From hardware vendor to lifestyle OS: Xiaomi's valuation leap has just begun.

Xiaomi has once again delivered its strongest quarterly report in history.

On August 19, 2025, Xiaomi released its second - quarter financial report. It achieved a revenue of 116 billion yuan, a year - on - year increase of 30.5%, setting a new historical high for five consecutive quarters. The gross profit margin reached 22.5%, a year - on - year increase of 1.8 percentage points. The adjusted net profit reached 10.8 billion yuan, a year - on - year increase of over 75%, setting a new historical high for three consecutive quarters.

From proposing the concept of "Smart Mobility, Smart Home, and Smart Life Ecosystem" in the fourth quarter of 2023, to the full implementation of this concept in 2024, and now to the continuous record - breaking performance, driven by the three core hardware businesses of smartphones, smart home appliances, and new energy vehicles, Xiaomi has transformed the "Smart Mobility, Smart Home, and Smart Life Ecosystem" from a pioneering concept into an industry consensus.

This consensus has been recognized by the capital market. Xiaomi's stock price has been rising steadily, and it has also attracted "followers". Great Wall Motors has joined hands with Haier to carry out a smart mobility and smart home ecosystem cooperation, and Midea has conducted in - depth cooperation with Huawei to jointly build a smart mobility, smart home, and smart life ecosystem.

A race for the entry and ecosystem in the next decade has begun. So, is Xiaomi's moat deep enough? Can latecomers replicate a second Xiaomi?

Combining Scale and Growth

From the simultaneous increase in revenue scale and gross profit margin, it can be seen that Xiaomi has achieved high - quality growth, rather than relying on low - price competition.

Let's first look at the smartphone business. In the second quarter, Xiaomi's smartphone revenue was 45.5 billion yuan, and the shipment volume was 42.4 million units, achieving year - on - year growth in shipment volume for eight consecutive quarters.

In a relatively sluggish smartphone market, Xiaomi's market share has increased. Globally, in the second quarter, Xiaomi's smartphone shipment volume accounted for 14.7% of the market, ranking third. In the Chinese mainland, Xiaomi's smartphone sales ranked first.

After the smartphone industry entered a stable sales period, the future focus lies not in quantity but in price. Xiaomi's high - end strategy for smartphones has also achieved results, and the Average Selling Price (ASP) has been steadily increasing.

In the second quarter of 2025, in terms of high - end products, Xiaomi's market share in the 4000 - 5000 yuan price segment reached 24.7%, a year - on - year increase of 4.5 percentage points, ranking first in the Chinese mainland. In the 5000 - 6000 yuan price segment, Xiaomi's market share was 15.4%, a year - on - year increase of 6.5 percentage points, also showing significant growth.

This means that Xiaomi's smartphones have firmly established themselves in the high - end camp in the domestic market.

After achieving "phased success" in the domestic high - end market, Xiaomi has set its sights on the overseas market. Lu Weibing recently said that the high - end strategy is Xiaomi's core strategy in the European market. At the earnings conference, he also emphasized the importance of differentiated operations in different markets, implementing a basic strategy that combines scale growth, product structure optimization, and high - end growth.

The Xiaomi 15 Ultra was globally launched in March this year. With a starting price higher than that of the iPhone 16 Pro Max, it achieved a 58% year - on - year increase in the first - sale results, which can be seen as a microcosm of Xiaomi's growing recognition in the overseas high - end market. As the high - end strategy goes global and the new retail model expands overseas, the ASP of Xiaomi's smartphones in the overseas market is expected to further increase, and Xiaomi is taking more stable steps towards the "200 - million - unit global smartphone shipment club".

Now let's look at the IoT and consumer products business segment. In the second quarter, the revenue of this segment was 38.7 billion yuan, a year - on - year increase of 44.7%. The growth was mainly driven by the revenue growth of domestic home appliances, wearable products, and tablets.

The intelligent transformation of traditional home appliances presents new opportunities in the home appliance industry, but it also comes with fierce competition. In the first half of this year, the home appliance industry experienced a fierce price war. Xiaomi withstood the impact of the price war. In the second quarter, the revenue of Xiaomi's smart home appliances reached a new high, with an increase of 66.2%, achieving both volume and price growth. Lu Weibing specifically emphasized that Xiaomi does not participate in the price competition in the home appliance industry. Instead, it provides valuable products to users through in - depth technological research and understanding of user needs.

In addition to home appliances, at the earnings conference, Xiaomi also revealed that the growth rates of product categories such as smart locks, air purifiers, and stoves were also very high.

