Xiaomi's MiMo AI Model Tops Global Usage Charts as Memory Cost Shock Tests Smartphone Margins
Q2 2026 earnings call, August 18, 2026
Xiaomi Corporation used its second-quarter 2026 results call to deliver a message that will resonate with investors tracking the broader memory pricing crunch hitting the smartphone industry: the company held smartphone gross margin at 8.5% even as memory component costs surged to roughly five times year-ago levels, a result that appeared to catch analysts off guard. President Weibing Lu told analysts directly, "last time you were worried about our gross margin. However, we still kept it at 8.5%. I think this exceeds your expectation." Total revenue for the quarter came in at RMB 108.9 billion, with adjusted net profit of RMB 6.2 billion.
Memory Cost Shock Reshapes Product Strategy
The dominant theme of the call was the unprecedented spike in memory component costs, which management said had exceeded its own expectations across the past several quarters. Lu was candid about the mechanics: entry-level phones are taking the biggest hit, with even a base-memory device now needing to be priced above RMB 2,000 to absorb the cost inflation. Xiaomi's response has been to push average selling prices higher, RMB 300 above the prior year, while shipments actually declined, a trade-off management framed as a deliberate rebalancing rather than a demand problem. Global shipments came in at 31.2 million units in the quarter, keeping Xiaomi in the top three globally for a 24th consecutive quarter, according to Omdia data cited on the call.
Lu offered a notably measured outlook on where memory pricing goes from here, saying he doubts costs will stay at five times prior levels indefinitely, but conceding "how many times eventually, it's difficult to say, perhaps in the middle." He pointed to a broader industry repricing already underway, noting that Apple and other vendors are also adjusting price strategies in response to the same cost pressure, and predicted a "global equilibrium" will eventually form. In the near term, however, CFO Alain Lam flagged that management has built up raw material inventory, memory in particular, to roughly RMB 40 billion from RMB 30 billion in the prior quarter, both for volume security and because unit prices themselves are rising.
MiMo Model's Global Ranking Is the Standout AI Data Point
The most concrete evidence of Xiaomi's AI ambitions gaining external traction came via a third-party data point: Xiaomi's MiMo-V2.5 large language model topped OpenRouter's global call-volume ranking, with usage increasing more than sixfold from RMB 1.5 trillion to RMB 10.5 trillion tokens in two months, a milestone reported by China's state broadcaster CCTV on August 2. Management attributed the adoption to the model's agent and coding capabilities, competitive pricing, and fully open-source release. Lam described it plainly: "this means that global developers had really voted for our model."
Despite the traction, management was explicit that monetization is not the near-term priority. Lam said the company is "in a large-scale investment phase" for AI and "not too anxious to pursue monetization," instead directing MiMo toward deep integration across Xiaomi's phone, home, car and robotics ecosystem. API and token-plan revenue has started flowing through the Smart EV, AI and Other New Initiatives segment this quarter, but remains bundled within roughly RMB 1 billion of "other related business" revenue rather than broken out separately. Investors looking for a standalone AI revenue disclosure will need to wait; Lam said the company "may disclose it separately" only "at appropriate times."
Robotics Moving From Lab to Factory Floor
Xiaomi disclosed tangible production deployment metrics for its embodied robotics program, a step beyond the research-stage updates typical of the sector. At its own EV factory, robots have reached a 98% success rate on a self-tapping threaded insert loading task, and are now being tested on logistics tasks such as sorting and returnable box folding at a 90% success rate. The company also open-sourced two new models, Robotics-U0, described as the first unified generative model able to handle all four categories of embodied intelligence tasks, and Robotics-1, pretrained on 100,000 hours of real-world data. Lu was careful to temper expectations on monetization timing, saying "for final large-scale maturity and development, I think it will take a longer time," and explicitly ruling out near-term ventures like food-delivery robotics, positioning the effort instead as a long-cycle synergy play with Xiaomi's chip, model and systems capabilities.
EV Segment: New Architecture Launch and Margin Volatility Explained
Xiaomi delivered 104,199 vehicles in the quarter, a sixth straight quarter of year-on-year growth, with cumulative SU7 deliveries surpassing 500,000 units as of August 17. The bigger news was the July unveiling of the Xiaomi Kunlun extended-range architecture and the resulting SkyNomad SUV series, positioned as a "intelligent variable space" family vehicle distinct from the SU7 and U7 sedans. Lu said early order data points to an older, more family-oriented buyer than the SU7 customer base, with "very small" overlap between the two customer sets. Presale pricing for the SkyNomad N90 Max and N70 Max was set at RMB 299,900 and RMB 259,900 respectively, with formal launch and final pricing due in September.
Segment gross margin for Smart EV, AI and Other New Initiatives came in at 19.2%, and Lam walked through three specific drags: a tougher year-on-year comparison against last year's higher-margin SU7 Ultra deliveries, a quarter-on-quarter mix shift toward the lower-margin new-generation SU7 versus the U7, and a drag from the newly launched large-model business being embedded in the same segment. The segment posted an operating loss of RMB 2.6 billion in the quarter as AI investment continues to ramp. Notably, Lu pushed back on the idea that ASP should be read as a margin signal, telling analysts "ASP relatively speaking, is not related to GP margin. It doesn't mean that when ASP is low gross margin will also be low."
Overseas Expansion and Capital Returns
International expansion continues to be a growth lever, with over 640 Xiaomi retail stores now open overseas and management targeting continued store rollout alongside entry into large home appliances in Europe, a category management called previously "blank" in international markets. Global monthly active users reached 770 million, up 4.8% year-on-year, with Mainland China MAU hitting a record 198 million. On EV, Lam confirmed international dealer interest is already building ahead of a planned second-half 2027 overseas launch, characterizing inbound interest from top-10 dealers in multiple countries as unusually proactive, attributing it to Xiaomi's positioning as a technology company rather than a traditional automaker. Separately, Xiaomi's share buybacks reached HKD 11.7 billion year-to-date, already exceeding the total repurchased in the entirety of the prior year, a signal of management's confidence in valuation even as near-term cost pressures weigh on reported profitability.