AsianFin -- Xiaomi Corporation on Tuesday posted much stronger-than-expected profit for the second quarter as margin of its emerging electric vehicle (EV) business offset weakening smartphone unit.

Credit：Xiaomi Auto

Xiaomi shattered quarterly records of both the top and bottom line. Revenue for the quarter ended June 30 gained 30.5% year-over-year (YoY) to RMB115.96 billion ($16.2 billion), topping analysts anticipated RMB115.3 billion. Adjusted net income soared 75.4% YoY to RMB10.83 billion, beating expected RMB9.2 billion by 29.2%. Gross margin advanced 1.8 percentage points YoY to 22.5% and dropped 0.2 points compared with the previous quarter, still better than expectation of 22.3%.

Xiaomi’s original and largest business smartphone for the June quarter dragged the headline sales and profit. Revenue from the segment fell 2.1% YoY to RMB45.5 billion, missing analysts estimated RMB48.3 billion by 5.8%. While global smartphone shipments reached 42.4 million units, edging up 0.6% YoY, the average sales price (ASP) of smartphones shed 2.6% YoY after a 5.8% YoY gain for the first quarter. That was the first decline in ASP over the past year, which led to decrease in revenue for the second quarter.

Xiaomi’s No.2 business IoT and lifestyle products generated RMB38.7 billion, up 44.7% YoY. The revenue slowed down from a 58.7% YoY increase in revenue for the March quarter. The slowdown reflected lackluster demand in the hardware market.

Xiaomi’s EV division was fueled by sales of its first premium EV SU7 Ultra, which lifted theASP of cars to RMB253,000. Revenue from the Smart EV, AI and other new initiatives umped 26.4% YoY to 21.26 billion, versus analysts’ anticipation of RMB21.05 billion. Losses from the segment narrowed to about RMB300 million. Gross margin gained 8.1% percentage points YoY  to 26.4%, well above estimated 23.5%. The gross margin overtook that of U.S. EV titan Tesla Inc. and Xiaomi’s domestic peer Li Auto. 

Xiaomi suggested its first SUV YU7, officially hit the market in June, would bring further growth as YU7 Series, starting at RMB253,500, received strong demand, with over 240,000 locked-in orders in the first 18 hours after launch.  Considering the production capacity of Xiaomi’s factory, such orders mean a customer will not be able to get a car by the end of this year even if his or her order was placed in June. 

Xiaomi intends to sell its first EV in Europe by 2027, said President Lu Weibing on an earnings call. “The business model we have developed in China can also apply in overseas market when we get into Europe,” Lu told analysts. “We’re doing the research and preparation. So far we have not got the specific product plan yet.”