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Ladies and gentlemen, welcome to Xiaomi's 2026 First Quarter Results Announcement Investor conference Call and Audio Webcast. Today's conference is being recorded. If you have any objection, you may disconnect at this time. [Operator Instructions]

Now I would like to hand the conference over to your host today, Mr. Xu Ran, General Manager of Group Investor Relations and Capital Markets Department. Please go ahead.

Good evening, ladies and gentlemen. Welcome to the investor conference call and audio webcast hosted by Xiaomi Corporation regarding the company's Q1 results.

Before we start the call, we would like to remind you that this call may include forward-looking statements, which are underlined by a number of risks and uncertainties and may not be realized in the future for various reasons. Information about general market conditions comes from a variety of sources outside of Xiaomi. This presentation also contains some unaudited non-IFRS financial measures that should be considered in addition to, but not as a substitute for the company's financials prepared in accordance with IFRS.

Joining us on the conference today are Mr. William Li, Partner and President of Xiaomi Corporation; and Mr. Alain Lam, Vice President and CFO of Xiaomi Corporation. To start Mr. Lu will share recent strategic and business updates of the company. Thereafter, Mr. Lam will review the company's financial performance in the first quarter of 2026. Following that, we'll move on to the Q&A session.

I will now turn the call over to Mr. Lu.

Good evening, everyone. Thank you for joining our Q1 2026 Results Announcement Conference Call. The first quarter of 2026 marks the first full quarter of our new 5-year plan. Over the past 5 years, we have completed the strategic closed loop of our entire ecosystem encompassing human vehicles or cars and homes and achieved comprehensive areas such as large appliances, EVs, chips and AI.

Looking ahead to the next 5 years in the short term, we faced the challenge of a triple cycle of cost, demand and competition. In the long term, we are entering a new phase where AI is reshaping our entire ecosystem of human cars and homes.

Tonight, I will maybe share 3 aspects with you. First, we will review our key performance in the first quarter 2026. Second, we'll respond to issues that everyone is concerned about. Third, we look ahead to our strategic development, our business focus for the next few quarters.

First, in Q1 2026, our group's total revenue was RMB 99.1 billion. Adjusted net profit, RMB 6.1 billion. Looking at business segments. First in Q1, we proactively controlled shipments of mid- to low-end products and channel inventory, while our smartphone shipment declined, our ASP reached record high. We also maintained our position among the top 3 globally. According to OMDA data, our market share in Q1 2026 was 11.3%, maintaining our position among the top 3 globally for 23 consecutive quarters.

Our smartphone shipment ranked second in Latin America with market share of 17.4%, up 2 percentage points compared to the previous period. We ranked third in Europe, Southeast Asia and Middle East and Africa with market shares of 17.2%, 16.9%, 13% and 9.2%, respectively. In Q1 '26, we ranked among top 3 and smartphone shipment in 47 countries and regions worldwide and among top 5 in smartphone shipments in 65 countries and regions worldwide.

For GP margin, the sharp rise in memory cost in the short term has ushered in a new normal for the entire industry will not simply pass on the increased cost linear to consumers. Instead, we position user needs and achieve a balance between scale and profit through profit, product metric, software optimization and leveraging our operational capabilities. In Q1 2026, we achieved a gross profit margin of 10.1% for smartphone, which reflects the operational resilience brought about by our own capabilities.

IoT business. In Q1 2026, IoT business achieved revenue of RMB 24.7 billion, mainly due to a year-on-year decline in domestic revenue caused by the high base of national subsidy last year. However, thanks to expansion of overseas channels and the increase in overseas product categories, overseas revenue reached a record high and achieved double-digit year-on-year growth. Among them PMMS ear buds ranked second globally, wearable products were ranked third and tablet globally and tablet was ranked fifth globally. Gross profit margin of our IoT business this quarter, it was 25.2%, which fully demonstrates our ability to hedge against fluctuations in a single industry through multi business synergy. This quarter, the business can provide more profit to mitigate the risk of declining gross margins on smartphone business.

For Rami EVs, we delivered 80,856 cars in the first quarter [ 2026 ] the Xiaomi 7 Series. As of May 6, 2026, our new generation 7 has accumulated over 80,000 preorders in 48 days since launch. This demonstrates that our EV business has withstood severe challenges and has emerged from most difficult period. As of 30th April 2026, Xiaomi has achieved cumulative delivery volume of 232,000 units in 10 months.

On 21st May, we officially released Xiaomi position at the sports car level SUV suitable for long distance travel priced at RMB 389,900. After extensive tuning and testing Xiaomi finally broke the SUV record the brokering becoming the fastest SUV in history. Xiaomi addition is priced at RMB 233,500 to refine the handling capabilities, Xiaomi underwent testing at the Numbering Noise Life.

The issues of AI and Androids that everyone is concerned about. We have emphasized on multiple occasions that deep integration of AI with physical world is the next stage of intelligent technology. Xiaomi, with this hardware ecosystem, reaching over 1 billion users has a tremendous opportunity to become in the AI era. If we don't create our own large-scale model, our understanding of the base model will always be looking at flowers through the fall. Only by mastering core technologies end-to-end can we truly create products with differentiated competitiveness.

The industry is still exploring the ultimate form of of AI and hardware. However, only those with core technologies and application scenarios can clearly keep up when the trend becomes clear.

Latest progress. In April 2026, we released Xiaomi MiMo-V2.5 Series. Xiaomi MiMo-V2.5 Series includes Pro 2.5 TTI Series and 2.5 ASR. This represents a comprehensive lead from usable to easy to use. On artificial analysis, global authorities, comprehensive intelligence ranking list for large open source models, Xiaomi MiMo-V2.5-Pro, first in the comprehensive intelligence index among global open source large models and is among the top 5 in the overall global ranking of large models.

At the same time, the agent index ranks first among global open source large models. At the end of March, MiMo-V2-Pro set another record on open rotor platform, teaming first place in the daily, weekly and monthly rankings. In the week of March 31, MiMo-V2-Pro weekly to consumption 4 trillion, after free trial period ended our average weekly token retention rate reached 35%. On April 3, 2026, we launched a Xiaomi MiMo token plan offering 4 years like standard Pro and MAX aiming to help users improve productivity at reasonable prices. Since launch of our token plant, the Pro and Mats have accounted for over 50% of revenue.

According to open route data released on May 12, MiMo rent first in terms of agent model volume contributing and the cumulative 1.45 trillion token calls in the past month. This means that the world's fastest-growing open-source agent product has chosen Xiaomi MiMo as its preferred engine in real world high-density to scenarios. To reward global developers, Xiaomi officially launched MiMo orbit 100-TToken program, distributing token benefits to AI users worldwide for free with a plan to distribute a total of 100 trillion tokens within 30 days. As of morning of 12th May nearly 80 trillion tokens have been distributed.

We'll continue to iterate on our base model. The moment of AI mobile phone has arrived. Perhaps 2026 will be a pivotal year for AI smartphones and arrival of such a moment will profile influence future changes in mobile phones. AI phones are not simply an AI features to existing smartphones, now are they simply creating an agent app. It's a shift from app-centric interaction approach to an OS agent-centric interaction approach. Mico is our initial attempt recently, ICT launched an evaluation of mobile smart assistance, Xiaomi Miclo became one of the first mobile smart agents in China to pass this authoritative evaluation.

At the same time, the packaging and testing categories of have expanded to multiple terminals such as tablets, PCs, speakers with screens, marking significant upgrade and cross-platform capabilities. In the future, mobile phones will be upgraded from operations to executive assistance and digital clones for people. We will deeply evolve our search OS taking the agent as the core and further increase the deep coupling between model and upper level framework.

We continuously enhance product experience of assisted driving. In March of this year, we officially release Xiaomi big model architecture. And Xiaomi-assisted driving to move from perception and invitation and reasoning. In May 2026, building upon XLA, we took a step further and officially released and fully open source Xiaomi semiautonomous driving model, a one-step latent-based language we show a reasoning framework. It unifies the 3 major technical approaches, VL model and later space reasoning into a unified framework.

And then bodied robots. We continue to explore the boundaries of fiscal intelligence and body robots are the ultimate integrator platform for AI capabilities, ships and OS capabilities and manufacturing capabilities and have extremely high barriers to entry. On April 27, we'll bring a new capability demonstration and officially released the full process of trading on a real device with Xiaomi-Robotics-0.

On the same day Xiaomi robot, which had turned from tightening screws in the factory came to the CME Group Investor Day event and made a winning place from many friends. The current progress is just the beginning. Robot will open up entirely new industrial and market opportunities for Xiaomi.

So we believe that we are going to achieve a lot of good results. So we are going to be a leader in hard core technology. We'll continue to do more in innovation and many other smart areas. We'll continue to innovate and upgrade and support our healthy development of various segments. So that's all in my part. So I'll pass the floor to Mr. Alian.

Mr. Lu. Hello, everyone. Good evening. As Mr. Lu shared with everyone, 2026 will be a year of both short-term challenges and long-term opportunities.

Let me talk about our results. In Q1 2026, our total revenue was RMB 99.1 billion. Overall gross margin was 22%. Looking at various segments. Our smartphone times AIoT segment revenue was RMB 79.3 billion. Smartphone times AIoT segment gross margin was 22.5%, up 2.5 percentage points quarter-on-quarter. For smartphones, the continued significant increase in memory cost has had an overall impact on the smartphone industry. We focused on optimizing our sales structure and channel management.

Revenue in this quarter was RMB 44.3 billion, accounting for 47% of our group's total revenue. Our global smartphone shipments reached 33.79 million units. Our average selling price for smartphones, thanks to our strategic adjustments, reached a record high of RMB 1,310, representing a year-on-year increase of 8.2%. According to third-party data, in first quarter 2026, our high end or premium smartphone sales in Mainland China accounted for 23.5% of our overall smartphone sales.

According to OMDA data, in the first quarter of 2026, we ranked among the top 3 globally in smartphone shipments with market share of 11.3%, maintaining our top 3 ranking for 23 consecutive quarters. Despite rising memory prices through proactive control of mid- to low-end phone shipments and channel inventory, our smartphone gross margin remained relatively healthy at 10.1%.

Regarding IoT. In Q1, our revenue of IoT business reached RMB 24.7 billion, with overseas revenue maintaining steady growth, achieving double-digit year-on-year growth and setting a new record. We prioritized profitability refrained from participating in industry price competition and simultaneously expanded our overseas channels and increased our overseas product categories. This quarter, gross profit margin for IoT reached 25.2%, up 5.1 percentage points quarter-on-quarter.

From a product category perspective, this quarter, we ranked third globally in wearable band shipments. And second, globally in TWS earbud shipments. Our tablet business performed steadily ranking among the top 5 globally this quarter.

Regarding Internet services, we have accumulated a large user base globally. In March 2026, our global MAUs reached 750 million, up 3.8% year-on-year. Among them, MAUs in Mainland China reached a record high of 196 million, up 8.1% year-on-year. In the first quarter of 2026, our Internet services revenue was RMB 9.5 billion, up 4.3% year-on-year. In this quarter, gross margin for Internet services was 76.1%. Advertising business continue to drive Internet business growth. Advertising revenue of this quarter reached RMB 7.1 billion, up 7.8% year-on-year.

Let me talk about intelligent or smart EVs, AI and other new initiatives segment. Revenue reached RMB 19.9 billion this quarter, up 6.9% year-on-year, accounting for 20% of the group's total revenue. Specifically, due to a decrease in quarterly deliveries of the SUV 7Cs we delivered a total of 8,856 new cars in Q1 2026. For Smart EV sales revenue, it reached RMB 19 billion. For other related business revenue, it was RMB 900 million.

Our average after-tax selling price this quarter was RMB 235,000. Affected by purchase tax subsidies and rising raw material costs, gross profit margin of smart EVs, AI and other new initiatives segment was 20.1% this quarter. In Q1 2026 our smart EVs, AI and other new initiatives segment incurred an operating loss of RMB 3.1 billion. As of 23rd April 2026, cumulative of the new generation SUV7 exceeded 26,000 units. As of 30th April 2026, cumulative delivery of Xiaomi 7 in the past 10 months reached 232,000 units.

In the first quarter 2026, our R&D expenses was RMB 8.95 billion, up 33.4% year-on-year. CapEx reached RMB 3.27 billion, up 20% year-on-year. Of this, smart EVs, AI and other new initiatives business accounted for 45.6% of total CapEx.

For net profit, in the first quarter of 2026, adjusted net profit was RMB 6.1 billion. At the same time, we focused on enhancing shareholder value and actively repurchased shares in the open market. Since the beginning of 2026, our share buyback amount has reached about HKD 8.4 billion, exceeding the total amount for the entire previous year, demonstrating the company's confidence in our long-term development.

We actively practiced the concept of sustainable development. In April 2026, we released the Xiaomi Group 2025 ESG report, marking our eighth consecutive year publishing ESG reports. The report comprehensively showcases our strategies and achievements in 2025 regarding data privacy, governance, responsible marketing and service, circular economy, sustainable supply chain, talent development and corporate governance.

So in terms of ESG ranking, in March 2026, we maintained our rating in MSCI ESG rating We received the top 1% of Chinese companies honor in the S&P Global CSA score, and were included in the S&P Global Sustainability both China Edition 2026 demonstrating continued recognition of our ESG initiatives.

Thank you, everyone. That concludes what I wanted to share with you today. Now we can begin the Q&A session.

Thank you, Alain. [Operator Instructions]

[Operator Instructions] The first question is from Morgan Stanley, Andy.

Mr. Lu, Alian, congratulations. Given the pressure in smartphone industry, you still performed and exceeded expectation. I have 2 questions. First question, for AIoT business in Q1, gross profit was very good. And last week, after the launch, your earbuds also sold well. So this year for AIoT business, while achieving high profit, high gross profit. In terms of revenue scale, can you achieve good performance in the coming 2 quarters? When it comes to new product launch and overseas market developments, what are some significant highlights?

AIoT business, I'm sure you all are interested in that. So last year in Q3, we already expected that would be memory cost increase, and it is going to be a super long cycle. And the extent of cost increase is also big. So for products relying on big memory like tablets and so on, that would be a bigger impact. So memory costs accounted for quite a big share of some of these products.

An AIoT business to our group is important. So we want to achieve a balance and also alleviate the pressure from memory costs. So in Q3 last year, for AIoT business, we enhanced its importance. And in Mainland China and overseas, we adopted different strategies. For China market, we focused on premiumization. This year, I think you gradually see many of our products. So our products are doing well. They are well received by users. We achieved good word of mouth. And in recent launch, we introduced a very good product with good external appearance and also some quality and also the connection with super AI assistant and so on.

At the same time, you also see our air conditioner. So it became very hot and it also sells very well. Users like our air conditioner because it cools very fast. And also the fan effect is very good. And then for our refrigerator, it keeps the freshness of food in a very good way. And then it is well received, especially when people need to redecorate their homes. So progress has been very good within Mainland market. For overseas, -- we are expanding our scale. Overseas -- our share in overseas market is still very small. But then for our AIoT business, there are many markets that we need to enter.

So given this situation last year, basically, we have solved the issues in many countries. Now we are in many countries, and we have expanded our product mix. Besides, we collaborated with many other e-commerce players, and so we're able to double our growth. So here, if you look at our overall AIoT business growth, we are able to achieve a good gross profit margin. In the future, I think potential is still huge. If you look at the China market, our earbuds, our watch, well, our share is still on the low side. There is still a long journey for us. For overseas, well, overseas market is 2x the potential of the Chinese market. And the competitive environment of overseas is different from the China market. I think for IoT business, that's my answer.

Let me supplement with some numbers. Just now Mr. Lu a lot about strategies and categories and channels and also about our overseas expansion of IoT. Now this is not a peak season or busy season, but for AIoT revenue overseas in Q1, it reached double-digit growth year-on-year. It already achieved. It already reached a record high in history, and it is around 40% of the overall IoT total.

Okay. My second question is about Xiaomi. So after the launch of UV and also looking at the buyer profile, regarding new generation U7 and last year, 7, what are the differences in user profile. With the launch of the 2 new models in terms of sales volume and profits, comparing with the situation without these 2 models, regarding sales volume, revenue and profit and important metrics, what will be the impact of these 2 new models. For U7, you can see that -- we have introduced 2 new products. So the U7 standard and also, we have introduced a G7 model. So for the 2 models or versions, one important idea is for SU7 comparing with Model 3, I think they may be rather similar, but then for U7, I think there are still differences. And after doing some analysis for Model Y, standard or entry-level version it accounted for 70% of the sales, and we realized that we may have some disadvantages in terms of cost. And then for users scenario, 600 kilometers range, I think the needs can be met.

But when it comes to even longer range, well, that may be a cost issue, given all these considerations, we have introduced a standard version and also a G7 version. Regarding the G7 version, we have already broken the SUV feed in the -- not in renting. So it is for -- well, it is a ceiling of SUV functionality. For these 2 products in the future, I'm sure they can actually complement to our overall product line. And after users have bought the cars, more than half of the users choose our [ 429,000 ] option. That is the full configuration. So more than half of them have chosen this version.

