Key Takeaways:
Goldman Sachs slashed its first-quarter revenue and profit forecasts for Xiaomi Corp. (01810.HK), projecting a 12 percent year-over-year revenue decline to 98 billion yuan on headwinds from its new electric vehicle business.
"The profit contribution from smart EV and other new businesses is expected to subside," Goldman Sachs analysts wrote in a note, explaining the 2-5 percent cut to 2026-2028 earnings per share forecasts.
The bank now sees adjusted net profit for the first quarter falling 49 percent from a year ago to 5.4 billion yuan. Revenue from the company's core smartphone and AIoT segments is expected to drop 14 percent and 22 percent, respectively. In contrast, the smart EV and new businesses unit is forecast to grow 5 percent to 20 billion yuan, accounting for 20 percent of total revenue.
The bearish forecast highlights the intense pressure on Xiaomi as it enters China's crowded and hyper-competitive electric vehicle market. While Goldman Sachs maintained its Buy rating and HKD 41 price target, the report questions the near-term profitability of the capital-intensive venture.
The forecast reflects a broader market reality where even established players are struggling. Competitors like BYD and Geely are engaged in a fierce price war that has compressed margins across the industry. BYD, the market leader, saw its own net profit collapse 55.4 percent in the first quarter of 2026, according to Boerse-global.de, a decline it attributed to changes in government purchase subsidies and increased competition.
For Xiaomi, the investment in EVs comes at the expense of its traditionally strong segments. Goldman's report shows the core smartphone and AIoT businesses are expected to shrink significantly faster than the overall company, suggesting the EV push is consuming resources and management focus. The bank trimmed its total revenue forecasts for Xiaomi for 2026 through 2028 by 1-4 percent, citing the lower expectations for the EV business's profitability.
The forecast cut puts a spotlight on the high costs of entering the EV market, a challenge faced even by established players like BYD. Investors will be watching Xiaomi's official Q1 earnings release to see if the EV segment's growth can justify the significant margin pressure on the core business.
This article is for informational purposes only and does not constitute investment advice.
