Xiaomi ‘in no rush’ to turn vast AI spending into profits despite earnings slump

Chinese technology giant Xiaomi has indicated it is not in a hurry to turn its substantial investments in artificial intelligence into profits, following a decline in net profits during the second quarter. The company's vice-president and chief financial officer, Alain Lam, stated during an earnings call that Xiaomi's AI investment is currently in a phase of significant input.

However, as a large corporation, the firm is not eager to pursue immediate monetisation. In the first half of the year, Xiaomi's spending on research and development increased by 25.6 per cent year-on-year to 18.2 billion yuan (US$2.7 billion), with AI-related expenditures accounting for nearly 30 per cent of the total. Despite the challenges posed by high memory prices and fierce competition, Lam emphasized that short-term pressures will not alter Xiaomi's long-term strategy.

The company reported a 6.1 per cent decline in revenue for the April-June period, falling to 108.9 billion yuan, and a 20.3 per cent drop in net profit to 9.46 billion yuan. The revenue slump and net profit decline surpassed analysts' forecasts of 108.3 billion yuan in revenue and 5.68 billion yuan in net profit. Xiaomi's electric vehicle (EV) segment showed a 15.9 per cent year-on-year increase in revenue to 20.6 billion yuan, recovering from a 6.9 per cent growth in the first quarter.

However, sales slowed down compared to the 233.9 per cent surge recorded a year earlier. EV deliveries in the second quarter were around 34,000 units, slightly down from 31,267 units in July, trailing domestic competitors such as Xpeng and Leapmotor. Xiaomi's EV business, once a bright spot, faced sluggish sales, making it difficult to meet its target of 550,000 vehicles for the year.

Deutsche Bank lowered its full-year forecast to 490,000 units, citing late delivery of the SkyNomad SUV introduced in late July. The gross profit margin for Xiaomi's EV segment, including electric vehicles, fell to 19.2 per cent for the April-June period, down from 26.4 per cent in the previous year, while the average selling price dropped by 9.5 per cent year-on-year to 229,312 yuan per unit.

In contrast, smartphone revenue declined by 7.5 per cent year-on-year to 42.1 billion yuan, and home appliance and internet-of-things products fell by 19.2 per cent to 31.3 billion yuan.