So I have done the market research and I realized from the research that there are some U7 users who are buying this. And also, many of the users are owners of brands, Mercedes-Benz and BMW cars. So right now, for G7 at the initial launch, every month, the capacity is around 2,000 odd units. I think if you need it, you can continue to place order, the cycle will be shorter. For the standard version, I think that it can very well solve the daily commuting needs so a range of 600 kilometers roughly. So I think the price can also use your budget in that case. I think in my market research, I asked the frontline colleagues, many of them joined Xiaomi from Tesla. And they said that as long as users can try can give it a trial of our product, then they will choose our model. So when it comes to car style degree of comfort, functionality and so on, products are very satisfactory.

For gross profit margin. The price difference is 20,000 and then for G7, I think gross margin will even be better. Now sales volume is not out yet. So I cannot really give concrete comment, but then the total volume, I think G7 is going to do well. Thank you.

Okay. Thank you for your question. Next question is from Goldman Sachs, Timothy Zhao.

Okay. Mr. Lu, I have 2 questions. First, I -- so we are happy to see that this year, you have exceeded market expectations in your AI progress. when it comes to AI business development and also bigger investment by many AI companies, well, this year, you are talking about [ JPY 16 billion ] of AI investment budget from MIMO 2.5 launch all the way till now. Do you have other operation data to share with us? For MiMo large model rhythm, how be? And then for me Clow, what will be the future plan and also next-generation AI OS road map and time table? How do they look like that is -- that's my first question.

Okay. Let me comment on our and for AI, expenses I'll ask Alain to supplement. For now we are promoting it with full force. So with close emergence, I think we are very quickly launching and then we are trying to make sure that it can be used with our tablet, our wearables and also our future EVs, our sound box and so on. So in the future, what is important is whether we can connect user data and then whether we can improve user experience, I think it is going to enhance experience a lot. But of course, all these cannot depart from large model and our framework and our AI OS, hyper OS transformation. I think all these are important.

Now we are proceeding with full force, and our team is collaborating this year for the OS launch, we are moving towards that direction. This is important.

Okay. Another question is about AI token and so on. So let me make a few points. As you can see, right now, we have already started some token attempts. And we have introduced different token packages for our users. So far, feedback has been quite good, as Mr. Lu said. 50% of the users are using our new versions, especially for the high-end models, the use and deployment is very high. So as a result, there are revenue related to AI token. So you asked about our AI investment and also our judgment. At the beginning of the year, we mentioned [ JPY 16 billion. ] And when our AI business develops, we will also continue to adjust this number because we realized that there are huge opportunities about AI. And regarding model iteration, if we get users recognition, then we will also release more volume for inference. And in the future, there may be a higher budget. But then this has to be based on our clear our ROI calculation while making new investments.

Okay. Now my next question is about EV business. So looking at delivery in Q1, more than 80,000 units in April, more than 30,000 units comparing with the whole year 550,000 unit target. So it seems as a run rate shows the difference. So what is your plan about new model? And then for EV business and new initiatives, gross margin in Q1 on a quarter-on-quarter basis, there is a decline. Alain just said that there is cost increase pressure. At the same time, there is one-off impact from cross-year order and also tech subsidies. So can you quantify the impact? And then for overall gross margin, how should we look at it in terms of new vehicles?

Yes, let me first comment in Q1, in January and February, there is only delivery of YU7 and for SU7, we are talking about this iteration. We have spent 2 months of not selling the old products. So we look -- we have also looked at the fast iteration of our other peers. And so we have spent 2 months to work on our old products so that users know that we are launching the new product, new SU7. After doing that, users word of mouth is very good. So that's because of our huge efforts.

And then in January and February, in Q1, only 80,000 units were delivered. And then in April, our delivery increased in April. For SU7 delivery, the delivery lead time was rather short. Actual delivery was a lot more than 30,000 units. So we do look forward to bigger volume. And then there is a larger model that would be launched in the second half of the year. We believe that, that model is going to be like a new platform. That model is very innovative. It is highly competitive. So we have a lot of confidence in that model. So for the whole year target, we have confidence that we can attain the full year target.

Regarding EVs. In this quarter, you can see that the gross margin of our EV business has declined. As you said, first of all, there is the purchase tax subsidy issue. That's the main reason. So regarding the end of last year, there were undelivered orders and then there was the VAT subsidy. So JPY 10,000 to JPY 15,000 was the amount. So ASP cost impact on gross margin. That's the first point.

Secondly, we started to sell some display car. And so that would also affect ASP and gross margin. At the same time, for the macro environment, there are issues regarding batteries and memory and also commodities, which would increase our costs. However, there are some factors that affect the whole industry. And relatively speaking, our ASP is higher than our peers. So there is cost increase, but then it did not affect our gross margin that much. That's one point.

So even though gross margin has declined, our overall gross margin within our industry is still on a high side. As Mr. Lu just said, we delivered 800-odd units in this quarter, which would affect the apportionment of our fixed cost. So now we're going to deliver the new generation SU7 and also the YU7 -- standard YU7 GT. So on a quarter-on-quarter basis, I think volume will increase.

And secondly, TT delivery will drive our quarter-on-quarter ASP. Besides regarding suppliers, we will continue to put in place some cost-reduction measures. So there will be some hedging. So these are the few factors that will affect our gross margin in the coming few quarters.

Next question is from CICC Wuhan Sing.

I have 2 questions. First, about the smartphone business. This year, memory cost pressure was big. And in Q1 for your smartphone business, shipments and gross profit has still shown some resilience. So in the future, given such crisis and challenges, how can you balance various metrics, including quantity, price and gross profit?

Right. Thank you. Well, we have discussed that many times. So this trend about the super cycle of memory cost increase did not differ a lot from our judgment. The cycle is very long. At the same time, the increase is a big expense. Since Q2 last year, the cost started to increase in Q3 as well. And then in that quarter, the cost increase was big in Q2 this year based on market quotation and also contract price. If we look at contract price, I think the increase is still big. So when it comes to cost increase and also cost for smartphone, this is a very big challenge. Besides it is not going to end yet, it is a very long cycle. I think we have to look towards 2027 and 2028 in Q3.

Well, in the past, the increase is 60% to 80% or even 100 on a quarter-on-quarter basis. But I believe that in Q3 this year, the increase will slow down. But still, the pressure is going to be huge because the base is very high. Even though there is just a small increase. The absolute value is very big already. So the impact on the overall industry is big, not only for smartphone. Well, for many products, memory costs account for a small share, I believe that there would be a huge impact on the overall consumer electronic industry.

Given that we have done a few things in Q1, you can see that we have made some adjustments. First, we have to dynamically balance selling price costs, volume and gross profit margin. and the relationship among these factors. So short-term price increase or price reduction may not be very wise. We have to come to a judgment about the market in Q1. For volume, there is some decline. But for ASP, it's increased by about 10% and our gross margin rose 2 percentage points. So this shows that our strategy is effective besides this year, we introduced some new products, MAX and some of the new products. So in terms of cost, I think we cannot just simply pass on the cost increase to the consumers.

So if we just increase the price, linearly, it is difficult for consumers to accept. We have to look at the users' needs as well. We have to make products that can meet users' needs and then sell the products to users at a reasonable price. That should be something we need to do. So we have to rationalize our product lines. Given the overall environment of price increase, I think we are still doing well in the China market.

If you look at the VCA activation, we have like 14% market share. This is because of our very important strategy, besides we tried our best not to increase price for all products. Even if we increase price, it is a small one only. So we are the last to increase price. We started to increase price in mid-April. Overall speaking, users still understand our stance. So we have put in place this overall strategy to phase up to the coming increase in this super cycle. Given this environment, we have to seize the AI phone opportunities. and AI-related opportunities.

My next question is about your going abroad plan. Just now you shared with us your progress in EVs. So regarding going abroad, and also your rhythm of new EV launch and also the increase in number of overseas sales centers, can you do more sharing with us?

For going abroad, I think comparing with the last quarter, we did not differ a lot. So first of all, in Q3, Q4 2027, we have to go abroad in terms of store opening. So we will first go to advanced countries and then developing countries. So first, high end and then high to medium to high end. So that's our strategy. And so far, for our team, we are doing preparation for going abroad because going abroad is complicated, there are a lot to do. There are a lot of legal and compliance requirements. And there are also localization needs for product match. And then we have to also make plans about network and call centers. So we are actually doing all the preparation work.

Next question from CITIC Yin Xinchi, please.

I am from Citi Securities. I have 2 questions. First, about MiMo large model. You just said that the daily average deployment already exceeded 1 trillion tokens. So I want to ask right now for token plan, what is the user conversion rate and retention rates for your AI team. In terms of future commercialization, do you also have internal appraisal targets or metrics?

My second question is about AIoT business. Just now, Alain said that for overseas AIoT business in the number and share rose fast. So in the coming 3 quarters, especially towards the end of this year for overseas AIoT business, how much will be the growth? And would that be new guidance for growth and share?

Let me first comment on AIoT. Alain can talk about MIMO large model. So I think the first question is this. We still think that IoT business is in the coming few years, the way that we can balance out the increase in memory cost and the impact on our business. This is going to be a very important balance for our business. So for AIoT business, we wanted to grow fast.

Regarding AIoT business in the China market, we insist on premiumization. Premiumization is the key. So in the recent launch, you can see that we have launched a few products. All those launch products have reached our internal targets. For earbuds, it has exceeded our target 2x. And for our products. So I think our product capabilities have been enhanced a lot and market acceptance is also very good.

In overseas market, the room is very big. Our share is just quite low still. So we have to do more product development overseas. Some products can satisfy overseas needs, but then very often, there are thresholds and barriers that are still high in overseas. In the past 2 years, I spent a lot of time to work on that.

And the third issue is channels. For channel starting last year, we put in investment in e-commerce. So I think that for overseas IoT development will still meet a lot of resistance. So AIoT business oversees growth can be fast, and I believe this is going to be a long cycle. The room is huge. Overseas AIoT business will see 3x, 4x growth potential.

All right. Let me get back to your first question about deployment of MiMo, let me make a few points. We have introduced token plan after that. We saw a few interesting phenomena that I can share with you. First, fee-paying volume is high. Token deployment exceeded 30% of fee paying. So fee-paying ratio is very high besides for token max version, token deployment exceeded 50%.

Third point, overseas number is high. The share overseas exceeded 50%. Retention rates, we did not disclose this number, but I think retention rate is also high. However, we are now working on AI models. And so far, we have not reached the business closed loop stage. If you look at many analysis about China and overseas, there are many new models being launched. We are still in the iteration cycle. We hope that when users deploy tokens, we continue to learn and iterate our model. So in the future, we still need to follow the market to adjust our token plans. And in the growth stage, we will collect data and integrate our models. That's the stage that we are in. We have still not reached the ultimate token plan fee model being a large business. So I hope you can understand this.

Next question is from Citi, King Hiu Wong.

I want to follow up on AI large models. Okay. Right now in the market, there are many large models, companies that will launch some new versions in June and July. So once every 2 to 3 months there will be an iteration. So regarding MiMo large models, what is the renewal time point? Are you going to follow the market rhythm? Or are you going to have your own plan? So you have your own strategic consideration. Just now you talked about deployments. So we have seen some price decrease. It seems that operators are launching large models, and they also have some sales plan. So what is your positioning in the market? What are your strategies? Regarding your company's efficiency enhancements, how can it be seen? Will it be realized in OpEx? So that's my question about AI.

Second question is about EVs. For Q1, EV on AI and new initiatives, business segment operation loss is [ JPY 3.1 billion. ] So in the future, as Mr. Lu said, you have much confidence in reaching the target. So in the coming few quarters, we will see more than 100,000 breakthrough in shipment. So for operating loss, I think in Q1, there will be the chance to cover the operating loss you still need to look at the AI investment of your company. So EV AI and new initiatives segment for this year. How will be its profitability? What would be its direction?

Okay. Let me talk about AI. And then Alain can comment on the next part. We do not have an internal target of iteration once every 3 months, we do not have a specific time line. Regarding model iteration, we do not have the need to announce it. We should not announce for the sake of announcing. So we have our own rhythm and our grasp. For AI large models, so Xiaomi MiMo large models should serve our business. It must be coupled with our business. This is very important. Now we have many business centered around scenarios with the data and also the AI large models. We also have to look at its cost. So without business closed loop, it is difficult to assess. So we need to strengthen our large models. At the same time, we will also sell tokens to the market. Of course, that depends on market competition that may be helpful to Xiaomi.

We will take this two-pronged approach. So I think it will be a balance between medium and long term and also horizontal and vertical. This will be a more favorable approach. I think this is the biggest difference between Xiaomi and other companies.

Right. Yes, let me supplement on a few points. Just now Mr. Lu said, that we are not a system focusing on large models. Our main business is not to sell tokens. So we will not announce or launch new models -- large models for the sake of launching. We will launch when we are ready.

Regarding internal enhancement, we encourage our employees to use our MiMo models more. But this is to help them enhance efficiency, and they can also generate more data to help us to iterate our own models, so that our models will be better. So this is part of the efficiency enhancement. It is not only to enhance our own efficiency, but also the capability of our models. These are 2 parts.

And your second question is about our EV EV, AI and other new initiatives, future direction. I think you can see quite clearly that in Q1, comparing with the previous quarters, the biggest difference is deliveries have come down. Just now we have explained that in -- this quarter, we did not deliver SU7. We focused on U7 and we prepare for the new generation SU7 launch. So there was some impact on revenue.

In the future, in Q2 quarter-on-quarter delivery for EV will rise for sure. That's the first point. Of course, we will increase our investment into AI. In the future, I think these are the 2 main results of our operating for a loss. So it will be the result of these 2 factors together, volume, gross margin and AI investments.

Next question is from JPMorgan, David Cole.

I'm from JPMorgan. I have a question. My question is in 2025 second quarter, delivery reached the peak and then after that, it declined. What are the reasons behind? How can you get back the expected growth momentum?

Okay. For the expected delivery, you said that there was a decline from the peak. Well, the main reason is in Q1, first of all, when we made the expectation at first, the volume was big. But later on, delivery cycle was rather long. And when consumers waited, there was also some disruption or disturb some users switched to other brands. We saw some per brands, which have locked in some users orders. So some users have switched to other brands. And looking at our product line layout. So basically, we are benchmarked again mode. And then within the cities for daily commuting range is around 600 kilometers that can satisfy users' needs.

We have also got another model regarding 800 kilometers. So for 600 kilometers, I think that range can satisfy people's commuting need already. And for the overall car model launch, we have already added one more model. We have now U7 standard and U7GT. After the launch in the past weekend, we saw quite good response from users test driving. I think, gradually, we will get closer to our expected volume.

Next question is from UBS, Jimmy Yu.

My first question is about smartphone and impact on sales volume and then you will try your best to achieve some balance in Q1 this year. Gross margin was rather steady on a quarter-on-quarter basis. My question is your products have been enhanced. That is part of it and besides there is global inventory sector. So if you look at smartphones and consumer electronics in the future, what is the outlook on gross margin? What would be the trend, taking into consideration cost increase for memory?

I think given the cost increase, pressure will continue. That is an objective effect. So we need to solve this problem. We need to balance scale, profit and also gross margin. We need to achieve a balance. But more importantly, when cost increases, we have to ask a simple question. So now users may need to spend more time. Are they still willing to do that? We cannot simply pass the cost increase to consumers. Given the new cost structure, we need to make sure that users are happy with the value for money -- so we have to satisfy our own values as well. That is important. Besides, we need to adjust our product structure and also quality.

Scale decline is for sure. But I think ASP increase can offset part of the impact from scale decline. And we need to work on our GP margin, then I think gross profit will be controllable. That is our overall thoughts and strategies about our smartphone business.

Thank you for your question. Because of time, we will conclude the call here. Thank you for your time. I hope that you will continue to support Xiaomi Group. Thank you, and goodbye.

Okay. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Greetings. Welcome to Xiaomi's 2025 Annual Results Announcement Investor Conference Call and Audio Webcast. Today's conference will be recorded. If you have any questions or objections you may disconnect at this time. [Operator Instructions]

Now we will have Mr. Xu Ran, General Manager of Group Investor Relations and Capital Markets Department to start.

Welcome, everyone. Welcome to the investor conference call and audio webcast for the company's 2025 annual results. Before we start the call, we would like to remind you that this call may include forward-looking statements, which are underlined by a number of risks and uncertainties and may not be realized in the future for various reasons. Information about general market conditions comes from a variety of sources outside of Xiaomi. This presentation also contains some unaudited non-IFRS financial measures, which should be considered in addition to, but not as a substitute for the company's financials prepared in accordance with IFRS.

We have William Lu, Partner and President of Xiaomi Corporation; and Mr. Alain Lam, Vice President and CFO of the Corporation to talk to us.

Mr. Lu will share recent strategic and business update. Thereafter, Mr. Lam will review the company's financial performance of 2025. And then after that, we will have the Q&A.

Mr. Lu, please.