Of course, what attracts the most attention from the outside world is Xiaomi's performance in the automotive business.

In the second quarter of 2025, Xiaomi delivered 81,302 new cars, a year - on - year increase of 197.7%. Among them, the newly launched Xiaomi YU7 in June continued the excellent performance of the SU7. Within 18 hours of its launch, the cumulative number of locked orders exceeded 240,000. At the earnings conference, it was also mentioned that Xiaomi's cars are expected to officially enter the European market in 2027.

Benefiting from the increase in delivery volume and the ASP increase brought by the higher - priced SU7 Ultra, the revenue of the smart electric vehicle and AI innovation business segment reached 21.3 billion yuan, accounting for 18.3% of the total revenue. Among them, the sales revenue of smart electric vehicles was 20.6 billion yuan.

Overall, against the backdrop of a slowdown in global economic growth and the general pressure on the consumer electronics industry, Xiaomi's performance presents a unique case. The smartphone and home appliance industries that Xiaomi is deeply involved in are both "red oceans" with extremely fierce competition and relatively mature market structures. The smart electric vehicle industry is also surrounded by strong competitors, and as a latecomer, the challenges faced by Xiaomi are self - evident. In such an adverse situation and on the basis of a large - scale business, instead of falling into the stagnation of the "big - company disease", Xiaomi has found a way to break through. It has explored structural opportunities in the mature smartphone market through high - end strategies, transformed the traditional home appliance "red ocean" into a "blue ocean" through intelligent transformation, and achieved overtaking in the smart electric vehicle industry with "advanced technology + ecosystem synergy".

As a result, Xiaomi has achieved high - quality growth that combines scale and flexibility. This characteristic of being "both large - scale and agile" is extremely rare among large - scale technology companies.

The Matthew Effect in the AI Era

The scarcity of Xiaomi's ecosystem lies in the fact that it has spent more than a decade weaving a network that covers all scenarios of "smart mobility, smart home, and smart life".

In its first year of establishment, Xiaomi launched the MIUI operating system, injecting the genes of the Internet and software into the company. In 2011, it released its first smartphone. In 2014, it entered the IoT field, entering the smart home control center through routers and smart speakers. In 2021, it announced its entry into the automotive industry and officially started selling cars in 2024, seizing the mobile travel scenario. Thus, it has built a full - scale closed - loop ecosystem of "smart mobility, smart home, and smart life", and completed the layout for the entry of all scenarios in the mobile Internet.

In this process, Xiaomi has always been planning ahead and laying out the next growth curve in advance. Therefore, Xiaomi can seize the opportunities at industry turning points and achieve self - leapfrogging.

The most fundamental reason why Xiaomi's ecosystem can continue to grow is that Xiaomi has always been user - centered, developing products based on people's real needs, and establishing a wide user base centered around "Mi fans".

Early products such as the "Super - writing" gel pen and the ultra - thin power strip with multiple USB ports were all developed from the perspective of solving user pain points to gain user trust. These seemingly insignificant products actually represent Xiaomi's in - depth involvement in users' daily scenarios. This habit of deeply understanding users' real needs in every detail has also been carried by Xiaomi into the automotive and home appliance industries, becoming a powerful driving force for creating a series of "blockbuster products" across industries.

Xiaomi is also very receptive to user suggestions. Last year, netizens left a message in Lei Jun's Douyin comment section, asking, "Can you launch a partition washing machine with a large drum for outerwear and a small drum for underwear?" Xiaomi quickly responded, and only a few months later, it launched the "Mi Home Dual - partition Washing and Drying Machine", which became a hit as soon as it was launched.

By "listening to feedback" and "co - creating with users", Xiaomi has won user trust with its sincerity in solving pain points.

Secondly, in the AI era, the layout of Xiaomi's smart mobility, smart home, and smart life closed - loop ecosystem is accelerating into the harvest period.

From the very beginning, Xiaomi has not been developing devices in isolation but focusing on connections. Based on its understanding of the development trend of the mobile Internet era, Xiaomi foresaw that the future would be an intelligent era of all - things interconnection, so it has been firmly laying out businesses in the three scenarios of smart mobility, smart home, and smart life.

If "people" are the origin of needs, "smart mobility" and "smart home" are the spatial and temporal extensions of needs. In these two important scenarios, interactions will occur among dozens or even hundreds of devices. Only by integrating them into the same protocol and the same account can users have a more convenient and seamless operation experience.

