Xiaomi (Minutes): Rising storage costs have a greater impact on manufacturers with lower ASP.
The following are the minutes of Xiaomi's Q3 2025 earnings call organized by Dolphin Research. For earnings interpretation, please refer to "Xiaomi: Can Cars Really Hold Up Without Subsidies?"
I.$XIAOMI-W(01810.HK) Core Data Review
Performance Overview:
Total Revenue: Reached RMB 113.1 billion, a year-on-year increase of 22.3%. This marks the fourth consecutive quarter where the group's revenue exceeded RMB 100 billion.
Group Gross Margin: 22.9%, an increase of 2.5 percentage points year-on-year, setting a historical high.
Adjusted Net Profit: RMB 11.3 billion, a year-on-year increase of 81%, setting a historical high for four consecutive quarters.
Revenue by Business:
Smartphones x AIoT: Revenue of RMB 84.1 billion.
Smartphones: Revenue of RMB 46.1 billion, accounting for 40.6% of total revenue.
IoT and Lifestyle Consumer Products: Revenue of RMB 27.6 billion.
Internet Services: Revenue of RMB 9.4 billion, setting a historical high, with a year-on-year growth of 10.6%.
Smart Electric Vehicles and AI Innovative Businesses: Revenue of RMB 29 billion, accounting for 25.6% of total revenue.
R&D Investment: This quarter's R&D expenditure reached RMB 9.1 billion, a year-on-year increase of 52.1%; cumulative R&D expenditure for the first three quarters of 2025 reached RMB 23.5 billion.
II.$Xiaomi Corporation(XIACY.US) Earnings Call Details
2.1 Executive Statements Core Information
1. Smartphone Business: Significant Results from High-End Strategy, Actively Addressing Cost Pressure
Market Position and High-End Strategy: Ranked top three globally in smartphone shipments, with a market share of 13.6%, maintaining a top-three position globally for 21 consecutive quarters.
In the Chinese mainland market, smartphone sales ranked second, with market share rising to 14.9%.
Breakthrough Progress in High-End Strategy:
Total sales of the Xiaomi 17 series increased by about 30% compared to the previous generation, with the ultra-high-end version priced above RMB 6,000 accounting for over 80%, achieving a "historic breakthrough." In the RMB 4,000-6,000 price range in the Chinese mainland, smartphone sales share increased by 5.6 percentage points year-on-year to 18.9%.
Technology and Product Strength:
Investment in underlying technology is key to the success of high-end strategy. The newly released Surge OS has received positive feedback from users for its smoothness, responsiveness, and interactive experience (such as Xiaomi Space Island); the Xiaomi 17 Pro Max adopts innovative display technology such as super pixel arrangement.
Cost and Gross Margin:
Acknowledging that global supply chain costs are entering a long-term upward cycle, which will put pressure on subsequent smartphone gross margins; in the short term, product structure improvement and operational efficiency enhancement will be used to mitigate pressure.
In the long term, continuous advancement in high-end strategy, product structure improvement, and self-developed chips and operating systems will be used to build differentiated competitiveness to cope with cost increases and reduce the impact of price fluctuations on finances.
2. IoT and Lifestyle Consumer Products: Adhering to Value Leadership, Not Actively Engaging in Price Wars
Performance: IoT business revenue has achieved year-on-year growth for seven consecutive quarters, with gross margin improving year-on-year for seven consecutive quarters, reaching 23.9% this quarter.
Core Strategy: Clearly aiming to be "contributors to the industry," leading industry value enhancement through product and technology innovation (such as the Mijia Three-Zone Washer-Dryer), activating user demand; not actively engaging in price wars, not relying on low prices to capture the market.
Manufacturing and Overseas Expansion:
Xiaomi's smart home appliance factory officially commenced production, marking the complete integration of design, R&D, production, and verification in the major appliance business. The factory plans a peak annual capacity of 7 million units.
This quarter's overseas IoT business revenue reached a historical high, and future efforts will continue to expand overseas markets to drive growth.
3. Smart Electric Vehicles and Innovative Business: Achieving Milestone Breakthroughs, Full of Confidence for the Future
Milestone: The smart electric vehicle and AI innovative business segment achieved single-quarter operational profitability for the first time, with an operating profit of RMB 700 million.
Delivery Volume: Delivered 108,799 new cars in the third quarter; cumulative deliveries for the first three quarters reached 265,967 units. In November 2025, monthly deliveries exceeded 40,000 units, and the annual delivery target is expected to be completed this week.