Good evening. Thank you very much for coming to the 2025 full year call. Now this evening, I'll be talking about 3 points. First of all, review our main achievements in 2025. Second, share of breakthroughs in hard-core tech, in particular, in AI and embodied intelligence. And thirdly, we'll look ahead for the strategic direction focus in 2026.

First of all, in 2025, some of our outstanding achievements. Well, in the year, our Xiaomi Group maintained high growth with both annual revenue and net profit reaching all-time highs. Total group revenue reached RMB 457.3 billion, surpassing the RMB 400 billion mark for the first time, up 25% year-on-year. Adjusted net profit reached RMB 39.2 billion, up 44% year-on-year.

By segment, first of all, Smartphones. According to Omdia, in 2025, our global smartphone shipments ranked top 3. Market share was 13.3%, remaining global top 3 for 22 consecutive quarters. In Latin America and Southeast Asia, shipment ranking rose to second. In Europe and Africa, third. According to third-party data in Mainland China, our smartphone sales ranking rose to second.

On premium models. In 2025, premium models in Mainland China accounted for 27.1% of total smartphone sales, up 3.8 percentage points. In RMB 6,000 to RMB 10,000 price bracket, our market share rose by 2.3 percentage year-on-year. We solidified our high-end base domestically and are making continuous breakthroughs in the RMB 6,000 to RMB 8,000 ultra-high-end market.

By end of February 2026, we launched our first Leitzphone for global markets, priced at EUR 1,999, a new milestone in our overseas premium strategy. We'll continue achieving top-tier pricing in mature international markets and elevate our premium overseas sales to new heights.

For IoT business in 2025, revenue surpassed RMB 120 billion for the first time, reaching RMB 123.2 billion and 18.3% year-on-year growth, hitting all-time high both domestically and internationally.

For the home appliances revenue, it reached 23% plus growth with record shipments. Wearables ranked first globally, TWS earphones ranked second. Tablet shipments grew 25.2% year-on-year, ranked fifth. Our AI glasses released in June '25 ranked third globally and first in China. We continue to drive full category premiumization at home and abroad with overseas high-end products, achieving stellar performance.

On premium strategy, in '25, our tech home appliances entered the European market already covering Spain, France, Germany, Italy and more. For autos, Xiaomi Auto delivered 410,000 units in 2025, far exceeding the 300,000 units target set at the year's start. February 13, '26, cumulative deliveries surpassed 600,000, and we are fully committed to delivering 550,000 units. In March 19, we officially launched a new generation SU7. It features major upgrades inside and out, including across the electric powertrain chassis, electronics architecture, et cetera. Within 34 minutes of launch, locked orders for SU7 exceeded 15,000, surpassing 30,000 orders after 3 days.

For this year's MWC, we also showcased our Vision GT concept car, not just a concept car, this is Xiaomi Auto's latest exploration of design innovation built on hardcore technology. We are the first Chinese brand invited to participate, and it represents recognition by the world's top simulation driving platforms. For China's auto industry, it shows that in terms of design and innovation, Chinese automakers can already compete on par with the world's best.

For hardcore tech, in '25, our R&D investment exceeded RMB 33 billion. For '26 we plan to invest over RMB 40 billion with more than RMB 16 billion for AI, embodied intelligence and other innovation fields. These investments build our solid product capability defenses.

And for AI in 2025, we achieved breakthrough progress. For AI, it is an era of truly useful AI, undergoing historical leap from usable to truly useful, a paradigm shift from single tasks to complex tasks processing, from passive to active planning, from tool attributes to ecosystem attributes, and for us with rich terminal products and use cases across smartphones, cars, home appliances, IoT, real data value of AI far surpass the single category companies.

Two, our foundation large models enter the leading global open-source tier. In March of the year, we released 3 models, Xiaomi MiMo-V2-Pro, MiMo-V2-Omni and MiMo-V2-TTS, completing our technical foundation for the Agent Era. MiMo-V2-Pro surpasses 1 trillion parameters, supporting 1 million token context windows and ranking 8th globally in Artificial Analysis Large Model Intelligence Index, fifth by global brand. During closed beta and public launch, these models rank first in weekly calls and held first place for many days on OpenRouter, single days as much as double in second place. And we will keep upgrading our foundation models as we move towards general intelligence.

Three, we are poised to lead AI in the physical world, deep integration of AI in the physical world as the next frontier. We control over 1 billion hardware access points for its ecosystem. In March '26, our phone AI Agent, Xiaomi miclaw entered limited testing. We're the first OEM to attempt deploying [ launch ] Lobster on phone terminals, exploring the delivery of true AI phone and ecosystem to users.

For auto, the new SU7 is equipped with our XLA Cognitive Large Model, achieving mall parking, navigation, complex scene understanding and voice control, improving both driving and experience. For SU7 Ultra, it's equipped with super shell AI, a smart cockpit and advanced AI.

For the home in November '25, we launched our Miloco smart home solution, giving smart homes eyes and brains and hands and feet for the first time, a pioneering real world application of Xiaomi MiMo, laying a new vision for next-generation smart homes.

Fourthly, for our AI is now Xiaomi core innovation engine in '25 with our tech-forward, about 2/3 of the winning projects used AI, reimagining work across fundamental materials, chipsets and OS, intelligent driving, tech home appliances and more, backed by China's strong AI industry. The coming decade belongs to China. And also Xiaomi is well positioned in person, car, home ecosystem. We'll invest RMB 60 billion in AI over the next 3 years. And in this era, we are confident that we'll place a new trade for Chinese AI.

For embodied robotics, it is the ultimate integration platform for AI chips, OS and manufacturing capabilities, a high barrier field. In 2026, we launched a haptic-driven precision grasping, fine-tuning model, core tech for robotic dexterous hands. Shortly after, we open-source a Xiaomi Robotics VLA large model, Xiaomi-Robotics-0, achieving several new SOTA results.

In March, Xiaomi embodied robot began internship in our car factory, achieving 90.2% deal size site simultaneous installation success for self-tapping nut workstations, meeting production line cycle times as quick as 76 seconds with 3 hours of auto operation. These are just starts. Over the next 5 years, we believe large numbers of embodied robots will work in Xiaomi's factories. And robots will break brown boundary between virtual and physical worlds. But there are challenges such as cost increase, et cetera. In the short term, there may be some pressure on our business. But on the other side, we will be steadfast in our strategy so that we will continue to have breakthroughs in AI, chips, OS and embodied intelligence.

We are committed to scaling our global business model and advancing Chinese tech worldwide. This person, vehicle, home ecosystem is not just a product combination, but the platform for understanding users' full scenario data. We'll firmly seize the opportunities of AI era, and we are filled with endless possibilities and imagination.

Well, thank you, President Lu. As shared by Mr. Lu, in 2025, we have achieved historical leap. Our total revenue reached a record high of RMB 457.3 billion, setting a company best. This year, we achieved a year-on-year increase of 25%. Revenue in the fourth quarter is a new single quarter record. Overall, gross profit margin was 22.3%, up 1.3% year-on-year, historical high also.

The second half of 2025 was more challenging for the first. For the full year, our smartphone times AIoT segment revenue was RMB 351.2 billion, up 5.4% year-on-year, which is also a new annual high. The smartphone times AIoT segment gross profit margin also reached a record 21.7%, up 0.5% year-on-year.

For smartphones, for the year, revenue was -- sorry, RMB 186.4 billion, accounting for 40.8% of total revenue. In '25, our global shipments reached 165 million units. Our high-end strategy had significant results of continued product strength enhancement.

Third-party data shows that in 2025, our high-end smartphone sales in the Mainland of China accounted for 27.1% of our total smartphone sales, up 3.8% year-on-year. In that, RMB 4,000 to RMB 6,000 price segment, our market share reached 17.3%, up 0.5% year-on-year. For RMB 6,000 to RMB 10,000 segment, our market share was 4.5%, nearly doubling year-on-year.

According to third party in 2025, our global smartphone shipment volume ranked top 3 with market share 13.3%, maintaining a top 3 position globally for 5 consecutive years. In 58 countries and regions, our smartphone shipments ranked top 3. And in 70 countries and regions, we ranked top 5.

Despite rising memory prices in 2025, our smartphone gross margin remained relatively healthy at 10.9% for the year.

For IoT, for this year, our revenue and gross margin both performed remarkably. 2025 revenue from IoT grew rapidly by 18.3% year-on-year to RMB 123.2 billion, a new record. And both for domestic and international sales, it was at all-time highs, thanks to product structure optimization and improved product strength. For gross profit margin of IoT, it was a record high of 23.1%, up 2.8% year-on-year. By category, large smart home appliances performed exceptionally well with revenue up 23.1% year-on-year, a record high.

Our wearable devices maintained rapid growth and an industry-leading position. Our wearable band ranked first in global shipments and TWS earphones ranked second. Tablet products continue to grow fast, ranking fifth globally with shipments up 25.2% year-on-year.

Internet services. We continue to expand our user base. In December '25, our global MAU reached 750 million, up 7.4% year-on-year. Of these, Mainland China MAU reached 190 million, up 10.1% year-on-year. In 2025, our Internet service revenue hit a record RMB 37.4 billion, up 9.7% year-on-year. And of this, just in the fourth quarter 2025 alone, Internet service revenue reached RMB 9.9 billion.

Throughout 2025, our Internet gross margin remained relatively stable at 76.5%. Advertising continued to drive Internet business growth with annual revenue of RMB 28.5 billion, a record high. Overseas Internet service revenue grew by 15.2% to a record RMB 12.6 billion, accounting for 33.8% of total Internet service revenue.

Next, on EVs. Our EV and AI and innovation business segment, annual revenue for the segment reached RMB 106.1 billion, surpassing RMB 100 billion in less than 2 years, up over 200% year-on-year, accounting for 23.2% of the group's total revenue. Of this, Smart EV sales revenue was RMB 103.3 billion, with other related revenue at RMB 2.8 billion. For the year, gross profit margin for Smart EV and AI, innovation business segment was 24.3%, up 5.8% year-on-year. In 2025, the segment achieved positive annual operating profit for the first time, recording an operating profit of RMB 0.9 billion.

We delivered a total of 411,082 new vehicles in 2025. In the fourth quarter alone, 145,115 new vehicles were delivered, a single quarter record high. The average post-tax unit price for the year was RMB 251,171, up 7% year-on-year.

Next, over the past 5 years, our cumulative R&D expenditure was RMB 105.5 billion, up 37.8%. '25 alone, R&D expenditure was RMB 33.1 billion, up year-on-year, and we estimate starting from 2026, our cumulative R&D expenditure over the next 5 years will exceed $200 billion.

For net profit in '25, the group's adjusted net profit was RMB 39.2 billion, a record high and up 43.8% year-on-year. For CapEx for '25, our CapEx reached RMB 18.2 billion, up 73% year-on-year. And of this, Smart EV and AI innovation accounted for 66% and over.

We continue to enhance our shareholder value and we actively repurchased shares on the open market. In '25, our share repurchase was approximately HKD 6.3 billion. Since early '26, our share repurchase totaled about HKD 4.7 billion. In January '26, we announced an automatic share repurchase plan for a cap, with a cap of HKD 2.5 billion, demonstrating our confidence in our company's long-term future.

We actively practice sustainable development. In low carbon initiatives in 2025, our group purchased more than 40 million-kilowatt hours of green electricity, over 10x of last year. In '25, our [ PV ] electricity usage in our auto plant exceeded 13 million-kilowatt hours, reducing carbon emissions by nearly 10,000 tonnes annually.

On ESG ratings in '25 for CDP Climate Change and Water Security Survey, Xiaomi received a management level B score. Also, in March '26, we achieved our best-ever score of 81 in EcoVadis gold medal, marking another recognition of our ESG efforts.

We will continue to follow a robust and enterprising operating strategy and look forward to an even greater achievement for 2026. Thank you so much. This ends my report for this evening. Next, we can have the Q&A session.

[Operator Instructions] Morgan Stanley.

Greetings both. First of all, congratulations for 2025, revenue and profits have reached new record highs. I have two questions, one on memory. We see that memory prices have been rising significantly. Investors, what's most concerned about this for the segment of smartphones. And we noticed that there are already some smartphone selling price hikes in order to offset this memory prices hike. But your smartphone sets are still the same in terms of pricing.

So perhaps in supply chain management and in inventory, you are better than your competitors so that in this challenging situation, you exceed your competitors in performance.

Perhaps Mr. Lu can explain to us for your new thoughts concerning smartphones and what are your responses to this year's challenges?

Right. For memory, yes, for each quarter, you have always been caring and concerning about this. And in different occasions, I have also talked about my views on this. In the past, I have said that this is a period that we are going through, and we have to look at 2027. And there may be high price hikes and we have done our work in this regard. But on the other hand, my own feeling is that the cycle of hikes may be longer than I had expected.

First of all, there is the AI-led demand. And also for memory, the cost hikes magnitude, I think, is going to be higher and much higher than I had expected. My expectation in the industry was already forward, but I think it's going to be even higher in terms of price hikes for this. So it is longer cycles and the price hikes is going to be higher than I had expected.

So for all the consumer items, it is going to impact greatly, not only for smartphones, which we are more concerned about. But for some categories, for some smaller capacity, categories with smaller memories, units, there is a situation where there is a cut in supply even. So this is an actual situation that's facing us in reality.

The impact of that, we have a calculation which is very simple, and that is we look at the memory and it's part of the product. The more it is as a part of this product category, the more it will be impacted but less -- of course, it will be less impacted. And in our categories, smartphones, tablets, notebooks, they are more in terms of proportion. But on the other hand, there are some, for example, high-end smartphones. Relatively speaking, it is less for memory part.

So for a company, if the products will have more memory as a part of their product then, of course, the impact will be higher, less will be less impact. So this is a very simplistic way of calculation I'm looking at it.

In the past 2 weeks, looking at the memory price hikes, we already see some competitors raising their mid-priced smartphone prices. And I fully understand that. I think for annual smartphone manufacturer, if they do not unload to the consumer, it is very difficult to sustain this kind of price hikes. But I think it is inevitable for this. And for Xiaomi, our pressure is very, very large indeed. But as I say, we will try our very best to digest this to protect the consumer. And when we can do this no more, we will have to hike our smartphones prices, and we hope that our consumers and our customers will understand this. Yes, we are slower in price hikes, but it doesn't mean that we are immune from it.

There are some competitive advantages for Xiaomi, which I can tell you. So for example, in home appliances, the category, for this category, it will be less impact. For smart cars, EVs, it would be higher because the memory part of that is higher. But on the other hand, compared to the proportion in smartphones, it will be lower. So with our variety of product segments, this is how I see it. And through this, I hope we will be able to better resolve this problem.

For smartphones, tablets and notebooks, we are a company -- we are globally leading and also in EVs as well in the past few years. And for the memory suppliers around the world, we have built a very good relationship, mutual trust, and we have long-term supply contracts. So at this point, I do not feel that we have any risk of nonsupply or stopping of supply. So this is our competitive advantage compared to our competitors.

The third point is that in my previous expectation, I was more pessimistic about memory price hikes. And therefore, I have been making more aggressive preparations. So in that case, our inventory sufficiency was higher. But overall speaking, for our terminal products cost, it is highly impactful. So this short-term pressure is definitely in existence, it is there.

Mr. Lu, this is very clear. My second question is about our vehicles. For the new generation of Xiaomi vehicles, there had been a successful announcement. And in the investor interaction, I noticed that some investors feel that we -- that Xiaomi doesn't -- no longer talk about or announce the data, but only for the unit data, well, and this is more negative. But for Xiaomi, what is the sale? I think it's going to be stable and it will be positive, and this is how I see it. Can you talk about these 2 investors' point of view?

Andy, let me just answer that question. Well, for the announcement of sales from the users side, we see some phenomena. The first phenomenon is that for the first 3 days of sales, we already have achieved significant sales, 34 minutes, 150 locked-in sales. And after 3 days, it was over 30,000 units sales, and we have lived up to our commitment. And that is for the delivery starting from the fourth day of launch, we have already started delivery because we have already made preparations for the manufacturing of cars. And also, with some of the problems of the previous batch, they had to wait for a long time and before we could deliver to our users, those who have locked in their purchases. So we have absorbed our experience, and we had a new iteration.

Well, as you have mentioned, why do we only disclose our locked-in contracts. We think that this is more fair. So it is not about preordering or big ordering. It is locked orders. Locked orders are solid, and that is the buyers are going to take delivery of these vehicles. And this governs our manufacturing cycle as well. So we think that's locked contracts or purchase is a fairer way of looking at it, and that is why we made the change. And in the industry, I'm sure people have their different practices, but this is what we maintain is the right way. So this is the first point. And also using this particular opportunity for our -- concerning the locked in contracts, let me share some information.

So for the first point, it is that a lot of investors have asked about the locked orders. Buyers, are they from our previous buyers or new buyers or most of them we know are new buyers. For the locked orders, they come from new buyers. So it is not the original owners who are changing to -- changing from -- [ 2 Euro ] cars.

