported a significant 22.3% year-over-year increase in revenue, reaching RMB 113.1 billion. A key highlight was the 80.9% surge in adjusted net profit, which hit a record RMB 11.3 billion. This performance was underpinned by an overall gross margin of 22.9%, indicating enhanced operational efficiency across the business.

Electric Vehicles and AIoT Emerge as Powerhouse

The standout performer was unequivocally the Electric Vehicles (EV) and AI segment. Its revenue skyrocketed by 199.2% to RMB 29.0 billion, achieving a positive operating profit of RMB 0.7 billion for the first time. Smart EV deliveries climbed to 108,796 units, surpassing the 100,000-vehicle milestone in a single quarter. Reflecting this momentum, Xiaomi has raised its 2025 EV production target to 400,000 units and outlined plans to begin international deliveries by 2027.

Strategic Moves: Capital Allocation and Cost Optimization

Management is backing its confidence with concrete capital actions. In late November, founder Lei Jun purchased shares worth approximately HK$100 million, increasing his stake to 23.3%. Concurrently, the company executed several buybacks of its B-shares, signaling active equity management.

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

On the operational front, a strategic overhaul of the retail network is underway. From 2026, the company plans to shutter over 1,000 underperforming Xiaomi Home stores in China and streamline staffing structures within its EV showrooms. This push for efficiency coincides with record research and development spending, which jumped 52.1% to RMB 9.1 billion, fueling the company's product offensive.

Key Financial and Operational Highlights:
- Q3 Revenue: RMB 113.1 billion (+22.3%)
- Adjusted Net Profit: RMB 11.3 billion (+80.9%)
- EV Segment Revenue (Q3): RMB 29.0 billion (+199.2%)
- EV Deliveries (Q3): 108,796 vehicles
- R&D Expenditure: RMB 9.1 billion (+52.1%)
- Founder share purchase and multiple buybacks conducted in November/December

Market Sentiment and Forward-Looking Challenges

Despite the strong fundamentals, Xiaomi's shares declined between 2% and 4% on December 15, pressured by weakness in the broader technology sector. The stock last closed at $27.19. While it has gained 24.55% year-to-date, it currently trades approximately 31% below its 52-week high of $39.48.

In summary, Xiaomi has demonstrated marked operational improvement, with its electric vehicle division beginning to contribute meaningfully to the bottom line. The sustainability of its stock appreciation now hinges on the successful execution of its ambitious EV plans—including the 2025 production target and 2027 international rollout—and its ability to maintain profitability as these new business lines scale. The company's broader IoT diversification has already prompted S&P to revise its outlook to "positive," lending credence to the long-term strategy.