Lei Jun still can't pop the champagne

Author | Wang Xiaojun

Editor | Zhou Zhiyu

Less than a year after the launch of its first car, Lei Jun submitted a "historically strong financial report."

On March 18, Xiaomi Corporation released its full-year and Q4 financial report for 2024. The report showed that Xiaomi's total revenue for 2024 increased by 35.0% year-on-year to RMB 365.9 billion; adjusted net profit grew by 41.3% year-on-year, reaching RMB 27.2 billion.

The breakthrough of the automotive business has reshaped Xiaomi's entire business ecosystem, continuously elevating Xiaomi's market value. Over the past year, with Xiaomi's automotive performance consistently exceeding expectations, investors have always regarded it with renewed interest.

Since the beginning of this year, Xiaomi has ranked among the top in the Hang Seng Tech Index constituents with a cumulative increase of over 63%. After the financial report was released, Xiaomi's ADR once rose by more than 6%. However, on March 19, at the market opening, Xiaomi's stock in Hong Kong fell by over 1%.

The contrast between the "strongest financial report in history" and the subsequent decline is striking. Investor enthusiasm for Xiaomi seems to be waning, as institutions that were previously optimistic about Xiaomi, including UBS and JP Morgan, have successively lowered their target prices or ratings for Xiaomi, with the core reason being that Xiaomi's current market value has fully reflected the valuation of its business.

Whether it is Xiaomi's ongoing efforts to ramp up automotive production capacity or the fierce competition in the high-end smartphone market, the path ahead for Xiaomi's breakout battle is not easy; and in the currently most competitive AI field, an annual R&D investment of 7.5 billion is not enough compared to many leading companies.

Lei Jun cannot pop the champagne early; he must continue to invest heavily, leading Xiaomi into a hardcore technology breakout battle. In the context of investors reassessing the valuation system of Chinese tech assets, Xiaomi will also be a core reference target.

In the midst of the transformation of the automotive industry and the rapid changes in AI technology, the challenges for Lei Jun and Xiaomi have just begun.

Automotive Revenue Less Than 10%

In March of last year, the pricing for Xiaomi's SU7 had not yet been announced, and various true and false messages flooded the internet. The market had both expectations and doubts about Xiaomi's first new car. The difficulty in pricing the new car was directly reflected in Lei Jun's haggard appearance.

Fortunately, after its official launch, orders for the Xiaomi SU7 quickly surged, dispelling previous market doubts.

Subsequently, Xiaomi embarked on a year of continuous brilliance, achieving the best performance across all business segments last year.

In 2024, total revenue reached RMB 365.9 billion, a year-on-year increase of 35%, setting a historical record; Q4 single-quarter revenue reached RMB 109 billion, a year-on-year surge of 48.8%, breaking the single-quarter record. Last year, Xiaomi's overall gross margin also improved to 20.9%.

Overall, although the revenue from smart cars in their first year has matched that of many long-established car companies, currently, Xiaomi's cash cows remain smartphones and IoT, which contribute about 80% of Xiaomi's revenue. It can be said that Xiaomi is still relying on its smartphone business to "support" its automotive ventures Specifically, in the past year, Xiaomi's innovative businesses, including smart electric vehicles, generated revenue of 32.8 billion yuan, accounting for only 9% of total revenue.

Although the adjusted net loss for this business last year was 6.2 billion yuan, in the fourth quarter, the gross margin for this business was 20.4%, further increasing from the third quarter. Additionally, in the fourth quarter, the adjusted net loss for smart electric vehicles and other innovative businesses was 700 million yuan, significantly narrowing, and this loss was also below market expectations.

Among all businesses, the smartphone segment remains the largest revenue contributor, generating 191.8 billion yuan (accounting for 52.4%), with global shipments of 169 million units, a year-on-year increase of 15.7%.

In recent years, Xiaomi has been focusing on high-end positioning for its smartphones.