For iPhone, about 50%, it is first generation. And for 60% of the new buyers, they are iPhone users. So for our locked contracts, the progress is faster than our first-generation users. So compared to the previous numbers, these locked orders are bigger. And also, you are very complementary of our allocation. About 60% of them are using the paid choice, the paid options. So compared to the previous generation, we think that the penetration is better. For example, female buyers, iPhone users penetration and also choosing different options of colors, for example, all these have been performing better in penetration than the last generation, the previous generation. Thank you for your question.

Timothy Zhao from Goldman next.

I have 2 questions concerning AI. First of all, concerning in the past 2 years, there are some models and including the foundation models. So for AI capabilities in the ecosystem, what is our capability? And also for miclaw and also for the IoT, how is miclaw positioning? And how do we see it done with IoT? And how is miclaw going to be significant? And also, I would like to know how we consider AI in its users and also developers and internal to Xiaomi and its commercialization? In LLM, what are some KPI considerations for your team? You once said that in the next 3 years, there's going to be a RMB 60 billion expenditure? And how is this on OpEx and CapEx, the allocation, please?

For 2023, we have used a lot of energy to consider our AI strategy going forward. So we have faced it. First of all, the infrastructure for AI, algorithm, et cetera. And out of the infrastructure, we had an exponential growth in terms of its application. And last year, we had already said that '26 was an explosive use of AI era.

So from virtual, AI has moved into the physical world. And this is true to my earlier prediction. And with this prediction coming true, we will be developing our AI/LLM. We started investing in '24 and in 2025 in [ MiMo ] LLM or large language models, we have made a lot of progress. And we have been very clear last year in saying that this year, '26 will be the year of explosive use of AI. And last year, we were more considering about agents, AI agents. So in individual terminal, how can AI have a bigger usage so that people are able to do things that they were not able to use before.

With OpenClaw, it's allowed us to very quickly roll out miclaw in testing. So at present, from the responses of our testing, it is very, very positive. And going forward, there is a huge market, and that is AI going to the physical world. So it will be in driving, in robots, in humanoids, et cetera. So in this area, Xiaomi has already made the deployment. And at the end, I think it will have to serve our entire ecosystem of Xiaomi.

So this is a direction. This is a large direction, and we will continue to strategically follow that. And also, you mentioned miclaw. And for miclaw, this AI agent of Xiaomi, this is our own developed and it is an agent and it is going to test our modeling capability and also our limitation, and also, it's going to test how we are able to deeply integrate and also our data capability. And at Xiaomi, we will do our own integration with our own data from our users.

So we will also be using cloud-based data. And also there will have to be certain integration into the system and also safety, we will be good in protecting safety. So for Xiaomi miclaw, it is going to be the prototype for the future AI agent. Now this is still early on. We do not have some specific commercialization model. And I don't have any KPI for the team yet because only when it is mature will the team has a certain KPIs.

So as for the RMB 60 billion that you talked about, yes, my colleague will answer that question.

That's right. For the [ RMB 16 billion ] and 3 years -- RMB 60 billion, it is -- it includes R&D and also CapEx. But of course, in R&D, it also includes the distribution from previous year's R&D. So it is our present period R&D and also our previous R&D and also CapEx. So there will be 3 parts. If you look at the 2026 [ RMB 16 billion ], most of it is R&D expenses, the present period. So it's a 70% present period R&D. So if it is CapEx plus the previous years, it would be the rest. So the next 3 years, every year, our CapEx will have some previous CapEx, which had been detained into this year. So it may be lower than the 70%. So it is for this period as well as a portion from the previous year's CapEx or amortization from previous year's CapEx.

China Capital, Wen Hanjing next.

I have 2 questions. First question concerning our IoT business. We see 2025 IoT performance have been very, very good from revenue and also in progress and advancement. So for this year, there are 2 concern points. They are positive. And for home appliances, new highs reached. But some investors are concerned that with the domestic situation, what do you say the economy ramping down a bit? How do you see this? And also, what about IoT going overseas? What is the planning?

And secondly, for vehicles in 2025, overall, for EVs, it is already profitable. And also for future planning for the entire year, how do you see profits for the entire year for vehicles?

I'll be talking about IoT, and then Alain will answer the other question. For IoT for this business, because we have a number of different categories. I'll be talking about China market and overseas markets. For China market, I think there is an opportunity, and that is premiumization of IoT. For IoT business for us, even though it is very large scale, but our ASP is low. Last year, we had major progress made, but it is still far from our goal. Our watches, our, for example, our hairdryer, et cetera, I think still the average price is relatively low.

So in R&D, with our investment in that, I think this year, we are going high end. I think there will be a lot, a lot of positive progress. So I think this is a huge opportunity. So for major home appliances, for our washing machines, our fridge, and it is 4 points. And for aircons, it is 10 points. So for ESG, I think there is still room for pricing. And for our IoT business, overall, last year, it is already at a very high level of AIoT as we will continue to do so.

As for overseas business, I think there is a huge space for development because our market has always been the -- in China. If going to the North American market, it's going to be 3x of our original market size. And it's -- so that is to see it's going to be 6x if we reach our potential. It's going to be 6x or at least a few times our domestic China market. So there is a lot of empty room for us to fill in terms of overseas markets. We will send people. We will send our products. And with our IoT development, there had been a lot of overseas and information and testing, and there is huge room for overseas growth and development. So for our high ASP products, this is a high area of growth potential. So this is our overseas plan.

Last year, it was 4.5 shops and it's going to grow to 10 or 10,000 shops. And I was in London in Xiaomi Home, I was able to observe that most of the products were high-end product selling. So you think that actually, our categories are very full in range, and these overseas markets, for example, in the U.K., they are selling at high end. So I think there is huge room for development in the overseas market.

For the vehicle question, last year in 2025, we have delivered over 410,000 units, far exceeding the 300,000 unit target we set at the year start. So at the year start for this will be 550,000 units for this year's delivery target for 2026. So '26 compared to '25, there is growth. But for the overall situation in '26, there is pressure. So for our expectations, et cetera, we are still very confident that we'll be able to reach our target.

As for our target profit. You would know for this category, it is AI and new business segment. So that would include our AI investment and also new development areas. So you cannot just look at the segment as just an auto segment. It includes other new businesses in this segment. But at present, the new businesses are still in the investment stage. As I've mentioned, in AI, for example, this year, we will continue to increase our investment in AI, including in robots. Robotics, we'll increase our investment there as well.

So you have to look at 2 areas. One, auto in this segment. And secondly, AI plus new business investment. So for this particular segment, last year, it performed very well. For this year, as auto growth and also in other areas, the kind of fruit that we're going to pick from them, the results, this is going to be an encouraging segment.

Kyna Wong, Citibank.

Can you hear me fine?

Yes. We can.

I have 2 questions. First of all, I would like to know for the Middle Eastern situation recently, I don't know whether for the overseas business, including IoT, handsets, has it impacted you? Are there certain logistics and also cost of raw materials had presented issues to you?

And also another question concerning your gross profit margin. For this year, for handsets or smartphones, is there a principle, let's say, under what kind of profit level will you be keeping it or making certain choices for adjusting the price. So for smartphone handsets to protect your profit margin, gross profit margin? And also for vehicles, there may be some pressure, as you have mentioned before. And how do you think this will be making your performance better than your competitors? Are there certain safeguards for profits and also AI, IoT because premiumization is a strategy of yours, you did say that for this kind of premiumization. What is your plan for AIoT, please?

First of all, for Middle Eastern conflict, it's nothing that we want to see, certainly. I hope that there will be a solution for it because it's going to impact industries and economy around the world, it's going to impact big way.

As for Xiaomi business, the Middle Eastern overall situation, for revenue from that part, it is not so much -- it is only in the single digits as a contribution to our profit. So in terms of the market from the Middle East, it's a small proportion of our overall at Xiaomi. So it is controllable from that regard. But at the same time, we also see that the oil situation from the Middle East, we already see some pellets, plastic pellets, and the raw materials is influenced or impacted. But overall speaking, it is still controllable. So that's for your first question.

Second question, concerning cars, IoT and also smartphone handsets, the gross margin and what is our pricing strategy, well, for this, I would say, first of all, for memory, for memory components, we are to quantify that. I would say in the past, for a quarter, for example, we expect it to be at a certain high price, but actually, it's going to be at an even higher price, rising even higher.

So we are very -- it's very hard for us to quantify that even for a small increase, it may because it is such a big part of the product, it will be impacting the cost of the product a lot. So it is very difficult to foretell early on, like what we had been able to do before. But for smartphones for this category, I think given our size and also our market share, it is very important for us. So if you say whether there's a principle, it would be that we hope. We try our best to make some balances. So my consideration is that we want to maintain our market position. That is very important to us because for smartphones, there are very few listed companies in this category.

So I'm not being able to get a lot of accurate data from the industry competitors. But from my years of experience, I know the following. For example, in vehicles, the absolute number as a part of the overall car price, it is less in terms of its impact, but not as big as a smartphone part. For IoT, it is even -- it is also even lower in terms of memory, internal memory price impact. So different categories will have different impact. What is big impact would be smartphone, notebook and also tablets, less so for smart cars, less so for vehicles that is, and even less so for IoT.

Next question, Citic, Xinchi.

I have 2 questions. First of all, on AI business. Miclaw has been introduced. And I was fortunate to have joined the launch. That was excellent. Can you give us more guidance? And that is at what point of maturity would you in big model or miclaw to commercialize them? And how would that be like in revenue? That's the first question.

As for the second question for this year for chip, for example, do you think that you can have some progress to update us?

For miclaw, I have already talked a lot about it, and I'm sure as a user, you will have felt this product, and you were there at the launch, and it's given us a lot of nice surprises, but it's a new product. And we still have a lot of -- there's a lot of room for improvement. And I, myself, also have gotten a lot of responses, so we have to improve on it. But I think the iterations will be very fast, and it will be a new version in a few days. So it's going to be -- it's going to have high speed iterations.

For Xiaomi overall speaking, for AI, it's still going to be contributed to our users. For the commercialization of AI, I would say, at this point, it is still too early. Even though our large model, efficiency is high, our token commercialization, for instance. But from absolute numbers, it may be a little bit high. So at this point today, I would say commercialization is too early to talk about for us.

And also, we already see our XLA model, XLA model. This is the XLA model, which is a cognitive large model. And SU7 is equipped with it from -- at present internally from our testing, it is very, very good in performance. So for these 2 models of cars, I am a user. And I personally would use -- if I use them, and if I have any questions in terms of use, I will put these cases to the team. And I personally experience these auto driving functions. It will be going forward step by step.

And also our auto driving, whether the models or chips, we already have some deployments. So integration terminal to terminal, and when we have this ready, it's going to give a lot of new experience to our users. I don't know whether you've been driving our cars. Yes, watch out for its progress as we integrate more and more of our models into them for automotive.

Because of time, this will be the last question from Zoe Xu of UBS.

A lot of questions have already been asked by others. I have 2 questions to ask concerning new business investment and also IoT. For new business, with the models iterations faster, and you said that there will be more investment into AI. So for expenditure on new business, is chips side will be adjusted? Or do we see that there will be new chips introduced?

Second question on IoT. Just now it's been mentioned for tablet and notebooks, there will be some cost impact. So will there be something like smartphones pricing strategy and that is to emphasize the experience for users, please?

Well, for this year, we have increased a lot of R&D expenses. But for chip, it is a long-term strategic capability of ours. I have already said that this is a platform capability chip because it's going to provide capability for a lot of profit -- product types and product categories. So even though in AI, we have increased our investment, but we have not slackened our investment in chips. Actually, some of the chips, many of the chips. They are part of our big AI strategy. So we will definitely be steadfast with it.

As for PC and tablets, we will follow more or less the same strategy as for smartphones. But please also notice that for the notebook that we have just launched, the Xiaomi NoteBook, after 4 years of development, it is selling very well. And it is the demand is even higher than we had expected. When we launched this NoteBook, we already knew that the memory part will be increasing in price. But on the other hand, the response has been so encouraging because of the product strength is good, even though it is more expensive, the users will be able to adopt it and they'll accept it.

So I think product innovation, technological capability, these are important, even though memory is hiking in prices. But still, we will have ways to make our products attractive. In 2022, through our efforts, I think our company and our management team will still be able to deliver good performance for everyone.

Thank you. We end the meeting here. Thank you very much for your participation. Thank you for your support for the company, Xiaomi.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Welcome to Xiaomi Group's 2025 Q3 Results Presentation Investors Conference Call and Webcast.So if there are any issues you may hang up now. [Operator Instructions] May I ask General Manager of IR Department and PR department to host this call.

Good evening, everyone. Welcome, and thank you for joining our Q3 2025 earnings call. As you already read from our financial statements, this quarter, Xiaomi once again delivered a solid financial performance. In Q3, amid a rapidly changing external environment and intense competition, Xiaomi's business lines maintained steady growth. Group total revenue reached RMB 113.1 billion, up 22.3% year-on-year, marking the fourth consecutive quarter exceeding RMB 100 billion. Group profit margin -- group gross profit margin reached 22.9%, up 2.5 percentage points year-on-year, hitting a new record high. Our adjusted net profit reached RMB 11.3 billion, up 81% year-on-year, setting a new record high. In terms of specific business operations, there are several highlights First, our 17 series achieved a remarkable success with total sales increasing 30% compared to previous generation. The Pro version accounted for over 80% of sales with PX model proving most popular. We achieved historic breakthrough in the 6,000-plus price range. Our major home appliance factory commenced operations. This marks our third large-scale smart factory following its smartphone and EV facilities, representing a significant stride forward in smart manufacturing. Internet revenue reached record high.

Innovative segments, including EV, AV and other AI and other new initiatives achieved profitability for the first time in a single quarter. Given recent changes in the external environment and industry competition, there are several key concerns about Xiaomi, such as whether Xiaomi can ensure supply chain stability and future trend of smartphone gross margins amidst rising memory costs and rapidly shifting supply-demand dynamics, impact of industry competition on our IoT business, updates on our EV initiative. So today, we will answer these questions and share information and more insights with you. First, regarding personal devices. In Q3, we ranked among the top 3 in global smartphone shipment with market share of 13.6%. Apart from India, we achieved year-on-year market share growth in all regions, except India. And in China, our smartphone shipments saw another year-on-year increase in market share, reaching 14.9%. We ranked second in Latin America and Middle East with market share increasing 0.5 and 0.5 percentage points year-on-year to 17.9% and 16.9%, respectively. We ranked it in Europe Southeast Asia and Africa with market shares increasing by 0.5%, 1.2 and 0.9 percentage points year-on-year to 20.9%, 16.7% and 12.6%, respectively. During the recent Double 11, Xiaomi smartphone secured spot in domestic smartphone sales for third consecutive year, claiming #1 position across all major e-commerce platforms.

This year marks the fifth year of our premium strategy. Our premium strategy yielded significant results. In Q3 this year, market share in the RMB 4,000 to RMB 6,000 smartphone segment in Mainland China increased 5.6 percentage points year-on-year to 18.9%, targeting the ultra-premium segment above RMB 6000 is a new objective for the second 5-year phase of premiumization. Our 17 Pro Max starting at RMB 5,999. During Double 11, it claimed double crown for both sales volume and revenue among domestic smartphones in the RMB 6,000-plus segment. Continuous breakthrough in ultra-premium segment not only optimized our product portfolio, but also drive sustained growth in overseas sales volume. We continue to drive premiumization through breakthrough in core foundational technology. In August, we officially launched Xiaomi HyperOS 3, delivering comprehensive upgrade across core experience, functional features and AI capabilities. We further enhanced system fluidity and responsiveness while introducing the groundbreaking Xiaomi HyperIsland for an entirely new interactive experience. Following the launch of Xiaomi HyperOS 3, overall user feedback matrix showed significant improvement. Xiaomi 17 Pro Max is innovatively adopted a super pixel array, delivering 2K display quality while consuming less power than a 1.5K display.

Global supply chain is undergoing a new cycle with storage costs currently entering an extended period of sustained increase. However, having navigated various raw material cost cycles, we have established robust supply chain management system and contingency mechanism. We remain confident in ensuring stable raw material supply. Regarding pressure on the future gross margin from rising storage costs, -- in short term, we can mitigate cost pressure through product mix updates, ASP increase and other measures. At the same time, we hope everyone recognizes that business beyond smartphones will provide stable support for our overall profitability. Over the past 10 quarters, our smartphone times AIoT segment has consistently maintained gross margin above 20%. In the long term, we'll continue advancing premiumization and building differentiated product capabilities based on self-developed chips and operating systems, aiming to reduce marginal impact of commodity price volatility on financial metrics. Second, impact of industry competition on IoT business. In Q3, our IoT business revenue was RMB 27.6 billion, marking 7 consecutive quarters of year-on-year growth. Gross margin, 23.9%, achieving 7 consecutive quarters of year-on-year gross margin improvement.

