(Yicai) May 27 -- Xiaomi saw its net profit more than halve in the first quarter of the year, mainly due to spikes in key component prices, intensifying market competition, and geopolitical uncertainties weighing on the global economy.

Net profit shrank 57 percent to CNY4.7 billion (USD699 million) in the three months ended March 31 from a year earlier, the Beijing-based company said in its latest financial statement yesterday. Gross profit declined 14 percent to CNY21.8 billion (USD3.2 billion), with gross profit margin down to 22 percent from 22.8 percent.

Xiaomi's revenue fell 11 percent to CNY99.1 billion, as revenue from the smartphone times artificial intelligence of things segment plunged nearly 15 percent to CNY79.3 billion.

Xiaomi's global phone shipments dropped 19 percent to 33.8 million units in the first quarter from a year earlier, with revenue down 13 percent to CNY44.3 billion and gross margin shrinking to 10.1 percent from 12.4 percent, as core component prices rose and competition intensified.

The average selling price of Xiaomi smartphones rose 8.2 percent to record CNY1,310 (USD193) per unit in the period, with premium handsets accounting for nearly 24 percent of shipments in China.

The current cycle of memory chip price inflation is likely a "super cycle" that will not reverse quickly, Xiaomi's President William Lu said during the earnings conference call. The company will manage shipments of lower-end models and optimize its product mix to balance scale and margins, he added.

Global smartphone shipments fell 4.1 percent in the first quarter, ending a growth streak that lasted 10 consecutive quarters since mid-2023, according to International Data Corporation. Xiaomi ranked third globally in the period, with an 11 percent market share, but it dropped out of the top five in China.

Meanwhile, revenue from smart electric vehicles, AI, and other new initiatives rose 6.9 percent to CNY19.9 billion.

The smart EV business achieved CNY19 billion in revenue in the first quarter, up 5.1 percent from the same period last year, as deliveries rose 6.6 percent to 80,856 units, boosted by the launch of the YU7 Series, partially offset by lower sales of the SU7 Series after the first generation was discontinued.

Xiaomi's EV average selling price fell 1.3 percent to CNY235,116 (USD34,660) because of purchase tax subsidies and a higher proportion of cheaper units.

The IoT and lifestyle products business posted revenue of CNY24.7 billion, with a gross margin of 25.2 percent. Overseas revenue reached a new record high.

Xiaomi has released a series of foundation models over the past year, including a vision-language-action model and the XLA cognitive model, which can advance assisted driving from perception and imitation to understanding and reasoning, Lu said.

The company also integrated its on-device AI agent Miclaw with its Super Xiao Ai assistant, with Miloco deepening the smart home agent experience, he noted, adding that Xiaomi plans to invest more than CNY60 billion in AI over the next three years.

Xiaomi's research and development expenses surged 33 percent to CNY9 billion in the first quarter from a year earlier.

"2026 will be a pivotal year for AI smartphones," Lu said. "AI phones are not simply adding AI features to existing smartphones, nor are they simply creating an agent app; instead, a shift from an app-centric interaction approach to an OS agent-centric interaction approach."

Xiaomi's shares [HKG: 1810] were trading down 2.5 percent at HKD29.02 (USD3.70) as of 11.45 a.m. in Hong Kong today.

The company also announced yesterday that it plans to buy back Class B ordinary shares with an aggregate value of up to HKD20 billion (USD2.6 billion) over the next 12 months. It has already repurchased 399.6 million Class B shares for a total of HKD14.6 billion.

Editor: Futura Costaglione