Stefan Mileschin

Surge in profits

China’s Xiaomi saw a surge in quarterly revenue that was driven by robust demand for its cheap smartphones in emerging markets.

Xiaomi’s first results as a public company showed that revenue from overseas markets for the quarter ended June 30 more than doubled from the year-ago period.

The results are likely to settle concerns about Xiaomi’s ability to sustain its scorching pace of revenue growth, after a closely watched but disappointing initial public offering in June valued the company at almost half the $100 billion that industry analysts had estimated.

The company’s gross margins in the second quarter dropped two percentage points to 12.5 percent as steady profits at its internet services business failed to offset declines in its hardware businesses, that includes smartphones and internet-connected devices such as smart TVs and electric scooters.

Xiaomi, which generates the bulk of its revenue from smartphones, has kept its prices low to grow rapidly in developing markets where it is taking on Samsung and Apple.

It wants to be an internet-based firm and hopes that its smartphones will drive traffic to its own app store in the longer term to boost its software-driven business and advertising on its platform.

The company shipped 32 million smartphones in the quarter which is up 44 percent from the year-ago period. However shipment growth rate slowed sharply from the 117 percent recorded in the first quarter.

Bullish investors in Xiaomi believe that the company’s primary asset is user traffic rather than devices, so far the company has been unable to show that it is poised to grow user traffic by increasing sales volume of its competitively priced products, particularly smartphones.

Xiaomi’s revenue for the quarter rose to $6.58 billion. International revenue was a third of total revenue.

https://fudzilla.com/news/mobile/470...wows-investors