Although our IoT business encompasses a wide range of product categories, we adhere to a clear picture to be an industry contributor that drives value creation through product and technological innovation. Therefore, we neither initiate price war nor likely follow them. We do not rely on low price to capture market share. Instead, we activate user demand and propel industry development by enhancing product value and increasing innovation investment. In Q3, our ARC for refrigerators, air conditioners and washing machines all achieved year-on-year growth. In September this year, we launched The Mijia Three-Zone Washing Machine Pro, which garnered a 99% positive rating across all e-commerce platforms following its release. And in October, Xiaomi's smart home appliance factory commenced operations, marking completion of our major appliance business integrated industrial cycle spanning design, R&D, product validation. This smart factory is designed for peak annual capacity of 7 million units. Moving forward, more high-quality smart home appliances will be designed, developed and manufactured here, continuously supporting Xiaomi's strategy to elevate all product categories. Overseas IoT revenue also reached record high this quarter. In 2026, we intensify our overseas market expansion to drive further growth in IoT revenue.

Then in Q3, we delivered 108,796 new EVs. Cumulatively, we delivered 265,967 new EVs in the first 3 quarters. In October, monthly delivery exceeded 40,000 units. We are enhancing monthly delivery capacity through ongoing technical upgrades and expect to complete annual delivery target this week. Next year's delivery scale is projected to maintain steady growth. Our Smart EV AI and other new initiatives segment achieved first quarterly profitability. We continue expanding our sales network. By the end of September, we have opened 402 EV sales centers across 119 cities in Mainland China. Our service network now comprises 209 locations covering 125 cities. And then in September this year, we offered Xiaomi car owners customization services once exclusive to luxury vehicles. We firmly believe that enabling everyone globally to enjoy a better life through technology should include providing opportunities for personalized self-expression. We recognize that EV industry still holds abundant dynamic scenarios and user needs awaiting our fulfillment. We are confident that our next vehicle will earn user recognition and support. Overall speaking, in July 2025, we're named to the Fortune Global 500 list for the vent consecutive year, ranking 297. We aspire for Xiaomi to become a top 100 global company by 2030.

We remain unwavering in our commitment to high-pressure intensive investment in foundational core technologies. This year, R&D expenses will exceed RMB 30 billion with projected R&D investments surpassing RMB 200 billion over the next 5 years. AI is driving profound transformation across all industries with over 1 billion devices connected globally, Xiaomi leverages AI to deliver ubiquitous intelligent experience to users worldwide.

We believe deep integration of AI with the physical world represents the next frontier in intelligent technology. We began intensifying our AI investment several quarters ago, while we cannot disclose too much our progress in large AI models and applications has far exceeded expectations, we are confident that in the near future, we'll continue to deliver surprises for everyone. Finally, I would like to thank all our users for their support. And as always, we extend our gratitude to our employees and partners for their continued trust. And that concludes my presentation for today. Now let me turn over to CFO, Alain.

Thank you, Mr. Lu. Good evening, everyone. As Mr. Lu shared with you just now, in Q3 2025, guided by the group's core operational strategy of steady and progressive advancement, all business segments continued to demonstrate resilience. In Q3 2025, we achieved total revenue of RMB 113.1 billion, up 22.3% year-on-year.

Gross margin reached a record high of 22.9%, up 2.5 percentage points year-on-year. Our smartphone times AIoT segment generated revenue of RMB 84.1 billion with gross margin of 22.1%. So since establishing the Mobile Times AIoT business segment, we have achieved year-on-year growth for 3 consecutive quarters with gross margin increasing by 1.3 percentage points year-on-year. And then for smartphone segment, revenue for the quarter reached RMB 46 billion, accounting for 40.6% of total revenue. Our global smartphone shipments reached 43.25 million units this quarter, marking a 0.5% year-on-year increase and extending our strong year-over-year shipment growth to 9 consecutive quarters. Our premium strategy has yielded significant results with continuous enhancements in product competitiveness. According to third-party data, in Q3 2025, our share of premium smartphone sales in Mainland China reached 24.1% of total smartphone sales. up 4.1 percentage points year-on-year. According to Omdia's data, we ranked third globally in smartphone shipments this quarter with a 13.6% market share, maintaining a top 3 global position for 21 consecutive quarters.

Third-party data indicates that we ranked second in Mainland China smartphone sales during Q3 2025, with market share up 0.7 percentage points year-on-year. In 57 countries and regions globally, our smartphone shipment ranked top 3 and among the top 5 in 68 countries and regions. In Q3 2025, our mobile phone gross margin stood at 11.1% due to intensified competition in Mainland China. For IoT, last quarter, our revenue was RMB 27.6 billion. This quarter, overseas IoT business revenue hit a record high. This quarter, our IoT gross margin was 23.9%, up 3.2 percentage points year-on-year. As of 30th September 2025, our IoT platform had connected over 1 billion IoT devices. According to Omdia's data, in Q3 2025, our tablet shipments ranked among the top 5 globally and among top 3 in Mainland China. Our wearable band devices ranked first globally in shipments and second in Mainland China. Our TWS ranked second globally in shipments and first in Mainland China.

In October 2025, Xiaomi smart home appliance factory officially commenced operations, marking the completion of our integrated industrial ecosystem spanning design, R&D, production, validation, loophole. Phase 1 of the Xiaomi smart home appliance factory represents a total investment exceeding RMB 2.5 billion with planned peak annual production capacity of 7 million air conditioners. It has already achieved industry-leading standards in both efficiency and quality.

For Internet services, we continued to expand our user base. In September 2025, our global MAUs reached 742 million, an 8.2% increase year-on-year. Within Mainland China, MAUs reached 187 million, up 11.6% year-on-year. In this quarter, our Internet services revenue reached a record high of RMB 9.4 billion, up 10.8% year-on-year. Gross profit margin for the Internet Services segment reached 76.9% this quarter, benefiting from sustained MAU growth and ongoing premiumization efforts. Our advertising business continued to drive Internet services growth, generating revenue of RMB 7.2 billion this quarter, up 17.4% year-on-year. Overseas Internet services revenue reached RMB 3.3 billion this quarter, up 19.1% year-on-year, accounting for 34.9% of total Internet services revenue and setting a new record high.

In Q3 2025, our Smart EV, AI and other new initiatives segment generated revenue of RMB 29 billion, accounting for 25.6% of the group's total revenue. Within this segment, revenue from Smart EV sales reached RMB 28.3 billion, while other related business revenue amounted to RMB 700 million. This segment achieved a gross profit margin of 25.5%. In Q3 2025, we delivered 108,796 new EVs. With ongoing deliveries of the SU7 Ultra and U7 series, our average post-tax unit price reached RMB 260,000 this quarter. Our new business segment achieved its first quarterly operating profit of RMB 700 million.

We are steadily executing our group's new 10-year goal, making large-scale investments in foundational core technologies and striving to become a global leader in next-generation cutting-edge technologies. In the third quarter this year, our R&D expenses reached RMB 9.1 billion, up 52.1% year-on-year. For the first 3 quarters this year, our R&D expenses totaled RMB 23.5 billion. As of 30th September 2025, our R&D personnel reached a record high of 24,871, accounting for 44.2% of total headcount. In the first 3 quarters of 2025, our CapEx reached RMB 13 billion, an increase of 87% year-on-year. We continue to reward shareholders through share buyback. So far this year, we have repurchased about RMB 1.54 billion worth of shares, equivalent to about 34 million shares.

In terms of net profit, our adjusted quarterly net profit has hit record highs for 4 consecutive quarters, reaching RMB 11.3 billion, up more than 80% year-on-year. Finally, in terms of ESG, in terms of ESG ratings, in October 2025, our MSCI ESG rating was upgraded from BBB to single A, marking the third consecutive year of rating improvement since 2022.

In September 2025, we achieved a record high score of 63 points in the latest S&P Global Corporate Sustainability Assessment and marking the second consecutive year of score improvement. In September 2025, we are successfully included in the Forbes 2025 China ESG 50 list. In October 2025, we're named to the 2025 Forbes Global Best Employers list, marking Xiaomi's third consecutive inclusion on this prestigious ranking. Thank you all. That concludes what I wanted to share with you today. Now we can begin Q&A session.

[Operator Instructions] First question is from Morgan Stanley, Andy.

Thank you, Mr. Lu and Alain for the sharing. Congratulations, Xiaomi for achieving record high profitability in this quarter. I have 2 questions. First question is about smartphone. The capital market is concerned about the big cost increase in internal memory. So we are concerned about the impact on smartphone gross margin. And can you share your expectation about the price change? And also for EVs, your delivery has been rising in these 2 months, and your SU7 Pro and Pro Max delivery schedule has been advanced significantly. So can you share with us the reasons behind such change? In the future, what is your development strategy for your EVs? What would be the change? And what would be the major directions?

Thank you, Andy. Let me take your first question, and I will ask Alain to answer the second question. So the cost of memories and its impact on smartphone. Now when it comes to cost increase, I think this is a rather long cycle, a relatively long cycle. So for cost increase for memory, in the past, usually, it would be over in a few years. But now the situation will be different from in the past. So basically, this is because of HBM that caused the change. So right now, the cycle is longer because of demand. In the past, for smartphones, basically, there are smartphones and notebooks and tablets together. Now there is HBM being added. So as a result, there is a bigger demand. And then supply is insufficient. In 2023, for internal memory, there was the base level in price. And at that time, costs continued to fall. I think you are aware of that. And I think for new production and output, that was one factor. As a result, there is longer cycle of demand increase, but supply did not catch up. That's the basic situation. And this caused a big impact on cost of smartphone. And for internal memory of smartphone and the relative cost, there is a price difference. And this price difference will continue to be narrowed. That is my view. And given this long cycle cost increase, then definitely, there would be quite big impact on gross margin for smartphones, tablets and notebook computers.

So because of a bigger ratio percentage of the internal memory. So there is a quite big impact on gross profit. And given such impact on gross profit, I have come up with solutions. The first solution is that you have to do something with product. You have to increase price. But comparing with other peers, I think cost increase is bigger than price increase. So that's the first point.

And then we have to also do some digestion in the supply side. And as a result, there will be a decrease in gross profit, and we can also optimize product structure. For internal memory cost, its ratio in high-end product and lower-end product will be different.

So in the past few years, we have been implementing premiumization, and we have increased our ASP. We hope that the competitiveness of the product can be enhanced. And this is something that we have been doing in the past few years. And we hope that this can offset some of the cost increase impact. And in Q4 and next year, I believe the cost increase of memory in relation to smartphone, tablets and notebooks, well, that would be impact leading to a decline in gross margin, but the extent may be different. So when it comes to 2026, I think we will be able to ensure our supply.

Let me supplement to Mr. Lu's answer, and then I will also answer your question about EV. Well, you can see that last year, starting last year, in our financial statements, we have a segment, smartphone times AIoT and then smart EV and AI business. In the past quarters, we can see that gross margin is above 20% for smartphone times AIoT. So we have the capability to offset the situation. Our IoT gross margin is healthy.

So for this segment, it is quite stable. It is more than 20% in gross margin. That's the first point that I would like to supplement to Mr. Lu's answer. The second question is about EVs. So you asked about our delivery volume, which is rising. We are a young company in the automobile industry. And then in terms of product delivery, we only started for 18 months. But so far, our total delivery exceeded 400,000 units in July and August, by means of some transformation, we have exceeded 40,000 cumulative delivery in September and October. So our delivery is rising. As Mr. Lu said, this week, we will be able to complete the target of more than 350,000 units set at the beginning of the year. So in terms of our delivery capability and also our quality reform, we have put in much, much effort.

And then recently, if you look at our Pro Max SU7 delivery timetable, it has been shortened a lot. As I mentioned earlier, we enhanced efficiency in order to enhance delivery. At the same time, at present, some materials are still subject to constraints. So we are enhancing our SU7 and SU7 Max delivery capability. And in the future, we can accelerate our delivery cycle of other products. So these are my answers to your 2 questions.

Next question is from Citi, Kyna.

I have 2 questions. First, based on Andy's question, I have a follow-up regarding your overall strategy. As what Mr. Lu said about demand and supply and the overall layout and also the impact on smartphone from memories, well, next year, in terms of your smartphone strategies, in terms of profitability, are you going to make adjustment to your delivery strategy regarding premiumization in the future? So you set a target of 30 million.

So in the future, will you be subject to price adjustment impact? And are you going to reach the target earlier than expected by making some adjustments. And then secondly, I have a question about EVs. So for those who have already bought your EVs, so regarding subsidies to them next year, what will be the impact on your gross margin? And given this impact, given your efficiency enhancement, is it enough to offset? Or will it give more room for more development next year?

Okay. Regarding smartphone retail price, if it increases, then our judgment is that there will be a downturn in the overall smartphone market. That's my overall judgment. But how much? Well, of course, I can't really quantify in detail now. Now for smartphones, it is still a retention market for the time being. And in the past few years, when it comes to product quality and experience, it is very good. So I think that is the situation. That's my overall view. For Xiaomi, in 2023, we have been seeing that our sales volume and also our profit and scale, we have seen a change in our strategy. In the past, we made a judgment of the overall market. Market share is still important to us in the China market in the past few years.

If you look at our peers, where last year, we had 15.8% share and now around 17%. I think that's our overall strategy. But still, we have to try to enhance our ASP. By 2030, we hope that we can achieve a scale of 30 million in terms of our premium strategy. So in 5 years' time, every year, I hope that, there would be an increase by like 2 million to 3 million units. And then so far, our premiumization direction will not change. So I will defer to Alain to comment on your next question.

Thank you, Mr. Lu. First of all, regarding EVs gross margin, in relation to EVs, this year, we delivered more than 350,000 units, but this still accounts for a small volume in the industry. As you know, the total in China is 22 million-odd units a year. So within the short term, volume is still our target and gross margin is not our most important target. And with the vacancy tax, we can see some other peers have also introduced some similar concessions. Now our delivery cycle is longer. We hope our users will continue to support our EVs. And regarding the vacancy tax, regarding next year's ASP and our gross margin, there will be certain impact. However, our current gross margin is at a healthy level. So we hope that while we can maintain or guarantee our delivery, we can still maintain a healthy gross margin.

Next question is from CICC, Wen Hanjing.

I have 2 questions for you. First, AIoT numbers. In this announcement, you said that the AIoT connected device for the first time exceeded 1 billion and the growth rate is more than 20%. And just now you said that for AI, no matter whether it is the MIMO model and the subsequent launches in the future in relation to AI layout and also combining with or connecting with your tablets, smartphone, notebook and appliances, what would be the ecosystem and application of AI? Second question is about large appliances. In Q3, large appliance business because of phasing out of national subsidy and competition, there is some year-on-year pressure. So in the future, what will be your tactics in large appliances for overall IoT business, what is the outlook?

Regarding IoT connections, well, I think you can pay attention to our directions and a few information. First, in 2023, so from MUI to [indiscernible] MUA and so on. So now they have become the HyperOS. So that's the first thing I would like to share with you. And then we are operating a whole ecosystem. So we hope that with deeper integration, we can offer better experience. Besides, starting from October, we announced an open source model, and that is Xiaomi MiLoco. So it is like a large model.

That's MiLoco. So Xiaomi uses the large model technology in the home scenario. And we believe that for smart home appliance, this is going to be a very good exploration. So AI large model plus Xiaomi IoT devices, these are connected and integrated. At the same time, for smart home appliance, it will get away from traditional hardware-based system. We are moving into a new way of delivery. interacting vision as well as language. So this is very important. Besides, we will go according to these 2 directions. In the future, I'm sure the business will rise. And we have built our large model team for 1 year or so. And very soon, you will see its output. We hope to have better algorithms, power consumption and so on. These are some of our targets. At the same time, we have to focus on our own strengths as well.

Regarding phasing out of national subsidy and its impact on large appliances, my view is this. For national subsidy, it is only in a certain stage, but it will not exist forever. No matter whether it is increased or decrease, well, we have to understand that it won't be forever. And then we also would consider when national subsidy will be terminated and what we should do in the future. Now if you look at some of our data this year, in Q3, you will realize that our ASP is still rising.

Our product structure is still good. Our innovative products are being launched continuously. Our gross margin is at a good level besides our globalization is accelerating. So I think all these are some good ways to solve changes or tackle changes in the external environment. And number three, in September, in Wuhan, we started our operation of our smart home appliance factory. We have spent almost 10 years' time. And then if you have the time, please go to Wuhan to take a look at our smart home appliance factory. It is quite a good one. The environment is good. The equipment is very advanced. It doesn't look like a traditional home appliance factory. It is very advanced and very smart. It is highly automated and AI technology is used in the overall layout and design. So for smart home appliance factory, the technology is also very advanced. This helps our production process. And then we can also empower our working partners.

So I think that in the area of large appliances, these are our directions. So regarding competition and national subsidies phasing out, there will be short-term impacts, but there won't be long-term impact on our direction. And basically, we are executing according to our targets. So there won't be a change. There won't be a big change to our overall objectives and targets in relation to large appliances.

We do look forward to some more pleasant surprises in relation to AI models.

Next question from Citic, Yingbo.

