Xiaomi makes net profit in the third quarter due to robust sales in India and Europe

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Oindrila Banerjee
Oindrila Banerjee
A English Literature student, love reading books, love literature and history, and enthusiastic about travelling. She likes to read random pieces of information and like watching films. She likes how refreshing it is to learn something new everyday. Her goal is to earn enough to take a trip round the globe.

Chinese smartphone maker, Xiaomi, has proved analyst estimates wrong by swinging a net profit in the third quarter due to robust sales in India and Europe.

Xiaomi’s profit for the three months through September reached 2.48 billion yuan ($357.23 million), as opposed to an 11 billion yuan loss it had encountered in the same period a year earlier. That is also a great gain when compared to a 1.92 billion yuan average based on five analyst estimates that were compiled by Refinitiv Eikon. Xiaomi has added that its operating profit sank 38.4 percent to 3.59 billion yuan in the third quarter; while its revenue rose 49.1 percent to 50.85 billion yuan.

The mixed results have come in the midst of a slowdown in smartphone sale in China and overseas. Be that as it may, Xiaomi, and its fellow budget handset makers, Oppo and Vivo, have accounted for around a quarter of the global smartphone market in the first half of 2018, according to data from researcher IDC.

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India is Xiaomi’s fastest growing market, where the company has hit jackpot with the budget Redmi phone series; along with Europe, where it entered with launches in Russia and Spain in 2017. Earlier this month, the company launched its flagship Mi 8 Pro device in Britain, adding another European country to its fast expanding global market.

Success aside, in order to weather the global market slowdown, analysts opine that Xiaomi needs to expand to new markets and start selling premium devices with wider profit margins. In a step towards the expansion of business, Xiaomi has been steadily adding new brands to its smartphone portfolio aimed at niche consumers. Concurrent with today’s earnings, it has announced a partnership with Meitu Inc, maker of a photo app, to sell phones under its brand, and earlier this year it launched Black Shark, a phone for gamers, and Poco, a budget device for the Indian market.

Mo Jia, who tracks China’s smartphone makers at research firm Canalys, has said that attempts to sell more expensive devices require changing brand perception; adding that, “It’s still very hard for Xiaomi to change its perception of being a low-end device manufacturer as the majority of its smartphone shipments are the Redmi series.”

Xiaomi is working towards transforming itself from a smartphone firm into a software company. As the firm was preparing for its IPO, Xiaomi’s founder, Lei Jun, touted internet services, mainly advertisements placed on the firm’s in-house apps, as its future and the key differentiator from other handset brands.

The third quarter saw Xiaomi’s smartphone division grow revenue by 36.1 percent while its internet service division grew 85.5 percent. On the other hand, while its phones made up 64.6 percent of total sales, its internet services made up only 9.3 percent.

The results are the second set released by Xiaomi since the smartphone maker raised $4.72 billion in an initial public offering (IPO) this June, placing the value of the firm at about $54 billion, almost half of some earlier industry estimates of $100 billion.

Xiaomi’s shares have fallen roughly 20 percent since the start of trading in July in a broader Chinese stock market sell-off and among its latest concerns is the slowdown in China’s tech industry.

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