JPM released a report stating that XIAOMI-W (01810.HK) +1.820 (+6.952%) Short selling $1.75B; Ratio 37.643% 's 2Q earnings met expectations, with smartphone gross margin outperforming forecasts, although growth momentum and gross margin for the electric vehicle business remained under pressure. The broker believes 3Q26 could mark a short-term trough for earnings (and potentially the share price), as memory price pressure is at its peak and SKYNOMAD will only begin deliveries in September, leaving electric vehicle momentum weak before deliveries commence. However, catalysts for strong YoY earnings growth remain lacking. Smartphone gross margin is expected to hover around 9% unless memory price increases slow. China's electric vehicle market continues to face pressure, creating downside risks to electric vehicle shipment forecasts. The broker forecasts around 450,000 vehicles in 2026. New businesses such as large language models and robotics have potential, but are unlikely to become significant revenue drivers over the next 12 to 18 months.

Smartphone shipments continue to face pressure, but the 9% gross margin level is now viewed as defensive. The broker expects shipments to remain under pressure in 2H26 as rising memory prices push up smartphone average selling prices, particularly affecting low- and mid-end demand. Full-year shipments are forecast at 123 million units, down 26% YoY. Despite rising costs and reduced scale, smartphone gross margin in 1H26 still reached around 9%, above the full-year guidance of 8%, supported by product mix optimization, with premium demand proving more resilient than low- and mid-end demand, and average selling prices rising 26% YoY in 2Q26. The broker now believes 9% is a defensible gross margin level for 2026.

Regarding electric vehicles, initial feedback following the launch of the SKYNOMAD platform in July was positive, with deliveries of the new EREV SUV targeted for September. However, China's electric vehicle market remains under pressure before deliveries begin. The broker lowered its full-year shipment forecast to 450,000 vehicles, below the company's target of 550,000 units. Gross margin for electric vehicles and new businesses also remains under pressure, below management's 20% target, due to rising costs, unfavorable product mix and increased investment in AI and large language models. The next catalyst will be a recovery in China's electric vehicle market or a significant rebound in monthly shipments, particularly for new models. In the medium to long term, overseas electric vehicle expansion, with the first market targeted in 2H27, will provide the next round of revenue and shipment growth momentum.

For the IoT business, the domestic market remains challenging while overseas momentum is strengthening. As memory prices rise and the impact of consumer subsidies fades, China's consumer market has weakened since late 2025, and demand for consumer electronics in the domestic market is expected to remain sluggish in 2H26. However, overseas IoT business performance is improving, benefiting from XIAOMI-W (01810.HK) +1.820 (+6.952%) Short selling $1.75B; Ratio 37.643% 's accelerated store expansion and broader overseas rollout of more product categories, especially large home appliances. The broker forecasts IoT revenue to decline 7% YoY in 2026 and remain flat in 2027, while gross margin stays stable at around 22%.

JPM lowered its 2026 and 2027 adjusted EPS forecasts by 2.1% and 3.3%, respectively. It raised the TP from HKD31 to HKD32 and maintained the Neutral rating.(ad/da)(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2026-08-18 16:25.)