BEIJING (BLOOMBERG) - Xiaomi reported a first-quarter profit that beat analysts' estimates, driven by strong overseas smartphone shipments and growth in online services.
Adjusted net income rose 11 per cent in the three months ended March to 2.3 billion yuan (S$458.3 million), compared with the 2.1 billion-yuan average of estimates. Sales rose 14 per cent to 49.7 billion yuan.
The largest Chinese smartphone brand after Huawei Technologies managed to grow its global shipments by 6.1 per cent in the past quarter even as total worldwide shipments shrank 11.7 per cent, according to research firm IDC.
Beijing-based Xiaomi's strength in online device sales served it well during the coronavirus period, particularly in Western Europe where shipments increased by almost 80 per cent, according to research firm Canalys.
In India, the company's sales increased thanks to new budget phones released before a nationwide lockdown was declared.
Revenue from Internet of Things products and online services maintained strong growth in the quarter. Xiaomi has been diversifying its major sources of revenue beyond smartphones, introducing a wide range of connected products from TVs to smartwatches. It also sells online advertising in China.
Xiaomi's smartphone gross profit is poised to surge as last year's brand revamp hurt margin, even as average selling prices likely tanked on lower China sales mix, said Anthea Lai, senior analyst, Bloomberg Intelligence. Higher revenue from online games and other services such as fintech could have lessened the probable advertising sales slump, she added.
Xiaomi faces a difficult second quarter as Covid-19 containment efforts in key overseas markets including India and Spain are poised to dampen sales. "The different levels of lockdown measures adopted in overseas markets are expected to affect our performance in the second quarter of 2020," the company said in a statement.
Geopolitical tensions are also stoking uncertainty for Xiaomi's supply chain. The Trump administration has moved to prevent chipmakers using US technology from supplying Huawei, and China has vowed to retaliate. Qualcomm, Xiaomi's most important processor provider, may be among Beijing's potential targets. The US chipmaker is also one of Xiaomi's earliest investors and its mobile CPUs power the company's entire product line.