From the perspective of Xiaomi smartphones' market share in different price segments, the effectiveness of the high-end strategy has begun to show. In the domestic market, in 2024, Xiaomi's market share in the smart smartphone segment priced at 3,000 yuan and above reached 23.3%, an increase of 3 percentage points year-on-year. Among them, the market share of smartphones priced between 4,000 and 5,000 yuan ranked first, reaching 24.3%; the market share of smartphones priced between 5,000 and 6,000 yuan reached 9.7%. In terms of gross margin, the gross margin for the smartphone business has also increased, reaching 12.6%.

Another stable profit-generating business is IoT and lifestyle consumer products, which still have room for further growth in the short term under local subsidies and national support policies.

Specifically, this segment's revenue was 104.1 billion yuan (accounting for 28.4%), breaking through the 100 billion yuan mark for the first time. Among them, the shipment volumes of major smart appliances (air conditioners, refrigerators, washing machines) reached 6.8 million, 2.7 million, and 1.9 million units, respectively, with a year-on-year growth rate exceeding 30%, and the profit margin also exceeded 20%.

Xiaomi has always hoped to be defined as an internet company, which is understandable, as its internet business gross margin reached 76.6%. However, the revenue contribution from the internet business is not high, with revenue reaching 34.1 billion yuan in 2024, accounting for about 10% of total revenue. Within this revenue, overseas internet services saw growth, while domestically, it mainly came from advertising revenue.

In terms of investment, Xiaomi's R&D is currently at a relatively high level.

In 2024, Xiaomi's total R&D expenditure was 24.1 billion yuan, a year-on-year increase of 25.9%, with a cumulative investment exceeding 105 billion yuan over five years, and R&D personnel accounting for 48.5%. In 2025, Xiaomi stated that R&D investment would reach 30 billion yuan.

Cars Become "Traffic Interfaces"

Currently, in terms of revenue, cars have not yet become Xiaomi's flagship product, and the overall automotive business is still in a loss state. Based solely on the sales data and loss amount from the fourth quarter of last year, Xiaomi SU7 incurs a net loss of about 10,000 yuan for each unit sold, which is a reduction of 56,000 yuan compared to the 66,000 yuan loss in the second quarter.

However, this year, Xiaomi's automotive business is not short of orders. Due to the optimistic order situation, the market is also very bullish on Xiaomi's cars. This can be seen from the surge in Xiaomi's stock price after the launch of its cars.

Moreover, because Lei Jun himself has devoted most of his energy to Xiaomi's automotive business, cars have become a traffic interface for Xiaomi In terms of the automotive business itself, in 2024, the automotive business delivered 136,800 vehicles throughout the year, making it the fastest delivery car company among new forces. By March 18, Lei Jun announced on Weibo that the 200,000th Xiaomi SU7 had also been delivered; the SU7 Ultra, released 20 days ago, completed its annual target of 10,000 units in just 3 days.

The success in the automotive sector has resonated with users, and Xiaomi's other businesses have also benefited from the traffic generated by Xiaomi Auto.

Interestingly, recently due to the issues with sanitary napkins and panty liners during the 3.15 event, many users have been wishing in Lei Jun's comment section for Xiaomi to produce sanitary napkins; recently, Tianyancha showed that the "Xiaomi" trademark includes products and services such as disinfecting wipes, emergency kits, sanitary pads, and medical eye masks.

This kind of traffic transfer has already been reflected in other categories. Xiaomi Group President Lu Weibing introduced the changes in Xiaomi's overall new retail after the addition of automobiles during the earnings call.

Lu Weibing stated that due to the huge traffic from Xiaomi Auto, Xiaomi can choose better locations for new store layouts. Also, because of the traffic from Xiaomi Auto, the overall foot traffic in Xiaomi stores has increased; users may not necessarily purchase Xiaomi cars when they enter the store, but they will pay attention to other Xiaomi products and make purchases.

He further stated that this year's goal is to net an increase of 5,000 offline stores, with 400 integrated large stores of over 500 square meters, which will not only display Xiaomi cars but also showcase all Xiaomi products.

Clearly, after entering the automotive sector, Xiaomi has not only added a new business curve but also enabled the ecosystem of Xiaomi to achieve a cycle.

