Xiaomi's Memory Cost Pivot and AI Monetization
Xiaomi's Q2 2026 earnings call (reported 2026-08-18) reveals a company at a strategic inflection point. The persistent surge in memory cost has forced a rethink of its smartphone pricing and product mix, while a parallel investment in AI and robotics is beginning to show early monetization signals. The call underscores a deliberate shift from absorbing cost increases to managing them via ASP growth, and a cautious but real move toward AI revenue.
Memory Cost: From Absorption to Price Adjustments
CEO Weibing Lu acknowledged that the memory cost increase was larger than expected, and the company can no longer absorb it entirely. “memory cost increased. There is no way for us to just pass on the whole cost increase to our consumers. We have to rationalize our product lines and adjust our product mix.” — Weibing Lu, CEO · 2026-08-18 This marks a clear departure from the stance in March 2026, when Lu had said, “we will try our best to digest this to protect the consumer. And when we can do this no more, we will have to hike our smartphones prices.” — Weibing Lu, President · 2026-03-24 Now, the company has indeed raised ASPs to record highs while keeping gross margin at 8.5% — a testament to its operational flexibility. As Lu noted, "I think we are now in an appropriate and controllable situation." This is a confident pivot, but it leaves little room for further cost shocks.
AI and Robotics: The New Growth Vectors
The most intriguing development is the initial monetization of AI. CFO Alain Lam noted that token plans and API calls "began contributing revenue this quarter," though he stressed a long-term view.
This represents the first concrete revenue from AI, a strategic advance beyond pure R&D. The company is also doubling down on open source models, releasing MiMo code and even a robotics model. In the prepared remarks, Lu highlighted that "our embodied robots have improved the success rate of dual-side task at the self-tapping threaded insert loading station to 98%," demonstrating tangible progress in robotics. This aligns with the broader industry trend of AI moving into physical applications, though it remains early.We are now in a large-scale investment phase. So we are not too anxious to pursue monetization. We'll continue to promote AI development in a steady and practical way.
EV Expansion and Persistent Losses
Smart EV deliveries reached 104,199 units, with the new SkyNomad series generating strong preorders. Yet the segment still posted a RMB 2.6 billion operating loss, underscoring the heavy investment required. The company reiterated its overseas EV plans for 2027, and management expressed optimism about dealer interest, but profitability remains a longer-term goal.
Outlook
Xiaomi is threading a needle: maintaining smartphone margins amid memory cost pressures, nurturing AI and robotics into future revenue streams, and scaling EVs globally. The call reveals a company that has learned from past cycles and is now more transparent about its strategic trade-offs. While the memory cost issue is a shared industry headwind, Xiaomi's proactive pricing and AI monetization efforts are company-specific and worth watching.