Xiaomi’s Share Buyback Strategy Faces Fundamental Headwinds

Xiaomi's leadership is deploying significant capital to support its share price, even as operational challenges mount. This creates a complex scenario for investors, who must weigh the company's financial strength against deteriorating fundamentals in its core smartphone business.

In a clear effort to bolster market confidence, Xiaomi's executives are continuing a substantial share repurchase program. A regulatory filing with the Hong Kong exchange revealed that the company purchased 5.7 million of its own shares just yesterday. The transaction was valued at 200.7 million Hong Kong dollars. While such buybacks can provide short-term price support, analysts note they do not address the underlying operational pressures the firm is facing.

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

The Core Challenge: Soaring Component Costs

The primary pressure point is a sharp increase in memory chip prices, which is directly compressing profit margins. This cost inflation has prompted Xiaomi to internally revise its smartphone shipment targets for 2026 significantly downward, according to market reports. These concerns are reflected in the stock's performance, which has declined since the start of the year. The rising cost of components threatens profitability for the current fiscal period.

The Crucial Test: Forthcoming Earnings

The efficacy of management's strategy will face a key test on March 24, 2026. The quarterly financial results scheduled for that date are expected to provide clarity on the precise impact of higher chip costs and the reduced delivery targets on Xiaomi's balance sheet. Until that data is released, the ongoing share repurchases are likely to remain the primary counterbalance to the operational risks confronting the company.