However, selling cars is not just about users placing orders; they also need to be delivered to users. Currently, although Xiaomi has repeatedly stated that it is enhancing production capacity, the delivery speed of Xiaomi cars remains one of the most unsatisfactory points for many users.

The Xiaomi Auto app shows that if you order a car now, the delivery cycle for the Xiaomi SU7 Max version is 30-33 weeks, while the other two versions take even longer, with the SU7 Ultra delivery cycle also being longer, around 40 weeks. In the future, with the addition of the Xiaomi YU 7, the production pressure on Xiaomi will further increase.

Therefore, although the growth of orders is always rapid, even with the production capacity of Xiaomi's second-phase factory and enhancements through dual-shift production, Xiaomi's production capacity in the next one or two years will still be difficult to compare with competitors who have been established for many years.

This also means that focusing on the orders for Xiaomi Auto is not very meaningful; the imagination for the automotive business in the next one or two years lies in the foreseeable production capacity.

Currently, orders support the expectations for Xiaomi Auto, and as new cars enter the market, competition is accelerating. Once the new car crosses the initial protection period, whether it can become a hit again, and the users' tolerance for delivery speed may not be as patient as with the Xiaomi SU7, which poses a new challenge for Xiaomi.

Increase Investment in AI Field

In the past few years, Xiaomi's focus has been on pushing for high-end development. With the official launch and recognition of the Xiaomi SU7 Ultra this year, Xiaomi's high-end story seems to have achieved good results.

However, this year, regarding these major manufacturers, the topic of market attention is AI, and every major manufacturer hopes to leverage AI for revaluation. In this wave, Xiaomi has not seized the opportunity. Although many of the booming companies are new industry players, Alibaba, Tencent, and ByteDance, these internet companies all have their representative products Xiaomi has always hoped to define itself as an internet company, but for a long time, it has been a typical product cycle-driven mature hardware stock valuation.

In this wave of AI, although it poached key roles from the DeepSeek team last year to prepare for a significant push in AI, Xiaomi has not launched any heavyweight products in this rapidly changing industry, thus failing to gain more traction.

This year, for Xiaomi, investment in AI has become not just a tool for providing new imagination but a direction it must bet on. Whether in the smartphone industry or the automotive industry, everyone is laying out AI strategies, and without significant investments, they risk falling behind in the future.

Take the automotive industry, where Lei Jun primarily operates, for example. This year, AI defining cars is the main theme of the industry, with everyone emphasizing intelligent driving for all and technological equality. Xiaomi has also recently pushed an end-to-end intelligent driving system to users.

Moreover, many new forces in the automotive industry are emphasizing their goal to become AI technology companies, betting on future directions in advance, with companies like Li Auto and XPeng having such plans.

Lu Weibing stated, "By 2025, Xiaomi's R&D budget will reach 30 billion yuan, with a quarter (about 7.5 billion yuan) allocated to the AI field. Another important task is to fully promote the implementation of AI technology in various terminal products, with the goal of reconstructing the underlying Panghu OS with AI in 2 to 3 years, evolving into AIOS."

This also means that although Xiaomi is late to the game, its AI has commercial landing scenarios because the market is relatively optimistic. Goldman Sachs stated in a research report that Xiaomi's strategic layout in the AI and IoT fields, through building an operating system-level AI agent—Xiao Ai and the world's largest AIoT ecosystem, is expected to achieve strong growth in the coming years and become a final winner in the AI industry.

In addition to AI, the progress of Xiaomi's automotive overseas expansion is also becoming clearer. Lu Weibing stated, "The current goal is to make 2027 the inaugural year for Xiaomi's automotive overseas expansion."

Currently, new forces are mainly exporting domestically produced vehicles for overseas sales, which means that although Xiaomi has not yet indicated whether it will build production bases overseas, the construction cycle itself is long, and the initial production will mainly be domestic. If Xiaomi wants to start overseas expansion in two years, it must face various complex issues in the target market and increase its production capacity to support overseas expansion within two years.

Currently, Xiaomi's automotive products have gained good recognition domestically, but whether it can replicate its Chinese-style success in the global market remains a marathon of technology, capital, and user trust