Xiaomi Group has released its second quarter and half-year financial report for Xiaomi Q2 2023. According to the Xiaomi financial report, Xiaomi’s revenue in the second quarter experienced a year-on-year decrease of 4%, amounting to 67.35 billion yuan. However, the net profit showed a substantial year-on-year increase of 168.5%, reaching 3.666 billion yuan. Additionally, the adjusted net profit demonstrated an even more impressive growth of 147%, totaling 5.14 billion yuan. Moreover, the overall gross profit margin was noted to be 21.0%.
Xiaomi’s business strategy of “equal emphasis on scale and profit” as the core led to the attainment of record highs in more than 15 business indicators after two-quarters of implementation. In the first half of the year, the total revenue reached 126.8 billion yuan, marking a year-on-year decrease of 11.6%. However, the adjusted net profit surged more than 8 times year-on-year to 8.4 billion yuan, nearly reaching last year’s level.
Despite the downward cycle in mobile phones, Xiaomi’s smartphone business revenue in the second quarter reached 36.6 billion yuan, reflecting a year-on-year decrease of 13.4%. Impressively, the gross profit margin set a new record at 13.3%, signifying a year-on-year increase of 4.7%. Notably, the smartphone’s ASP (average selling price) rose by 2.8% to 1112.2 yuan per unit from 1081.7 yuan during the same period last year. This increase was mainly attributed to a rise in ASP in mainland China. Canalys data further revealed that Xiaomi maintained its position among the top three global smartphones for 12 consecutive quarters in the second quarter, securing a market share of 12.9% – an increment of 1.6% from the previous quarter, with a total shipment of 32.9 million units.
Xiaomi’s IoT and consumer products revenue surged 12.3% YoY to 22.3 billion yuan in Q2 as market demand improved and promotional fee policies continued. Accompanying this was a remarkable 17.6% gross profit margin, sustaining growth for three consecutive quarters. By June 30, the Xiaomi AIoT platform linked a staggering 654.5 million IoT devices, excluding smartphones, tablets, and laptops, marking a 24.2% YoY increase. In the same month, the Mijia APP experienced a 17.1% YoY rise in monthly active users, totaling 82.9 million.
The second quarter brought about a 6.8% year-on-year increase in Xiaomi’s Internet service revenue, totaling 7.4 billion yuan, and the gross profit margin expanded to 74.1% year-on-year. Within this, advertising revenue surged to a record high of 5.1 billion yuan, marking a year-on-year increase of 13.0%.
Xinhuanet reporter: The Xiaomi financial report released today reveals a noticeable trend in Xiaomi’s revenue during the second quarter—a narrowing decline. Notably, the adjusted net profit has doubled year-on-year, reflecting significant improvement in profits. Could you, Mr. Lu, summarize how Xiaomi achieved this result? Furthermore, we’d appreciate insights from the management about the company’s future business expectations.
Lu Weibing: As previously stated, Xiaomi’s business performance has undergone what I consider “qualitative changes,” even in the face of a largely unchanged external environment. These changes primarily stem from shifts in internal factors that have bolstered our capabilities.
To provide an overview, first and foremost, our strategic adjustment was impeccably timed. In 2022, we advocated for a “stable operation” strategy, emphasizing the need to balance scale and profit. This approach demanded high standards for our operations, considering Xiaomi’s historical emphasis on a “scale first” development strategy.
Secondly, effective execution complemented our sound strategy. Several key indicators affirm this: the gross profit rate and the expense ratio. The former especially serves as a true indicator of a company’s industrial prowess. A strong industrial foundation yields a high gross profit rate. Likewise, the expense ratio reflects operational competency. Notably, despite a rise in gross profit margin and expense ratio, Xiaomi’s competitiveness has excelled. This clearly signifies the enhancement of our capabilities.
Behind this capability enhancement lie Xiaomi’s strategic directions. The primary thrust involves resolute investments in research and development (R&D). Even during last year’s formidable challenges, Mr. Lei consistently emphasized the necessity of steadfastly investing in the future and R&D.
This year’s array of new product launches underscores technological advancements. Our technological trajectory has shifted from merely “catching up and following” to progressively “leading.” This transformation is evident to all.
The second core element of our strategy centers on a steadfast focus on the high-end market. In my view, this dovetails with our technological investments. The transformation in Xiaomi’s high-end offerings—both domestically and internationally—has contributed to an upsurge in our average selling price (ASP) and gross profit margin.
The third strategic focal point pertains to continuous management upgrades. Over the past few years, we’ve introduced one or two major management changes annually. These transformative shifts have consistently bolstered Xiaomi’s overall organizational capabilities.
These strategies underscore our core efforts over the past years. Additionally, this quarter’s improved gross profit rate and operational outcomes are not restricted to the mobile phone segment alone. Our IoT gross profit rate has reached historical highs, signifying substantial improvements in balanced business development.
Observing specific sectors, Xiaomi’s wearable business leads in China, our TV business maintains its premier position, the tablet sector—restarted two years ago—has secured the third rank, and our air conditioner performance surpasses the broader market. Refrigerator sales have more than doubled since last year. These achievements reflect a broad-based surge, rather than being limited to a single category, showcasing our well-rounded capabilities.
Looking forward, significant alterations seem unlikely. Sustaining our historical strategic trajectory and capacity building seems adequate. The pivotal factor is consistency. Personally, I believe Xiaomi possesses untapped capabilities and management prowess. My confidence remains steadfast. Xiaomi’s operational performance is poised for continuous, not just quarterly, improvements. We extend our gratitude for your sustained interest and attention.
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