I have 2 questions. First question about automated autonomous driving. Recently, Mr. Lu on Weibo talked about upgrading in terms of autonomous driving. So in the future, what level can you reach because of such enhancement in autonomous driving? And regarding your overseas development, so far, what is your progress? What is your store layout? And what is your future plan in the process? How do you strike a balance in terms of traditional distributors in overseas markets. These are my 2 questions.

Autonomous driving, well, my view is this. I think for future smart EVs, autonomous driving is a critical point. So all along, we have been working on that. Autonomous driving is a very important direction for our EV development. And basically, we are working towards this macro direction in our investment and deployment. So you can see that there are low, mid- and high configuration -- high standard configurations. So when it comes to algorithm, we are -- we -- equipped with LiDAR and also very high-level configurations. In the future, we have upgraded to 1,000 clips in the past, 3 million. Now we have upgraded that to 10 million clips. So that means the quality of our driving has improved a lot. So you can see from all our parameters and data, you can see the enhancement from 3 million clips to 10 million. And recently, there were also a number of announcements. new version and so on, I think you are able to see all the enhancement. And recently, you may be paying attention to our large model. So recently, the MiMo model had made much progress.

In April, we have introduced another model in May, the multimodal model in September, the large language model. So language, voice and multimodal. So all these have been announced in the future. no matter whether we talk about the autonomous driving or our cabin, that is our cockpit, that would be big support and our algorithm is enough. We have enough amount of data.

So I think all these will enhance the overall assisted driving experience. So you can pay attention to our advancements. So I'm sure you have paid attention to the details, showcasing our strengths. For overseas, we are following our established strategies. So for East Asia, Korea, Japan, we have already penetrated the market in Europe also. For Southeast Asia, we are building our stores in high density, Latin America, North Europe and so on, we are doing a lot of work. And then for new retail, we are doing a lot of development in overseas and efficiency is also being enhanced. So I think our output is quite satisfactory. Recently, I went to Singapore, and I took a look at our store, it is very good. So the scale is 2 million.

And this year, in terms of categories and overseas, comparing with Mainland China, there is still a gap in the Japanese market, many categories are not there. So in terms of product channels, I find them very good. And there is no conflict between these developments. For traditional channels, I think they are more professional channels. They sell smartphones, they sell large appliances. So they are specialty stores mainly. And then for Xiaomi very often, many of our product categories are placed and sold together. So if you come to Hong Kong, you can see many of our stores -- if you go to fortress and also, for example, Broadway, you can get our products in Europe, in Spain. You can also see different scenarios. But then in fact, I don't see a big conflict among these different channels.

Next question is from Zoe of UBS.

Next question is from Zoe of UBS. So we have talked about storage and memory a long time. I have a small follow-up question. Just now Mr. Lu said that you have been proactive in inventory management. So for your existing inventory level comparing with the beginning of this year and same period last year, what is it like? And then about Miloco after launch.

So in the smart home appliance development, it has around much discussion. And many software hardware vendors are doing a lot of supporting facilities. So the question for the management is, can you share with us about Miloco in the medium term? What is your plan? And after the exploration stage, are you going to maintain the openness of the ecosystem? Or when you reach a certain level, are you going to internalize it to your own -- within your own Xiaomi ecosystem, please?

Okay. Regarding our management, we are -- well, when there is cost decline, then we want to keep inventory and vice versa. And everybody is doing this. So this year, we want to build up your inventory, but you may not be able to do it. At present, I think our situation is okay. In the industrial chain, I think if you think of Samsung and other partners in the U.S., we have good working relationship. We have good working relationship with other domestic suppliers. So in terms of the supply chain priority, I think we are exercising good management.

You don't need to worry too much about our inventory. And if you look at our gross margin of products, you will see for yourself, I think we are doing quite well. I think people know the impact of cost on gross margin. And I think our management has been quite good. You don't need to worry. And you talked about Miloco, yes, as I mentioned earlier, we have been cultivating deeply in AIoT, and we have spent 1 year in exploring about large models. I think we have got clear view for traditional smart home appliance, well, we have also making it smarter with our large models, and there is better interaction between human and machine. I think we will -- we will keep our ecosystem open. In the future, I think we will share more about R&D with you. So don't worry, we will maintain openness of our ecosystem.

Next question is from Huatai Securities, Huang Leping, please.

I have 2 questions. First is about storage or memory. In the past few years, Mr. Lu said that the overall smartphone market is stable. There are like 6 to 7 players all over the world and with more or less stable volume. So what do you think about this wave? Will this wave lead to a big change in the overall smartphone market?

And in terms of product and pricing strategy, how are you going to change? After this cycle, how can you make one step forward? That's my first question. Second question, about the positioning of your factory. for large appliance business of Xiaomi, you are within top 3 in various categories. And after the opening of the Wuhan factory for your large appliances product lines, what is its role in the future when Wuhan factory starts production, how are you going to go up one step or one platform in the large appliance business?

Okay. Today, globally, the smartphone industry, it has entered a relatively stable situation. Apple, Samsung, 200-odd million for us. So more or less, other vendors like 150 million, that's the situation. Given the overall layout within a certain period of time, there won't be much change. But this time, cost increase is very big, and it is going to last longer time. So there would be bigger volatility. Cost digestion for each player will cause impact. The cycle is more or less the same for all, but if your ASP is relatively low, then you will be subject to more impact. So the cost increase will do larger impact on these players.

In Q3 -- in Q1, Q2, cost increased, but not to a large extent. In Q3, the cost increase was big. And then in Q3, we can digest the Q2 inventory. And then in Q4, the inventory will be that after price increase. So you can see the market reactions in China. I think the layout is not formed yet. We have seen an increase by 1 percentage point for Xiaomi, but then the gap has not widened. So there is much infolution. This year, at the highest 17 points at the lowest around 3 points. So the difference is 1 to 2 points among different companies. At the end of the day, I believe it is a must that we will see a different layout. So who is better prepared then who will be better off. So when you are in a difficult position, then in a more competitive situation, your strength will help you survive. So we need to rely on our own strengths to enjoy a better position. So I think we also have to look at the long-term position and long-term supply. And basically, the overall situation is quite certain. -- changes in China, the impact will be bigger than that in the global market. And then regarding our Wuhan factory, my view is this. In terms of factory and OEM, so I think we are working on a two-pronged approach. That is our long-term strategy for smartphones and large appliances. When we build the large appliance factory, we give a lot of focus to our working partners.

We had much communication. Of course, we have accumulated long-term strength already. If you go to our Wuhan factory, I will extend invitation for you to pay us a visit. Our factory is different. The degree of smartness is much higher than other players. If you visit -- if you have visited our smartphone factory, actually, our smartphone factory equipment capability is being also transplanted to a large appliance factory. So smart platform is being migrated. The whole control system is done by Xiaomi. So this is something that we are very positive about. No matter whether you talk about control system or our equipment, they are all by Xiaomi. Secondly, the degree of automation. If you go to our existing production lines, you see our efficiency and our efficiency of manpower is much higher than others. And if you look at our inspection positions, in many positions, for traditional production, they rely on manual inspection. And because they use the naked eyes, then the error rate is also higher. But for us, we use AI to do inspection. Efficiency and accuracy is greatly enhanced. That's the value of our factory. And after realizing such value, then we will also transfer this technique to our other OEM factories. They will have to transform their factories based on Xiaomi's standards. it's like Apple. Apple doesn't have any factory now, but all the other -- all the OEM factories have to follow their standards.

We are talking about the same global standards for Apple. So that is what we are doing now. And for our own factories, we are manufacturing high-end premium products. So the entail higher technology. And then for the OEM factories and partners, we will ensure that their existing capacities will not be affected. And if there is a need to reduce capacity, we will first do it with our own factories to ensure the position of our partners because we have long-term working relationship. Please don't worry. These are undertakings to our long-term working partners. So then for our working partners, overall capability and efficiency enhancement, I think this is very helpful. You may feel free to communicate with our working partners to get more understanding. This year, actually, right now, for our smart factory, it accounts for only 10% of the total capacity, but it also gives very strong management of our overall smartphone factories. So that's my answer to you.

Next question from Goldman Sachs, Timothy.

I have 2 questions. First, regarding your business in Mainland China, you have 18,000 stores already. So in the future, what would be your expansion rhythm and long-term strategy, overseas IoT revenue has reached a record high. So in the future, will it continue to rise with expansion of overseas new retail for revenue, overseas revenue growth rate? How much will it be?

Second question about expenses. In Q3, for smartphone and IoT segment, operating expenses grew fast. So in the future, for smartphone and AIoT segment, what would be the expenses ratio trend?

Okay. In 2020, 2021, at that time for EVs, our target is to have 30,000 stores, but our first target is 10% stores in -- that was achieved in 2020 in the process, definitely, there will be some issues. So in 2022, '23, we wanted to constrain our capacity. So we first focus on our 10,000 stores, and then after 2023, we accelerated store opening that happened in 2024 and 2025. Offering 20,000 stores, then on this platform, we want to stabilize the operation.

Next year, our target is not about store count or store opening. For the newly opened 10,000 stores, we want to enhance its efficiency. And for existing stores, we hope that they will do a better job. We will do better personnel training and improve our competitiveness. That is our overall strategy and direction. We won't change that.

And for structure, we will look at our internal and external environment and see when to accelerate, when to decelerate. For this model, it starts overseas and we will replicate it. In overseas, I think it will be more difficult than in China. In Southeast Asia, things are difficult. In Thailand, Philippines, we did it fast. In some of the places, things may be much slower.

Recently, I went to Worley, the capital has a population of 3-odd million. Besides, we also have established our AIoT expansion strategy for our AIoT products, I think they are doing good job. These are complementary. We have not reached the limit of our potential. There is still a lot of upside. And Alain can answer your question about expenses.

I think there are 2 simple thoughts: First, R&D expenses increased. In terms of R&D expenses, its increase is bigger than revenue growth rates. That's the first most important factor. The second factor is mentioned by Mr. Lu, regarding new retail network, this month or this quarter, on a quarter-on-quarter basis, we have an additional 1,000 stores. And among the 1,000 stores, 60 odd stores are big stores. So in terms of operation of these stores, it takes time for them to ramp up. So basically, there is increase in selling expenses, mainly because of store opening. And the next thing is R&D expense increase. These are the 2 main factors.

Thank you. Because of time, we will conclude our call here. Thank you for your time. I hope that you will continue to support Xiaomi Group. Thank you. Goodbye. Thank you all. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Ladies and gentlemen, welcome to Xiaomi's 2025 Interim Results Announcement Investor Conference Call and Audio webcast. Today's conference is being recorded. If you have any objection, you may disconnect at this time. [Operator Instructions] Now I would like to hand the conference over to your host today, Mr. Xu Ran, Head of Investor Relations and Corporate Finance. Please go ahead.

Good evening, ladies and gentlemen. Welcome to the investor conference call and audio webcast hosted by Xiaomi Corporation regarding the company's 2025 interim results. Before we start, we would like to remind you that this call may include forward-looking statements, which are underlined by a number of risks and uncertainties and may not be realized in the future for various reasons. Information about general market conditions comes from a variety of sources outside of Xiaomi. This presentation also contains some unaudited non-IFRS financial measures that should be considered in addition to, but not as a substitute for the company's financials prepared in accordance with the IFRS. Joining us on the conference today are Mr. Lu Weibing, Partner and President of Xiaomi Corporation; and Mr. Alain Lam, Vice President and CFO of Xiaomi Corporation. To start, Mr. Lu will share recent strategic and business updates of the company. Thereafter, Mr. Lam will review the company's financial performance in the first half of 2025. Following that, we will move on to the Q&A session. I will now turn the call over to Mr. Lu.

Good evening, ladies and gentlemen. Thank you for joining our 2025 second quarter earnings conference call. As you can see, this quarter, Xiaomi once again delivered an impressive financial report with both revenue and net profit reaching new record highs. In the second quarter of 2025, amid intense industry competition, Xiaomi's various business lines continued to grow steadily. Group total revenue reached RMB 116 billion, up 30.5% year-on-year, marking the fifth consecutive quarter of record-breaking performance. Gross margin, 22.5%, up 1.8 percentage point year-on-year. Adjusted net profit, RMB 10.8 billion, up 75% year-on-year, marking a new record high for the third consecutive quarter. In terms of specific business operations, there are several new key highlights. YU7 was successfully launched and went on sale, setting a new industry record for preorders.

Xiaomi's first self-developed 3-nanometer flagship chip was unveiled and successfully integrated into 3 terminal products for market launch. Smartphone business remains among the top 3 globally with the highest market share in China during Q2. Number four, home appliance business continues to grow rapidly. Given the recent changes in the external environment and industry competition, there are some key questions about Xiaomi, let me give some answers. For example, what are the outlooks for Xiaomi smartphones in terms of volume and profits? Can the large appliance business continue to grow? How does Xiaomi view the resurgence of the YU7? Today marks the release of our Q2 financial results and earnings communication meeting. I will focus on addressing the above questions and share some of my thoughts with you. First, the issue of balancing volume and profit in personal devices. In Q2 2025, we ranked among top 3 globally in terms of smartphone shipments with market share of 14.7%, narrowing the gap with the top 2 players again.

At the same time, according to third-party data, we ranked first in smartphone excavations in Mainland China. Our smartphone shipments have rapidly increased market share in various overseas regions. In Southeast Asia, we are #1; Europe, #2; and in Middle East and Latin America, #2. In Africa, our market share stands at 14.4%, an increase of 2.7 percentage points year-on-year. Our shipment growth rates in multiple regions have far outpaced the overall market. However, mobile phone industry has entered a mature phase with overall market showing little growth. The brand landscape remains highly competitive with the top 6 brands holding very similar market shares. However, the current structure is not yet stable, and we anticipate that leading brands will emerge in the coming years. We are confident that with continued investment in core technology, product innovation and the deepening of our human vehicle home ecosystem strategy, we will continue to grow. Our goal is to achieve steady annual increase of 1 percentage point in market share in China.

Compared to Samsung and Apple, we started later, but we believe that with the improvement of our international market infrastructure, the expansion and deepening of localized operations and continued breakthroughs in new retail, the gap with the top 2 will continue to narrow. Our goal is to enter the 200 million club in global sales, significantly narrow the gap with Apple and Samsung and truly establish a 3-way stalemate market structure. However, as a mature market, the opportunity for users to upgrade their devices will drive continuous improvements in product structure. Therefore, we continuously advance our high-end strategy. We are continuously leveraging breakthroughs in core technologies to drive premiumization. In May 2025, Xiaomi officially launched our first self-developed 3-nanometer flagship processor, the XRING O1 and we have to seize the opportunity from AI so as to achieve breakthrough in the model. In May 2025, the open source multimodal large model, Xiaomi MiMo-VL/7B was officially launched.

In July 2025, 2 papers by Xiaomi AI team were selected by the International or ICCV. In Q2 2025, in Mainland China, the market share of smartphones priced between RMB 4,000 and RMB 5,000 and between RMB 5,000 and RMB 6,000 increased by 4.5 and 6.5 percentage points year-on-year to 24.7% and 15.4%, respectively. In terms of brand premiumization, our brand perception continues to improve. In June 2025, we're ranked second in the 2025 Kantar BrandZ Top 50 globalized Chinese brands list. In the Chinese market, our smartphone brand ranked second among all smartphone brands in terms of total omnichannel momentum. Looking ahead, in the Chinese market, we'll focus on breaking into the ultra-high-end segment. Simultaneously, we'll drive premiumization in global markets and across all product categories. And then in terms of other products -- our tablet product shipment volume grew 42.3% year-on-year, maintaining fastest growth rates among the top 5 global manufacturers.

In Q2, wearable band devices ranked first globally in terms of global shipment volume and second in Mainland China. TWS ranked second globally in terms of global shipment volume and first in Mainland China. In June 2025, we officially launched an innovative product, the first Xiaomi AI devices leading the industry. And they are equipped with solar AI, providing users with powerful multimodal intelligent interaction capabilities. After the launch, not only did sales far exceed expectations, but positive review rate on JD platform also reached 98%. And then regarding air conditioning business, which is of greatest concern to everyone. According to third-party data, the industry as a whole experienced volume growth, but price declined in the first half. However, we are back to the trend with both volume and price growth, achieving year-on-year increase of over 60% in shipment volume and year-on-year increase in ASP. We are confident in our ability to achieve sustained long-term growth.

Our home appliances hold a unique advantage in terms of product channel, brand and users. So our intelligent transformation is based on overall success and we are confident that innovation driven by user needs can transform the seemingly red ocean of the major home appliance industry into a blue ocean. Guided by this philosophy and our precise understanding of user needs, we are the first to launch innovative categories. And at the same time, we fully understand that maintaining a sustained competitive edge in product competitiveness requires not only product planning that exceeds user expectations, but also a deeper understanding of core technologies and proactive sustained high-pressure investment. This has been our unwavering commitment over the past few years. We won't get caught in price competition. We will enhance our customer insights and user insights to deliver products that fully benefit users. We believe that with time, the large appliance business will continue to grow.