Unit Price: The average post-tax unit price of cars this quarter was RMB 260,000.
Sales and Service Network: By the end of this quarter, 420 car sales stores have been opened in 119 cities in the Chinese mainland, and 209 service outlets have been established in 125 cities; Xiaomi has begun providing "technical services that were once exclusive to luxury cars" to Xiaomi car owners.
Future Outlook: Delivery scale is expected to continue growing next year.
Believes there are still abundant scenarios and user needs to be met in the automotive industry, and is "very confident" in winning user recognition for the next car model.
4. Internet Services: Growth in User Scale and Revenue
Global monthly active users reached 742 million, with 187 million monthly active users in the Chinese mainland.
Revenue reached a historical high, with a gross margin of 76.9%. Advertising business and overseas internet services (revenue of RMB 3.3 billion, accounting for 34.9%) are the main growth drivers.
5. Future Outlook
AI Strategy: Believes the deep integration of AI with the physical world is the next station for smart technology. The group has started intensive investment several quarters in advance, with progress in large models and applications "far exceeding expectations," and promises to bring surprises in the near future.
R&D Investment: Reaffirms unwavering investment in underlying hardcore technology. R&D investment for the entire year of 2025 is confirmed to exceed RMB 30 billion, with a target of over RMB 200 billion in R&D investment over the next five years.
Corporate Vision: Aims to become one of the world's top 100 companies by 2027.
2.2 Q&A Session
Q: Regarding the impact of increased smartphone memory costs on gross margin and price change expectations, and the reasons for the rise in electric vehicle delivery volume, future development strategy, and main directions?
A: For smartphones, the increase in memory costs is long-term, due to HBM demand leading to supply shortages, which will have a significant impact on the gross margin of smartphones, tablets, and laptops; solutions include product adjustments, price increases (but cost increases exceed price increases), optimizing supply chain and product structure, enhancing ASP through high-end strategy to offset part of the impact; gross margin is expected to decline in Q4 and next year, but to varying degrees, ensuring supply in 2026. Additionally, the smartphone x AIoT department's gross margin exceeds 20%, capable of offsetting the situation, IoT gross margin is healthy and department stable.
For electric vehicles, the rise in delivery volume is due to improved delivery efficiency, with total deliveries already exceeding 400,000 units. In July/August, technical improvements have resulted in delivery volumes exceeding 30,000 units; by September/October, monthly delivery volumes have exceeded 40,000 units, the annual target of over 350,000 units set at the beginning of the year will be completed this week; some materials are still limited, but efforts are being made to enhance the delivery capacity of SU7 and SU7 Max, and future acceleration of other product delivery cycles is possible.
Q: Will the high-end strategy for smartphones be adjusted due to memory cost impact, and what is the impact of next year's electric vehicle sales growth on gross margin?
A: For smartphones, if retail prices rise, it is expected to lead to an overall decline in the smartphone market, but the market is currently still in stock competition. The direction of the high-end strategy remains unchanged, aiming to achieve 30 million high-end smartphone sales by 2030, with plans to increase by 2-3 million units annually over the next five years. For electric vehicles, this year's deliveries exceed 350,000 units, but in the Chinese market with annual sales of 22 million units, the scale is still small, with the short-term primary goal being sales rather than gross margin. Although next year's tax policy may have some impact on ASP and gross margin, the current gross margin is at a healthy level, hoping to maintain a healthy gross margin while ensuring deliveries.
Q: Regarding the first-time surpassing of 1 billion AIoT devices and the application layout of AI in the ecosystem, and the future strategy and IoT business outlook due to the exit of subsidies and competitive pressure in the major appliance business?
A: For AIoT and AI layout, we have evolved from MIUI to HyperOS, operating the entire ecosystem to achieve deep integration and better experience. In October, we open-sourced a large model named MiLico, applying large model technology to home scenarios, exploring smart home appliances, enabling device interconnection integration, breaking away from traditional hardware systems, and transitioning to new interaction and language delivery methods. The large model team has been established for about a year, and results will be seen soon, with goals including better algorithms and power consumption.
For the major appliance business, state subsidies are only temporary and will eventually exit. We respond to external changes by enhancing ASP, optimizing product structure, continuously launching innovative products, maintaining good gross margin, and accelerating globalization. In September, the Wuhan smart home appliance factory commenced production, with high automation and AI technology application, empowering partners. Competition and subsidy exit have short-term impacts, but will not change our long-term direction and overall goals in the major appliance field.
