(Bloomberg) -- Xiaomi Corp. reported a quarterly profit that beat analysts’ estimates after the Chinese smartphone maker got half its revenue from outside its home market for the first time.
China’s largest smartphone brand after Huawei Technologies Co. said adjusted net income rose 11% in the three months ended March to 2.3 billion yuan ($324 million), compared with the 2.1 billion-yuan average of estimates. Sales rose 14% to 49.7 billion yuan, powered by a 47.8% jump in overseas revenue.
Xiaomi managed to grow its global shipments by 6.1% in the past quarter even as total worldwide volume shrank 11.7%, 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%, 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.
What Bloomberg Intelligence Says
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. Higher revenue from online games and other services such as fintech could have lessened the probable advertising sales slump.
-- Anthea Lai, senior analyst
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Xiaomi faces a difficult second quarter as Covid-19 containment efforts in key 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 U.S. technology from supplying Huawei, and China has vowed to retaliate. Qualcomm Inc., Xiaomi’s most important processor provider, may be among Beijing’s potential targets. The U.S. chipmaker is also one of Xiaomi’s earliest investors and its mobile CPUs power the company’s entire product line.
(Updates with overseas sales from the first paragraph)
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