In addition to major appliances, our many small appliances have also tremendous potential. For example, our smartdoor locks, air purifiers, rain shoots and other product categories are also growing rapidly. Then let's turn to Xiaomi EV. In Q2, we delivered 81,302 new EVs. In July, we delivered over 30,000 new cars in a single month. We continue to refine our technology on the track. In April 2025, our Xiaomi SU7 Ultra prototype once again tackled the Nürburgring Nordschleife circuit, setting a new record for our prototype lap times on this with a time of 6 minutes, 22 seconds and ranking third globally. In June 2025, our first SU7 product, the Xiaomi YU7 Series was officially launched. Within 18 hours of its release, cumulative preorders exceeded 240,000 units. Xiaomi YU7 series builds on the outstanding performance of Xiaomi SU7 Series, once again creating a Xiaomi-style blockbuster sensation.

The continued success demonstrated the phased achievements of the capability-driven strategy. And we expect to officially enter the European market by 2027. And we are not only confident in the next success of Xiaomi Automobile, but also in the next success of our model and methodology. And our overall strengths are being enhanced. So for many consecutive quarters, we have delivered very remarkable results. Finally, what I would like to say that in July 2025, we are actually included in the Fortune 500 list for the seventh consecutive year, ranking 297th, an improvement of 100 places from last year.

We fully understand that transitioning from an industry challenger to an industry leader and from excellence to greatness requires further breakthrough and understanding and continuous enhancement and upgrading of capabilities. Today, Xiaomi is more strategically patient than ever before. We will adhere to our strategic priorities of technological hardening, brand premiumization, market globalization and ecological model transformation. So in the past 5 years, you have seen our transformation. Over the next 5 years, Xiaomi will undergo a qualitative change. That concludes what I wanted to share with you. Now I will pass the floor to Alain.

Thank you, Mr. Lu. Good evening, investors and analysts. As Mr. Lu shared with everyone just now, in Q2, guided by the group's core business strategy of steady progress, we once again achieved outstanding performance. Our total revenue, revenue from mobile x AIoT division, revenue from smart EVs and AI and new initiatives division and adjusted net profit all reached record highs. In Q2 2025, our total revenue was RMB 116 billion, up 30.5% year-on-year. Gross margin was 22.5%, an increase of 1.8 percentage points year-on-year. Our smartphone x AIoT division generated revenue of RMB 94.7 billion, up 14.8% year-on-year. Gross margin was 21.6%, up 0.5 percentage points year-on-year. And then regarding smartphones, revenue for this quarter was RMB 45.5 billion, accounting for 39.3% of total revenue. Global smartphone shipments for this quarter reached 42.4 million units, marking the eighth consecutive quarter of year-on-year shipment growth.

According to Canalys, our global smartphone shipments ranked third this quarter with market share of 14.7%, marking 20 consecutive quarters in the top 3 globally. Additionally, we ranked among the top 3 in smartphone shipments in 60 countries and regions worldwide and among top 5 in 69 countries and regions. According to third-party data, in Q2 2025, we ranked first in smartphone sales in Mainland China. Our smartphone gross margin in this quarter was 11.5%. Our premiumization strategy achieved significant results with product competitiveness continuing to improve. According to third-party data, the proportion of premium smartphone sales in -- our total smartphone sales in Mainland China reached 27.6%, an increase of 5.5 percentage points year-on-year. For AIoT, in this quarter, revenue reached a record high. In this quarter, AIoT revenue was RMB 38.7 billion, up 44.7% year-on-year. In this quarter, IoT gross margin was 22.5%, up 2.8 percentage points year-on-year.

Multiple product categories achieved both volume and price growth year-on-year. In this quarter, revenue from smart large appliances reached record high, up 66.2% year-on-year. Among these were air conditioning -- our air conditioner shipments exceeded 5.4 million units with year-on-year growth exceeding 60%. For refrigerators, shipments exceeded 790,000 units, up more than 25% year-on-year. For washing machines, shipments exceeded 600,000 units, up more than 45% year-on-year. According to Canalys data, in Q2 2025, our tablet shipments globally grew 42.3% year-on-year, maintaining the fastest growth rate among the top 5 global manufacturers. Our TWS ranked second globally in shipments and first in Mainland China. Our wearable band ranked first globally in shipments and second in Mainland China.

In June 2025, we officially launched our first Xiaomi AI glasses, which excel in terms of weight, battery life and memory, while also featuring electrochromic functionality and integrating super AI assistant, providing supers with -- providing users with powerful multimodal intelligent interaction capabilities. Regarding Internet services, we continued to expand our user base. In June 2025, our global MAUs reached 731 million, up 8.2% year-on-year. Among them, MAUs in Mainland China reached 185 million, up 12.4% year-on-year. In Q2 of 2025, our Internet services business revenue reached RMB 9.1 billion, up 10.1% year-on-year. Gross margin in this quarter for the Internet services business was 25.4%. Our overseas Internet business revenue was RMB 3.1 billion or RMB 3 billion, up 12.6%, accounting for 32.9% of total Internet services revenue, setting a new record high.

In Q2 2025, revenue from our Smart EVs and AI and new initiatives segment reached RMB 21.3 billion, accounting for 18.3% of total revenue. Of this, revenue from Smart EV sales amounted to RMB 20.6 billion, while revenue from other related businesses totaled RMB 0.6 billion. Gross margin for Smart EVs and AI and new initiatives segment reached 26.4%. In Q2 2025, we delivered a total of 81,302 new vehicles with ASP of RMB 253,662. As of July 2025, since the launch of Xiaomi EVs, cumulative deliveries have exceeded 300,000 units. Our new business operating loss continued to narrow with the operating loss in this quarter amounting to RMB 300 million. We are steadily executing the group's new 10-year goals that is investing heavily in underlying core technologies and striving to become a global leader in next-generation hard-core technology. In Q2 2025, our R&D expenses reached RMB 7.8 billion, up 41.2% year-on-year.

Number of R&D personnel reached a record high at 22,641, accounting for 46.2% of total number of employees. In Q2 2025, total operating expenses amounted to RMB 17.2 billion. Excluding RMB 5.9 billion in new business investment expenses, our core business operating expenses totaled RMB 11.3 billion with expense ratio of 11.9%, maintaining a healthy level. In terms of net profit, our adjusted net profit for the quarter reached a new record high for the third consecutive quarter, amounting to RMB 10.8 billion, a year-on-year increase of more than 75%. And then finally, about ESG. We actively fulfill our corporate social responsibilities and committed to promoting low-carbon development. In terms of low-carbon practices, our office premises used about 7.2 million kilowatt hours of green electricity in the first half of this year, an increase of over 270% compared to the same period last year.

In the first half this year, PV power generation of our EV factory, total energy saved reached 6.9 million kilowatt hours, reducing carbon emissions by over 4,160 tons. Besides Xiaomi SU7 Series secured the top spot in the large pure EV category on both the J.D. Power 2025 China New Vehicle -- New Energy Vehicle Product APEAL Index and New Vehicle Quality Study rankings. In July 2025, the North China region of Mainland China was hit by heavy rainfall. And the Xiaomi Public Welfare Foundation donated RMB 5 million in cash and RMB 350,000 worth of urgently needed disaster relief supplies to support emergency aid, temporary relocation and post-disaster reconstruction effort in the affected areas.

In March 2025, the Xiaomi Public Welfare Foundation donated MMK 500 million, Myanmar currency to the Myanmar Red Cross Society to support emergency relief and post-disaster reconstruction effort in Myanmar following the earthquake. In terms of scientific and technological innovation, as of June 30, 2025, the Xiaomi Innovation Joint Fund had provided total funding of over RMB 210 million for research projects, supporting a cumulative total of 141 teams in Mainland China. Thank you all for your support in Xiaomi. That's all in our presentation. Now we can proceed to Q&A.

Thank you, Alain. Now we will move on to Q&A.

[Operator Instructions] First question, Andy of Morgan Stanley, please.

Congratulations for your Q2 revenue and profit, new record highs. This is amazing. I have 2 questions. The first question about AIoT. For the AIoT segment in Q2, it performed very strongly. So can you share with us the performance in the Chinese market and overseas market. And then for the overseas market, you are expanding very fast. So in the future, for new retail building -- new retail system building, what will be the positive impact on AIoT business? The second question is about smartphone. In Q2, smartphone business gross margin came down quarter-on-quarter.

And from the industry's point of view, if we look at some costs, they are rising. So for smartphone gross margin, given the short-term fluctuations, what will be the long-term development trend for spare parts cost increase, well, this is one risk factor. But at the same time, the degree of concentration in the industry rises and you are working more on premiumization. With these 2 positive factors, can they help your smartphone business to achieve growth in gross margin in the future? Will there be other factors that will cause impact on your long-term gross profit of smartphone?

Thank you. First question is about IoT and overseas new retail. I think for IoT business right now, no matter whether you talk about Chinese market or overseas market, we have good growth rates in the Chinese market because we have built the new retail system. Some time ago, for IoT, we focused more on online, less on offline. In the past 2 years, we focused a lot on offline. So if you look at our offline stores, well, we opened a lot of larger stores, but this is not enough. We have the next-generation iteration plan for overseas market, it benefited from channel expansion. In the past, for IoT, our channels are narrower. But in the past 2 to 3 years, we opened up the overseas channels. So for IoT in China and overseas, it is doing quite well now. But for the businesses that we have built, basically, they are mainly sold in China. So in China, the numbers may be higher. So growth rate in China market will be higher than overseas for large appliances. For new retail, this year, it is a scale of loop -- scale closed loop. So last year, we completed our exploration and research. And in the first half, we opened 200 stores.

And then for major countries, we have opened one or more Xiaomi direct retail -- new retail stores. And we have incorporated many working partner stores. And after this year's effort, next year, we believe we will put in more efforts to open 1,000 stores per year. After that, for the overall IoT business, that will be a big help. If you don't have controllable channels for IoT, the efficiency will be very low if you get into different platforms. So I believe with our effort, overseas growth potential is going to be huge. That's my first answer. And then you asked about gross margin. For smartphones, this year, I believe if you talk about price increase for memory, internal memory or storage, it is much higher than expected, especially for the low-priced market. So we realized that the increase in price was actually highest in that segment. For low to medium-end products, the impact is bigger.

And this year, in March and April, so there was actually some restrictions on the materials and also battery materials as a result. This year, I think if you talk about cost for smartphones, this year, if you look at all these factors, I think there will be cost increase. And then in Q2, together with our product structure adjustment, in Q2, we launched some new products, but very few. In the first half in China, we only launched 6 new products. For other brands, maybe 10-plus or 20-plus new styles for us in Q2, together with these factors, gross margin came down as compared to Q1 overall speaking. I think this year, in Q4, it is going to be the quarter where most of our new products will be launched. And then in Q4, I think gross margin will rise back. So this is the situation about gross margin this year. In the long term, I think we have to tackle the issue by means of premiumization. So for premium products, I think that is the focus of our investment. For tech investment, so I think chip, OS, these are the main core technologies of our investment.

Let me supplement. For Q2, it is peak season for air conditioners. And in Q2, shipments exceeded 5 million units already. So this will drive our overall Chinese market IoT revenue. It will grow faster. So that is the point I would like to add.

Next question is from Timothy of Goldman Sachs.

Once again, congratulations on the strong Q2 results. I have 2 questions to ask. First question is about AIoT business gross margin. So on a year-on-year basis, there is a significant increase. But on a quarter-on-quarter basis, there is pressure. So for quarter-on-quarter, what is the source of the pressure? Besides for home appliance market, competition will be more intense, especially given the high base. So in China, there may be the risk of slowdown in growth. So in the second half of this year for IoT, what is the trend of gross margin? Next question is about your R&D expenses. In Q2, your R&D expenses was up more than 40% year-on-year. And this growth rate is the fastest in the past years. So given this year-on-year growth, what are the directions of investment mainly. In Q2, we saw that you introduced a 1 million place driving technology. So what is the progress of this latest development for new businesses, large models and chips. So are you going to increase investment quarter after quarter?

Yes. Thank you. Regarding AIoT gross margin, there is increase in year-on-year basis, but the slowdown in quarter-on-quarter. I think this is mainly because of 618 in the Chinese market. Now from my point of view, I think the main point is the impact from 618. There are no other major variables and changes. For home appliance, given the current national subsidy situation, -- for this home appliance segment, at the beginning of the year, we set our estimates, but there isn't much impact. We can actually complete our overall targets set at the beginning of the year for the large appliance segment. The overall trend and targets have not been changed. That's the first point. And then regarding R&D, for R&D, so you asked about the direction of our investment. No matter whether we talk about core technology, for example, chips, AIoT and also various product line technology like smartphone and EVs, we are making investment all around.

And there is a wide scope of investment for us. Today, we enjoy such good growth and good word of mouth and good competitiveness. And then we also have quite good gross margin and net profit margin. I think this is closely related with our investment. Without such investment, we won't be able to deliver such report card. And besides, you mentioned 1 million. In fact, it is 10 million clips. So at present, when it comes to the assistance to driving, I think it is quite big. Eclipse equals to about 30 seconds roughly. So all the sensors can be incorporated and comparing with the past, I think the assisted driving precision can be greatly enhanced. So regarding large models and chips, our investment is basically in line with our original plan and budget. Will it increase? Of course, we will increase as compared to previous quarter. Alain, anything to add?

Yes, a few points to add. First, for AIoT gross margin, last quarter, I said that in Q1, there were not much sales promotion activities. In Q2, there was the 618, as mentioned by Mr. Lu. In the past few years, when we adjusted the gross margin of AIoT, then you can see the 22-point-something, which is a historical high, and it is only lower than last quarter. So for 4 consecutive quarters, our gross margin of AIoT was more than 20%. So for IoT gross margin, you can see quite clearly that it is rising gradually. And secondly, for R&D expenses, you asked about AI and chips. Well, we will continue to increase investments. However, there are some variances. For chips, I think it is mainly about research for AI investment, it is about hardware, depreciation, investment. These are the points I would like to add.

So next question is from Zoe of UBS.

Congratulations on your very good Q2 results. Now my question is, from Q2, a 26.4% gross margin for EV, this is very amazing. So by means of changes to your product structure, on a quarter-on-quarter basis, you delivered very fast growth rate. So for medium to long term, for EVs, what will be the stable level of gross margin? And then in the short run, in the second half of the year, is there a target that you are confident in? Now looking at the uncertainties in the second half, what would be some uncertain factors in relation to your profitability?

Thank you. For gross margin, in this quarter, our gross margin grew as compared to Q1. Gross margin was quite satisfactory because of a few reasons. First, if you look at our ASP, this quarter, ASP is RMB 253,000 to RMB 254,000, including tax, then around RMB 286,000 to RMB 287,000. So with this selling price, basically, it is the BBA level. And it's -- and thanks to our premiumization strategy success. This is the first point. Secondly, I think it also owes a lot to data and also our very standardized SU7 platform. So they use the same platform, SU7, YU7. So the modularization and standardization is very good. And then there is a collective strength as well, even though our overall scale is not big, but for a platform and category, the scale is very big. So I think we enjoy economies of scale as a result. So these are the 2 points explaining the good gross margin.

Well, in the long run, regarding the gross margin, I think it's difficult to say whether we can maintain this good level. It all depends on whether we can maintain good order volume. With good order volume, then I don't need a lot of other monetization effort. Regarding second half of the year and the profitability, we have a target. We hope that in the second half of this year, we can achieve a single quarter or single month profitability. It is difficult to say whether it will happen in which month or in Q3 or Q4, but this is our broad goal, and this has not changed. We are working hard towards this goal. But I would like to say that this is about a certain month or a certain quarter from 2022 to first half 2025. In new businesses, we have altogether invested CNY 30-odd billion. And in the financial statements, there is still a loss. If we have to achieve accumulated profit, we still take some time. It is still a long way to go. So that's all in my answer. Thank you.

I have still the second question to ask about Internet. So overseas growth comparing with Chinese growth is faster. So apart from shipment growth, in terms of ARPU composition and overseas Internet business model, have you made any new attempts?

So we have not got such detailed data. We need some time to do some studies. I think your research is very detailed. But at present, in overseas, all along, we said that we want to do localized operation. Now with this capability, then comparing with the past in overseas markets, we can achieve more refined operation. I think this is the benefit arising from refined management as compared to the past. So that's the first point. If you look at our premiumization progress in the first half, for products over USD 600, the year-on-year growth was 50-odd to 60%. So product structure has enhanced the ARPU improvement. This is very helpful. If you look at overseas ARPU, it is around $4 roughly. So you can work that out. As Mr. Lu just said, we implement more localized operation. And when our user base expands, so we do more localized, besides there more international brands or APP willing to work with us. In the past, there were more Chinese APPs going abroad with us. But now we have the localized operation capability. We have attracted more local APPs and international big APPs working with us.

Next question is from Yingbo Xu from Citic.

Yes. I have 2 questions. So first of all, I would like to congratulate you on the excellent results in Q2. I have 2 main questions. The first question, now in AI, in these years, you keep on investing. You have your own large models and AI glasses. And then also some upgrade in terms of your cockpit -- driving cockpit. So in the future, in terms of AI development direction, software and hardware, what are your thoughts? Second question will be more longer term. In Q2 this year, the number of connected devices increased a lot. So can you share with us in the future, given this ecosystem and such a big user base, what is your long-term plan, please? And what are your long-term targets?