Q: Regarding the upgrade and future level of autonomous driving, and the progress of overseas development, store layout, future plans, and how to balance traditional dealers?
A: For autonomous driving, it is a key point for future smart electric vehicles, and we have been working hard, as it is an important direction for EV development; investment deployment covers low, medium, and high configurations, algorithms equipped with lidar and advanced configurations, data upgraded from 3 million clips to 10 million clips, significantly improving quality; recent large models such as MiMo released in April, May, and September provide support for autonomous driving and cockpit, with sufficient algorithms and data, enhancing assisted driving experience.
For overseas development, following established strategies: East Asia (South Korea, Japan) has penetrated the market, Europe is advancing, Southeast Asia has high-density store building, Latin America and Northern Europe are also expanding; new retail development efficiency has improved, output satisfactory; for example, Singapore store revenue scale is 2 million, Japanese market categories differ from mainland but channels are good; traditional channels are professional stores, selling smartphones and home appliances, Xiaomi categories are often sold together, no major conflict between different channels.
Q: Regarding the current inventory level compared to the beginning of the year and the same period last year, and the mid-term plan for the Miloco large model, will the ecosystem remain open?
A: Regarding inventory management, we adopt proactive strategies, not retaining inventory when costs decrease, and vice versa; this year, we want to build inventory but it may be difficult to achieve, the current situation is good; relationships with international partners like Samsung and domestic suppliers are good, supply chain management is prioritized, no need to worry excessively about inventory; product gross margin performance is good, well managed. Regarding Miloco, we have been deeply engaged in the AIoT field and spent a year exploring large models, with clear plans for traditional smart home appliances, making them smarter and enhancing human-machine interaction through large models; we will keep the ecosystem open, and more R&D progress will be shared in the future.
Q: Will the rise in memory costs lead to changes in the smartphone market structure and company strategy, and what is the role of the Wuhan factory in the major appliance business?
A: The global smartphone industry has entered a relatively stable period, with brand shares not changing significantly over a certain period. This round of cost increases is large and long-term, bringing significant fluctuations; manufacturers with lower ASP are more affected. Q3 saw significant cost increases, the market structure is not yet formed, competition is fierce. The final market structure will inevitably differentiate, relying on one's own strength to survive in competition, focusing on long-term position and supply.
The impact on the Chinese market will be greater than globally. For the Wuhan factory, we adopt a dual-track long-term strategy of combining self-owned factories with OEMs. The Wuhan factory's level of intelligence is far higher than peers, transplanting equipment and smart platforms from the smartphone factory, the entire control system is self-developed by Xiaomi, with higher automation and labor efficiency, and AI detection is used to improve precision and efficiency. After realizing this value, this technology will be migrated to OEMs, requiring them to transform according to Xiaomi standards, similar to the Apple model. Self-owned factories mainly produce high-end products, while OEM partners ensure their existing cash flow, if production needs to be reduced, self-owned factories will be adjusted first to maintain partner relationships. Currently, the smart factory accounts for only 10% of total capacity, but has strong management effects on the entire production system.
Q: Regarding the expansion pace of stores in the Chinese mainland, long-term strategy, and future growth rate and trend of overseas IoT revenue?
A: In terms of store expansion, the ultimate goal in the Chinese market is 30,000 stores; capacity was constrained in 2022-2023, focusing on 10,000 stores; accelerating store opening to 20,000 stores in 2024-2025. Next year's goal is not the number of stores, but improving the efficiency of newly opened 10,000 stores, improving existing stores, conducting personnel training, and enhancing competitiveness; strategy will be adjusted to accelerate or decelerate based on internal and external environments. Overseas, replicating this model is more difficult, for example, progress is fast in Southeast Asia like Thailand and the Philippines, slower elsewhere; AIoT expansion strategy as a supplement, potential not fully realized, with room for growth.
Q: Regarding the growth of operating expenses in the smartphone and AIoT departments and the future trend of expense ratios?
A: Expense growth is mainly due to two factors: firstly, R&D expenses growing faster than revenue growth; secondly, expansion of the new retail network, with 1,000 new stores added this quarter, including over 60 large stores, these stores need time to ramp up, leading to increased sales expenses.
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