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English|Xiaomi Posts Deeper-Than-Expected 93% Profit Fall as High Inflation Hurts Demand

BEIJING, August 19  (TMTPOST)— China’s smartphone giant Xiaomi Corp recorded significant decline in both the top and bottom line in the past quarter, underlining how the roaring inflation hit markets of popular electronic products, especially mobiles.
English|Xiaomi Posts Deeper-Than-Expected 93% Profit Fall as High Inflation Hurts Demand
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Source: Visual China
In the quarter ended June 30, 2022, Xiaomi booked revenue of RMB70.17 billion (US$10.31 billion) with a year-over-year (YoY) 20.1% decline, a little bit ahead of an average analysts’ expectation of RMB70 billion. The net income shed 83% YoY to RMB1.39 billion, below the Wall Street projection of RMB1.5 billion.
Xiaomi’s core business also had steep decline in both sales and delivery that quarter. Revenue from smartphones slid 2.5% YoY to RMB42.27 billion, missing the estimates of RMB42.41 billion. The company shipped 39.1 million smartphones, down 26.2% from the delivery of 52.9 million units in same period last year. However, the business of Internet of Things (IoT) and consumer products, Xiaomi’s second largest revenue segment, showed resilience with quarterly sales of RMB198.1 billion, beating the analysts’ projected RMB197.4 billion. The overall revenue of internet services business fell 0.9% YoY to RMB 6.97 billion, less than the estimated RMB7.09 billion, but the overseas market saw the revenue of RMB1.7 billion, representing a 52.1% YoY increase.
In a statement released Friday, Xiaomi suggested weak performance of smartphone was mainly due to ongoing global macroeconomic turbulence and the resurgence of COVID-19, which continued to impact overall market demand. The global smartphone industry shipments declined 8.9% YoY and 7.7% quarter-over-quarter (QoQ), while shipments in China down 10.1% YoY and 10.9% YoY, according to Canalys. Xiaomi sit on a much higher amount of finished goods inventory in the quarter ended June, the management in an earnings conference call admitted. The inventory in China has dropped to a healthy level, they explained, so a majority of the inventory came from overseas market, which hurt by elevated inflation that forced consumers to reduce spending as well as changing exchange rate driven by the strong U.S. dollar. Executives said they will work hard to clear inventory in the next half of the year.
【English|Xiaomi Posts Deeper-Than-Expected 93% Profit Fall as High Inflation Hurts Demand】As to the rapid growth of overseas internet services, Xiaomi officials the business was benefited from increasing of monthly active users (MAU). In June, global MAU of MIUI, the Android mobile operating system developed by Xiaomi, reached 547.0 million while MAU of MIUI in mainland China reached 140.2 million, both hitting record highs. They also noted the search revenue from overseas was more than that in developing markets.
Earlier this month, another two Chinese tech giants have posted the noticeable slowdown in various degrees for the second quarter. Alibaba's revenue in the second quarter dropped 0.09% YoY, for the first time stagnated. Its net income shrank 50% from a year ago to RMB227.39 billion, though better than analysts' projection of RMB204 billion. Tencent's net income fell 56% YoY to RMB18.6 billion, compared with the market projection of RMB25.03 billion. Its revenue of RMB134 billion with a 3.2% decline also missed estimates.

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