By Jiahui Huang

Chinese smartphone and electronics maker Xiaomi reported a slump in quarterly net profit, caught between soaring memory-chip prices and subdued consumption in one of the world's largest consumer markets.

The results underscore the headwinds the Chinese electronics giant has been contending with across its businesses, with shares under pressure over the past six months amid concerns about the challenging environment.

The global memory-supply shortage driven by the AI boom has led to higher component costs, weighing on Xiaomi's smartphone profit margins, while demand for its smart home products, such as air conditioners and vacuum cleaners, is flagging amid trade-in subsidy fatigue and stiff competition in the appliance sector.

Meanwhile, concerns about the company's electric-vehicle production capacity abound, and continued heavy spending in the fast-growing segment alongside competitive pricing have raised worries about a profitability squeeze in Xiaomi's newest segment.

The Beijing-based company said Tuesday that its net profit fell 27% to 6.54 billion yuan, equivalent to $950.5 million, in the fourth quarter. Revenue was 116.92 billion yuan, up 7.3% from a year earlier.

Analysts had expected 6.41 billion yuan of net profit on revenue of 118.45 billion yuan, according to a Visible Alpha consensus estimate.

Sales from its smartphone business, still the biggest revenue driver, fell 14% to 44.34 billion yuan during the period on weaker smartphone shipments and average selling prices. Xiaomi said the segment's gross profit margin declined to 8.3% from 12.0% a year earlier as prices of key components rose and competition increased in the Chinese market.

Market research firm Counterpoint said last week that China's smartphone market could remain under pressure for a few more months as rising memory costs are passed on to downstream vendors. Earlier this month, analysts at Citi said that Xiaomi's smartphone shipments could decline 13% this year, while HSBC estimated a 10% drop in 2026 sales volume.

There were also signs of weakness in Xiaomi's Internet-of-Things and lifestyle products segment, whose revenue dropped 20% to 24.60 billion yuan in the final quarter of 2025.

The company said sales from certain lifestyle products, large home appliances and televisions in China declined due to intensifying competition and lower national subsidies. Gross profit margin for the division slipped to 20.1% from 20.5% a year ago, mainly due to lower margins for large appliances in the Chinese market, it said.

The company's EV business remained a bright spot, with quarterly revenue from smart EVs more than doubling to 36.3 billion yuan, driven by stronger vehicle deliveries and selling prices.

For the full year, Xiaomi's net profit increased 76% to 41.57 billion yuan. Revenue climbed 25% to a record 457.29 billion yuan, supported by growth across its smartphone, IOT and EV segments.

Annual revenue from the company's smart EV, AI and other new initiatives business more than tripled to 106.1 billion yuan, with gross profit margin for the segment climbing to 24.3% from 18.5%.

WrIte to Jiahui Huang at jiahui.huang@wsj.com

(END) Dow Jones Newswires

March 24, 2026 07:49 ET (11:49 GMT)

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