The gross profit margin of Xiaomi mobile phones has dropped to 8.3%. LU Weibing called on people to understand if the prices are raised.

On the evening of March 24th, Xiaomi Group (01810.HK) released its 2025 performance report. The annual revenue exceeded the 400 billion yuan mark for the first time, reaching 457.287 billion yuan, a year-on-year increase of 25%. The profit attributable to the owners of the company was 41.643 billion yuan, a year-on-year increase of 76.02%. The adjusted net profit was 39.166 billion yuan, a year-on-year increase of 43.8%. Both the annual revenue and net profit reached record highs.

Xiaomi's management said bluntly that 2025 was "a year of historic leap" for Xiaomi and stated that starting from 2026, it is estimated that the cumulative R & D expenditure in the next five years will exceed 200 billion yuan.

However, despite the impressive financial report, Xiaomi is still facing many operational challenges at present.

In the fourth quarter of last year, Xiaomi achieved a revenue of 116.917 billion yuan, a year-on-year increase of 7.3%. This was the fifth consecutive quarter that its revenue exceeded 100 billion yuan. However, the adjusted net profit decreased by 23.7% year-on-year to 6.34 billion yuan. Xiaomi's smartphone business, which is the "pillar" of the company, is facing dual pressures of declining revenue and rising memory costs.

At the evening conference call, Lu Weibing, a partner and the president of Xiaomi Group, admitted, "The increase in memory costs is more radical than our original prediction." Compared with the situation where competitors have raised the terminal prices due to cost pressures, he said that the pressure faced by Xiaomi is also very great. "We just held on a little longer than others, but the trend of price increase is inevitable."

The smartphone business is under pressure, and competitors have raised prices

Looking at the business segments, Xiaomi's smartphone, IoT, and Internet services businesses are still the core sources of revenue. The smartphone × AIoT segment achieved an annual revenue of 351.217 billion yuan in 2025, a year-on-year increase of 5.4%. The overall gross profit margin of this segment was 21.7%, a year-on-year increase of 0.5 percentage points.

However, looking more specifically, the smartphone business, which accounts for the highest proportion of revenue, is having a "tough time".

In 2025, the annual revenue of Xiaomi's smartphone business was 186.44 billion yuan, a year-on-year decrease of 2.77%. At the same time, affected by factors such as the reduction of national subsidies and the increase in the prices of core components, the gross profit margin of the smartphone business decreased from 12.6% in 2024 to 10.9% in 2025. Among them, the gross profit margin in the fourth quarter was 8.3%, a decrease of 3.7 percentage points compared with 12% in the same period of the previous year.

Data shows that in the past year, Xiaomi's smartphones experienced a decline in both volume and price. The shipment volume decreased by 2.0% from 168.5 million units in 2024 to 165.2 million units in 2025, mainly due to the decrease in shipments in India. At the same time, the average selling price (ASP) of smartphones decreased from 1,138.2 yuan per unit in 2024 to 1,128.7 yuan per unit in 2025.

Since last year, the profitability of Xiaomi's smartphone business has been continuously affected by the rising storage prices. Lu Weibing said at the performance meeting that due to the sharp increase in server demand driven by AI, the increase in memory costs is much more radical than predicted. "This is indeed a huge challenge for Xiaomi."

Under the shortage of storage chip supply, many mobile phone brands have adjusted their prices in mid - to late March. Among them, OPPO and vivo have successively announced price adjustments for some products. Although Xiaomi has not followed up for the time being, at the conference call, Lu Weibing said bluntly that the price increase trend is inevitable and hoped that users could show more understanding when the prices rise.

In his view, this (storage price increase) is a long - term cycle that will last until 2027. "Overall, it has a very significant impact on the cost of Xiaomi's existing terminal devices centered around smartphones."

However, Lu Weibing also revealed that based on the relatively pessimistic expectations before, Xiaomi had relatively sufficient memory inventory. At the same time, he believes that Xiaomi's relative advantage lies in its business diversification. For example, the large home appliance business is less affected by memory cost fluctuations, and multi - category collaboration can share risks.

While the smartphone business is under pressure, Xiaomi's IoT business "shoulders more responsibilities".

The annual revenue of IoT and consumer products exceeded 120 billion yuan for the first time, reaching 123.2 billion yuan, a year-on-year increase of 18.34%. The gross profit margin increased by about 3 percentage points year-on-year, reaching 23.1%. Among them, the smart large home appliances performed outstandingly, with the revenue increasing by 23.1% year-on-year and the shipment volume reaching a record high.

Regarding the impact of the reduction of national subsidies, which investors are more worried about, Lu Weibing said that the important opportunity for domestic IoT is "high - endization". With the R & D investment, Xiaomi will make great progress in the high - end field this year, and there is still much room for improvement in terms of scale and ASP (average unit price).

In addition, he said that new retail plays a supporting role in the IoT business, and there is a large space for going global. Xiaomi had about 450 new retail stores in overseas regions last year, and it is expected that the number will exceed 1,000 by the end of this year.

The automotive business is profitable, and Lei Jun posts on Weibo to show sales exceeding 100 billion

The innovative businesses such as automotive and AI have become a highlight in Xiaomi's financial report.

In 2025, the innovative businesses such as smart electric vehicles and AI became the core growth pole of Xiaomi. The segment revenue was 106.07 billion yuan, a year-on-year increase of 223.8%. The proportion of the segment revenue in the total revenue increased from 9% in 2024 to 23.2%.

Among them, the smart automotive business has almost become Xiaomi's stable "second growth curve", which has hedged the impact brought by the pressure on the smartphone business to a certain extent.

Last year, the revenue of Xiaomi's smart electric vehicle business was 103.3 billion yuan, a year-on-year increase of 221.8%. The average unit price of cars including tax exceeded 280,000 yuan. Lei Jun, the founder of Xiaomi, posted on Weibo on the evening of March 24th, saying, "In the second year of Xiaomi cars' launch, the sales exceeded 100 billion yuan."

In terms of deliveries, in 2025, Xiaomi delivered a total of 410,000 new cars, a year-on-year increase of