Despite A Sharp Decline In Its Phone Business, Xiaomi Achieves A Profit Beat

Xiaomi Corp.'s profit exceeded estimates despite the world's third-largest smartphone maker enduring a rough fourth quarter.

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Smartphone shipments fell sharply in the three months ending December, but the Beijing-based business nevertheless managed to earn a net profit of 1.5 billion yuan ($218 million), which was more than the average expert expectation of 800 million yuan. The corporation reported 66 billion yuan in revenue for the quarter in a filing Friday. Experts expected a total of 65 billion yuan.

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Xiaomi, formerly China's largest smartphone manufacturer, is now behind competitors Honor and Vivo in domestic shipments. Yet, the company's attempts to diversify its goods and investments aided it in navigating a period impacted by China's Covid Zero limitations and the upheaval caused when they were abruptly lifted.

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According to the filing, the firm is on pace to meet its objective of mass-manufacturing smart electric vehicles in the first half of 2024. Xiaomi's billionaire co-founder Lei Jun has made growing into the developing EV industry a top priority, promising billions of dollars in investment. As it races to meet a pledge to produce its cars by 2024, the company is in negotiations with Beijing Automotive Group Co. about collaborating on EV production.

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Thus far, official permissions for the project have been the bottleneck for Xiaomi's automaking ambitions. Xiaomi is one of the latter would-be entrants into a Chinese EV industry already crowded with competitors, including well-known brands like BYD Co. and Nio Inc. Despite the lack of a head start, Lei, who has described electric automobiles as his "final startup attempt," is banking on his company's competence in linked technology and establishing devoted user communities. According to the filing, it spent 3.1 billion yuan on smart EVs and associated efforts in 2022.

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Xiaomi's global smartphone sales decreased by 26.3% in the fourth quarter, the highest drop among all manufacturers, as global demand slowed. Still, the company's 33.2 million handsets sold at the time were enough to retain it as the world's third-largest smartphone brand after Apple Inc. and Samsung Electronics Co., according to industry research firm IDC.

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Lei has also promised investors that he will enhance Xiaomi's profitability while preserving its business size, a difficult undertaking that will need greater margins in the phone sector as well as higher profit from investments and more profitable internet services.

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"After Xiaomi achieved some headway in higher-end markets, it makes sense to shift attention to profitability," Zhongtai International Securities analyst Angela Qin said in a note ahead of the release of the results. "The initiative will assist in alleviating rising strain from the macro environment and emerging enterprises."

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