Xiaomi's growth is slowing down
On Wednesday, the results of Xiaomi were published for the quarter, which ended in September. The company's profit report shows a decline in the growth rate. Analysts' expectations were confirmed: the company is experiencing visible difficulties due to the shift in focus on service. Such changes allow the manufacturer to reduce smartphone purchases worldwide.
The report indicates an increase in the company's profits from the third quarter by 3.3%. Profit for this quarter amounted to 53.7 billion yuan, or US$7.65 billion. The same figure in the previous quarter was 51.95 billion yuan (US$7.39 billion). Compared to the second quarter of last year, Xiaomi's profit increased by 5.5%. In addition, Xiaomi's adjusted profit and gross profit amounted to 3.5 billion yuan (US$500 million) and 8.2 billion yuan (US$1.17 billion), respectively. These results show an increase of 25%.
Analysts' forecasts coincide with the real situation. However, there is a slowdown in the company's growth.
Revenue from smartphone sales continues to decline, reaching 32.3 billion yuan (US$4.6 billion) in the reporting period, a decline of 7.8%. Despite the relatively high number of smartphones sold, Xiaomi attributed the decrease in its indicators to the slowdown in the Chinese smartphone market.
Such statements by the manufacturer were confirmed by Canalys, which reported a 3% contraction of the Chinese smartphone market in the third quarter. Counterpoint stated that all Chinese manufacturers have suffered greatly from this situation in the market. Only the market leader, Huawei, is still on the plus side.
Last year, Xiaomi developed a business model that allowslimiting the damage from the reduction of smartphone supply through the implementation of web services.
The problem turned out to be that this sphere of services is not developing fast enough. In addition, advertising faces a lot of problems, and the revenue from this sphere is falling for several quarters in a row. The insufficient success of Xiaomi is based on the slow transition to earnings from Internet services while reducing the cost of selling equipment.
Compared to other indicators, steady growth is demonstrated by the MIUI software created by Xiaomi on the basis of Android. The report specifies that the number of active users increased from 278.7 million in June to 292 million in September 2019.
Currently, most of Xiaomi's revenue is generated by the sale of smartphones. In addition, Smart TV and Mi Box platforms created by the company are very profitable and have more than 3.2 million paid subscribers. Recently, the company entered a new territory - the business of Fintech, the income from this sphere has already reached 1 billion yuan (US$140 million). Xiaomi actively operates outside of China, earning 48.7% of total revenue from international trade. The company is especially popular in India, which presses more than 12 million in profits.
The founder of the company plans to release a number of smartphones with 5G support, which may ensure greater growth of its revenues.