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What cap? Xiaomi is reporting huge profit numbers (Updated: Xiaomi responds)

Update: Xiaomi told Android Authority it's still sticking with a 5% profit cap.

Published onMay 31, 2023

Xiaomi 13 Pro hero
Ryan Haines / Android Authority
  • Xiaomi’s Q1 2023 financial results have revealed big profits.
  • This comes despite Xiaomi previously pledging to cap its hardware profit margins at 5%.
  • The company told Android Authority it’s still sticking to a cap.

Update: May 31, 2023 (7:50 AM ET): Xiaomi has come back to Android Authority after the publication of the article, noting that it’s still sticking to its 5% profit cap.

“The difference between the two can be accounted for in the difference between net and gross [profit – ed], rather than any other issues,” a company spokesperson told us.

Original article: May 26, 2023 (7:19 AM ET): Back in 2018, Xiaomi pledged to cap its net profit margin for hardware at 5%. The company’s moves to offer premium pricing for various products have put this claim to question in recent years. Now, the company has posted its Q1 2023 financial results, and it’s making big profit numbers.

Xiaomi’s most recent financial results show that its gross profit margin across the board hit a high of 19.5% (up from 17.3% in Q1 2022). Meanwhile, the company says its gross profit margin on smartphones reached a high of 11.2% (up from 9.9% a year ago). The company also highlighted a record 15.7% gross profit margin for its IoT and lifestyle products, as well as a 72.3% margin on internet services.

The hardware-related figures seemingly contradict the company’s 2018 claim that it would cap the profit margin on hardware sales at 5%. “We will always hold to an overall 5% profit margin across all of our hardware business,” Xiaomi reiterated to Android Authority in 2021.

So does that mean Xiaomi’s 5% profit margin cap is a thing of the past? Well, a 2021 earnings presentation notes that if the net profit margin for hardware exceeds 5.0%, the company will “return the excess above 5.0% to our users.” This echoes a previous claim by the brand.

The same 2021 earnings presentation noted that the company’s hardware business made less than 2.o% net profit in 2021. So it’s possible that Xiaomi is coming up with a loophole to tout a low profit.

We’ve nevertheless asked Xiaomi whether this 5% profit cap is a thing of the past in light of these recent earnings. We’ll update the article if/when the company gets back to us.

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