In 2010, when Xiaomi started with MIUI, it planted the seed of connecting people and devices. In 2014, when the IoT business began to take shape, Xiaomi released its first device connection protocol, starting to address the problem of fragmented smart devices. In 2017, it launched the self - developed IoT system Vela OS to further unify the IoT device ecosystem. In 2021, it started the research and development of the in - vehicle OS, and finally in 2024, it completely connected the three scenarios of smartphones, cars, and homes through the Surge OS, enabling them to "speak the same language" and supporting seamless device interconnection.

Behind the all - things interconnection is Xiaomi's strong position in the hardware entry.

Xiaomi's smartphones with a global top - three sales volume, nearly one billion IoT devices, and cars with rapidly increasing sales volume form a full - scenario contact network. A large number of devices and scenarios provide real - time data for AI. This has formed a data flywheel effect, that is, the more devices are connected, the deeper the understanding of user needs, the more proactive the services, the higher the certainty of blockbuster products, and the stronger the user stickiness.

Products bring entry points, entry points precipitate data, and data feeds back to products. In the AI era, this closed - loop is accelerating Xiaomi's "Matthew Effect". The intelligent experience of the "smart mobility, smart home, and smart life ecosystem" based on the Surge OS is Xiaomi's ecological moat. Followers can replicate SKUs and invest heavily in channels, but Xiaomi's first - mover advantage is an insurmountable gap.

What supports Xiaomi's ecological moat is profound technology, which is the result of Xiaomi's R & D accumulation in various technological fields such as chips, AI, and OS.

Currently, Xiaomi has 22,300 R & D personnel. In the second quarter, its R & D investment was 7.8 billion yuan, and it is expected to reach 30 billion yuan for the whole year. It plans to invest 200 billion yuan in R & D in the next five years. In particular, the large - scale investment in the chip business will further promote the deep integration of Xiaomi's software and hardware. The Xuanjie O1, the first flagship SoC chip launched this year, is a successful first step in Xiaomi's new journey.

User Assets Bring Valuation Imagination

After the accumulation of super - enthusiasts, Mi fans, and potential Mi fans, Xiaomi's user assets have become a quite large - scale group. As of June 30, 2025, Xiaomi's global monthly active users exceeded 730 million.

From an operational perspective, user assets bring more certain growth, higher gross profit margins, and lower customer acquisition costs.

After consumers purchase a product due to a single need, the possibility of purchasing other products within the ecosystem increases significantly. Therefore, there are many users who own multiple Xiaomi products. According to the financial report data, as of June 30, 2025, there were 20.5 million users who owned more than five devices (excluding smartphones, tablets, and laptops) connected to the AIoT platform, a year - on - year increase of 26.8%.

The strong consumption driving force generated by ecosystem synergy gives Xiaomi a higher user lifetime value (LTV). According to a research report, the average annual consumption of Xiaomi users reaches 12,000 yuan, which is four times that of users of ordinary brands.

The large - scale ecosystem users and higher LTV together constitute more certain growth for Xiaomi in the future.

A sufficient number of users is also the basis for reducing costs and exerting economies of scale. The most typical example is smart electric vehicles. As the delivery volume increases, the high fixed costs are spread over a larger number of sales, the marginal cost decreases, and the gross profit margin gradually increases, rising from 12.5% in Q1 2024 to 26.4% in the second quarter of 2025.

The gross profit margin of the IoT and consumer products business has also been continuously improving. In 2015, the gross profit margin of this business was only 0.4%, and in the second quarter of 2025, it reached 22.5%.

In addition, ecosystem synergy reduces the migration costs such as behavior habit costs and data asset costs when users' decision - making deepens within the ecosystem, which makes users make spontaneous purchases. This results in a relatively low sales expense ratio for Xiaomi. According to the Q2 financial report data, it is less than 7%.

This sales expense ratio is lower than that of most comparable companies. Among home appliance companies, it is lower than that of Midea, Hisense, and Haier, and slightly higher than that of Gree Electric. Among smart electric vehicle companies, it is lower than that of major players such as NIO, Li Auto, XPeng, and SERES. Among smartphone companies, the only one with publicly available data is Transsion Holdings, and Xiaomi's sales expense ratio is also lower.

Under the "smart mobility, smart home, and smart life ecosystem", Xiaomi has shown high growth potential and strong profitability, which is also reflected in its stock price trend. However, the unique business structure has also brought "sweet troubles" to Xiaomi's valuation, as there are no completely comparable companies in the market.

Northeast Securities uses the sum - of - the - parts valuation method. It has found comparable companies for different businesses. The smartphone and AIoT business is compared to Apple, and the automotive business is compared to Tesla at different stages. For example, Xiaomi's current