So for AI, we have said many times at present in terms of AI, first, we have AI large model. We'll keep on investing. And then there is also our application layer. Together with large models, there is the need for a conversion. That's a SaaS layer. Our team has done basic layouts and deployments. And for AI application equipment, there is a lot, for example, cockpit in EVs, AI glasses and so on. So there are many wide applications. Well, today, I have a few points. I think we'll see a big future for the new AI. But then today, in the application, we are not inclined to either terminal-based or cloud-based. It depends on user experience. We will choose the one delivering better user experience. However, when the efficiency is higher for the model and when the computing power is enhanced, then I think terminal-based will be the main trend.

And then there will be more and more devices that will be AI-based or AI empowered. And you just mentioned the number of connected devices. Well, that number doesn't include smartphones and tablets. Our long-term vision is that we want to form a closed loop. And this is, for sure, our goal. Now we are connecting the devices, but then the user stickiness is still not enough. Now when stickiness is not enough, then there is still a gap in terms of the value created for the users. But if stickiness can strengthen, then we can turn our company into a network economy company, then I think this is a big upgrade for our business model. With this upgrade, then I think our inner value will see huge change.

Let me supplement. It is not only about AI smartphones. If you look at our U7 and also AI glasses, there are many AI functions. For example, AI integrated with voice and also AI translation and so on, they are in many of our products like EVs and glasses. So in terms of AI application, we have actually incorporated many scenarios and AI is being integrated with many other products as well.

Very clear answer. We do look forward to the overall whole ecosystem of AI and further growth.

Next question, Kyna from Citi, please.

I have 2 questions. First, regarding the smartphone industry, in the first half of the year, some manufacturers at the beginning was very aggressive. But later on, they realized that the industry was flat. So in the second half of the year, how do you see the global smartphone growth? Is it going to be rather flat? And in China, everyone is talking about whether there will be renewal of subsidies and other encouraging or encouragement policies to boost consumption. How do you see the Chinese market for the whole year regarding the smartphone shipment target, 175 million to 180 million, can you attain the target?

And then next question is about EV business. In the future, just now you talked about gross margin. If we look in a long-term, more reasonable level with a certain scale, then what is a more reasonable gross margin level. Now the state is talking about anti price competition and the whole industry will move towards a healthier situation. In the future, are you going to develop overseas? In 2027, you want to go into Europe. And then how should you get yourself prepared for Europe? Will there be impact on your future profit because you need to strengthen your business overseas. So I would like to get your views. And finally, I hope that you can continue to achieve new highs in your results.

So your first question is about smartphones. For smartphones, this year, at the end of last year or early this year, people were optimistic about the smartphone industry. If you talk about various brands targets, they are rather positive or proactive. But after half a year, it seems that in the overall industry, there was not the expected volume growth. So of course, it is just natural that there would be price war as a result. This is a basic rhythm. Mid this year, I think everybody's inventory is more or less at the level. And in the second half of the year, the market will become more rational. Overall speaking, I think for the whole year, for the global industry, there won't be growth or very, very small growth, only 0-point-something percent growth, I guess. I think there would not be much progress. That's my basic judgment of the overall global industry. Given the overall situation this year, we have revised our targets. So it will be around 175 million in shipments.

That's our target. And comparing with last year, I think we need a growth of 5 to 6 percentage points. And this growth comparing with the overall industries is a lot higher. But given our strength and our company situation, in terms of product structure optimization and ASP increase, well, our expectation is higher than that of scale growth. That's our strategy of smartphones. Regarding EVs, gross margin and infollution and overseas development, first of all, we do agree with anti-infollution. For Xiaomi EVs, we don't take part in price war and infollution. We will do our own job well. So in terms of order delivery and so on, we will do a better job in terms of development of new car styles and models. This is our biggest concern. After doing all these well, then I believe that gross margin is a natural result. Now if your products are not competitive, then at the end of the day, you can only compete on price and do quick sales promotions, then gross margin cannot rise.

For Xiaomi, this is something that we insist on. We have to do our platform well. We need best sellers, and then we have to control our spare parts cost, then we can have our advantages. Now Xiaomi adheres on introducing best sellers. For overseas development, now today in China, the business model that we have developed in China can also apply in overseas market. When we get into Europe, then for all our models and tactics developed in China, they will be brought to Europe as well. So in 2027, we are going to get into Europe. Now we are doing the researches and preparation. So, so far, we have not got the specific product plan yet. So for future gross margin and net margin, it's difficult to say for this moment. Now in the past few years, no matter whether we talk about chips or EVs, so we first completed the difficult task. So we started with the most difficult market that is Europe. So we want to do a good job in the difficult task first, and then we'll move on to the easier ones.

Next question, Xu Yingbo, please.

Well, congratulations on the Q2 results. I have 2 questions. First, about financials. In Q2, if you look at revenue for EVs, there is quarter-on-quarter growth. Gross margin also increased. And then for EV business, gross margin grew significantly. And net profit is also stable. There is increase on the cost and as well. So can you explain the increase in cost for EVs and in the coming quarters, will there be a big change in the overall judgment about cost? The next question is about your brand strength. You just mentioned about your EV business. Now EV business is successful in China. Xiaomi's brand strength is very strong. You have already formed a strong brand in China, and you want to develop overseas market. So how are you going to shape your brand strength in overseas markets? And how are you going to make investments?

Well, for gross margin, we do not have much incremental information. Our gross margin is quite good. Our ASP is quite good with tax [ CNY 281,000 ], I think we are already a mid to high-end vehicle already. And then SU7 that we have just launched, well, it has reached our expectation. We have reached economies of scale. So scale is quite good, and our production efficiency is very high. So it supports quite satisfactory gross margin. If we look towards the future, on the cost end, we haven't seen big changes or big change variables. And then for overseas brand strength, first of all, globally and also in Europe, our brand awareness is 95% or above in some countries like Spain, 98%, 99%. For Xiaomi's brand awareness in overseas market, there isn't much problem. But for EVs, Xiaomi EVs, they are not very reputable right now.

Before 2027, we have to solve this issue about brand awareness of Xiaomi EVs and also how to enhance users' interest in Xiaomi EVs. At present, some users use their own ways to transport their cars to Europe already. I have met a Xiaomi fan who had brought their car to Britain. And then I can see that he has driven his car to many, many countries in Europe, being seen by many people. And then the same happened in Germany. So many people had seen our Xiaomi EV. So today, even though brand awareness of Xiaomi EVs seems not high, but maybe it is a lot better than our expectation. So I'm not too worried about this brand awareness issue. In China, we also built from scratch. So I'm not particularly worried.

Next question, Huang Leping from Huatai Securities.

I have 2 questions. First question, recently, in China, regarding robots, new enterprises and so on, this is rather hot as a topic. So how do you see this robot category and the related business opportunities? Second question, for home appliances, large appliances business grew fast, especially for air conditioners, 5.4 million units already. So now online, you are already #1. So for your large appliance business, especially air conditioners, what are you going to do to enhance it further to a new level?

First, regarding robots, I won't comment on that. Let me talk about Xiaomi. We are positive about opportunities from robotics. We have already invested in it for 4 to 5 years because we are optimistic. And then for embodied robots in factories and its application, we are also positive. The point is in our own factories, can we first complete some closed loop and then we can enhance the efficiency. Right now, the difficulty is very high for such robotics. I haven't seen very clear timetable for commercial closed loop. It may take some more time. Next question is about large appliances. Let me first correct myself. We are not really #1. This is a point that I would like to correct. We haven't reached #1. There is still a big gap from #1. Now we are working on large appliances.

Our air conditioners developed fast. But for refrigerators and washing machines, they are also doing -- developing fast. For air conditioners, if you talk about scale and also value, they are bigger than the combined value of washing machine and refrigerators. So our investment into air conditioner is bigger, and we are more advanced by 2 years than the other 2 categories. I think our selling price is also quite good. This year, price war is intense in the industry. But if you look at Xiaomi, first, our ASP rose by CNY 200 roughly. This is a rough estimate, around CNY 200. Given such situation, our air conditioner gross margin also increased year-on-year. So this year, if you look at our results, our scale grew 60% from last year. ASP also grew CNY 200 from last year. Gross margin also increased from last year.

And based on these circumstances, these are the results that we have achieved. Overall speaking, the price war in the industry might affect us a little bit, but it won't block our forward development trend. And we do not care much about the ranking on a monthly or quarterly basis. In the long run, we have to look at the change in the layout in the industry. We have to see whether our products are competitive and whether our strategies are good. And after we sell our products to users, our user ratings are high, these are important. If all these are positive, then definitely we can move forward. And Xiaomi has still not reached the ceiling that we have in mind for air conditioners and for large appliances. In the Chinese market, there is still a few times of growth potential, not to mention overseas. We've just started in the overseas development. So there are still many times of growth potential. We have a lot of confidence in Southeast Asia, we did quite a good job in this period.

Because of time, we will now take the last question. Kuai Jian, please from Orient Securities.

My first question is about AI talent strategy. Recently, for overseas AI talents, they are being snudged intensely. For Xiaomi, your R&D expenses continued to rise. Some time ago, there were rules about AI talent deployment. So when it comes to talent strategies, can you explain more? So in which areas did you make deployment? What kind of talents are you more inclined to hiring? So that's my question.

This is a very broad topic, AI strategy. This is a broad topic. It is very difficult for me to give you a brief answer. But if you take a look at our recent results and deliveries, you will be able to deduce that we have many remarkable talents in our company. So please rest assured. So we have not operated for a long time in this area yet. And I think in the future, there will be more and more positive outcomes. This year, R&D expenses, about CNY 30 billion, 25% was invested into AI. First, about basic investment into computing power. That's also one important point. So that's all I can say for this question. Thank you.

Thank you. We'll conclude the call here. Thank you very much.

Thank you. This concludes the conference today. Thank you again for joining us. We hope you will continue to support Xiaomi Group. Goodbye.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Ladies and gentlemen, welcome to Xiaomi's 2025 First Quarter Results Announcement Investor conference call and audio webcast. Today's conference is being recorded. If you have any objection, you may disconnect at this time. [Operator Instructions]

Now I would like to hand the conference over to your host today, Mr. [ Chiran], General Manager of Group Investor Relations. Please go ahead, sir.

Good evening, ladies and gentlemen. Welcome to the investor conference call and audio webcast hosted by Xiaomi Corporation regarding the company's 2025 first quarter results. Before we start the call, we would like to remind you that this call may include forward-looking statements, which are underlined by a number of risks and uncertainties and may not be realized in the future for various reasons. Information about general market conditions comes from a variety of sources outside of Xiaomi. This presentation also contains some unaudited non-IFRS financial measures that should be considered in addition to, but not as a substitute for the company's financials prepared in accordance with IFRS.

Joining us on the conference today are Mr. Lu Weibing, Partner and President of Xiaomi Corporation; and Mr. Alain Lam, Vice President and CFO of Xiaomi Corporation. To start, Mr. Lu will share recent strategic and business updates of the company. Thereafter, Mr. Lam will review the company's financial performance in the first quarter of 2025. Following that, we'll move on to the Q&A session.

I will now turn the call over to Mr. Lu.

Good evening, everyone. Thank you, and welcome to Xiaomi's Q1 2025 Results Announcement Conference Call. This year is the 15th anniversary of Xiaomi's founding and also the beginning of our new 5-year journey. In the first quarter just passed under the traction of the overall strategy of people, car, home and ecology, we have steadily pushed forward the various strategies of our group. Various business lines have achieved multipoint blossom increasing another record. We have delivered a single quarterly financial report that is the strongest in our history. Tonight, I would like to share with you two main points. First, talk about the milestones we've achieved in core technology, including the breakthrough of XRING processor released last week and the progress of the AI big model.

Second, I'd like to share with you the highlights of our first quarter results and latest progress in executing our strategy. As you know, our development goal for the new decade is to invest massively in the underlying core technology and become the next generation of global hard core technology leader. Based on this goal, we have adhered to technology-based principle. At the beginning of the year, we announced that our R&D investment in 2025 should reach RMB 30 billion, which means that our R&D investment in the 5 years from 2021 to 2025 should exceed RMB 102 billion. Last Thursday, Mr. Lei announced a new 5-year R&D investment target for the next 5 years, that is from 2026 to 2030 R&D investment is expected to reach RMB 200 billion. And these R&D investments will help Xiaomi turn hard core technology into a corporate mode. In the field of hardcore technology, AI and chips are important underlying core technologies and there are also two very important strategies of our Xiaomi Group, and we have recently shown you our latest R&D achievements in these two fields.

In the field of AI, we continue to promote research of large model of the base. At the end of April, the Xiaomi Big Model core team released Xiaomi's open source first Big Model for reasoning Xiaomi MiMo, which, with the parameter size of OE-7B has achieved excellent results in the open test set of mathematical inference and core competitions. And then in the field of chips last Thursday, we delivered the first report. Xiaomi's first independently developed and designed 3-nanometer flagship cell phone SoC chip, Xiaomi XRING O1 was officially released, using second-generation of 3-nanometer process with 90 billion transistors, the performance and experience are in the first echelon of the global industry. XRING 01 advanced 10-core 4 quad-cluster architecture and the AnTuTu score reached more than 3 million points, while energy consumption performance is also very good. .

Currently, the XRING 01 is installed in our flagship smartphone, Xiaomi 15S Pro as well as the highest end tablet Xiaomi Tablet 7 Ultra. In addition to the release of XRING 01 processor chips that you have already seen. We also released Xiaomi's first long-lasting 4G watch chip XRING T1 at the same time. XRING T1 internal integration of Xiaomi's first self research 4G baseband, representing Xiaomi in the baseband of this key track has taken an important step forward.

For scale of investment in the chip sector when we decided to relaunch big chips in 2021, we set out a plan for long-term investment. At least for the coming 10 years, we should at least, at least -- we should invest at least RMB 50 billion. Over the past 4 years, starting 2021, as of the end of April this year, XRING's cumulative investment in R&D has exceeded RMB 13.5 billion. At present, the size of our R&D team in the chips division has exceeded 2,500 people. Number of person and the scale of investment ranked top 3 in China. We believe in the future, chips will be the core track for Xiaomi to breakthrough hardcore technology. We'll do our best to maintain strategic patience and continue to invest in them.

Let's now share with you some highlights of our first quarter results. In Q1 2025, keyword for results was record high. Our total revenue, core business revenue, adjusted net profit and many other metrics all reached record high in a single quarter. Total revenue of RMB 111.3 billion, up 47% year-on-year. For a second consecutive quarter, and for cellphone business, RMB 92.7 billion, up 23% year-on-year single quarter adjusted net profit exceeded RMB 10 billion for the first time, reaching RMB 10.7 billion, up 64% year-on-year. I would like to highlight some of the key business results we achieved during the quarter. First, after a decade, we returned to #1 in smartphone shipments in Mainland China. In Q1, just passed, we returned to #1 in smartphone shipments in Mainland China increasing our share by 4.7 percentage points year-on-year to 18.8%, thanks to the continuous improvement of our brand and product strength and the solid new retail foundation we have built over the past few years.

For 5 consecutive quarters, we exhibited growth. Our shipment growth rate in the first quarter reached 40% year-on-year, fastest among the top 5 vendors, significantly outperforming 4.6% year-on-year growth rate of the broader smartphone market in Mainland China. We continue to promote premiumization strategy. In Q1, our global smartphone ASP hit a record high of RMB 1,211, up 5.8% year-on-year. In Q1 2025, Xiaomi's share of high-end smartphone shipment in Mainland China increased from 21% in the same period last year to 25%, an increase of 3.3 percentage points flagship from Xiaomi 15 Ultra saw a year-over-year increase of more than 90% in sales month in Mainland China shipment compared to PD sensor. At the same time, we continue to increase proportion of high-end users, which contributed to our record Internet revenue in Mainland. For channel expansion, we actively promoted construction of new retail channels. In terms of channel expansion, we actively promoted construction of new retail channels, adding more than 1,000 Mi Home to approximately 60,000 in Mainland China in Q1, expanding automotive stores to 235 and continue to enhance wider user reach and realize ultimate user experience with extreme efficiency.

In Q1, smartphone market share in offline channels in Mainland China increased to 12.1%, up 3.2 percentage points year-on-year. IoT revenue continued to reach record high driven by strong growth in multiple IoT categories. Thanks to our breakthrough in technology, product brands, channels and services, coupled with favorable national subsidy policy. Our IoT revenue reached RMB 32.3 billion in Q1, exceeding RMB 30 billion for the second consecutive quarter, with strong year-on-year revenue growth of 59%. We achieved breakthrough in a number of categories, focusing on our major large home appliances, tablets and wearable businesses, which achieved good results this quarter. We are all very concerned about big home appliance business. We set high target. And by 2030, for the Mainland market, we want to be 1 of the top 2 this year. In China Mainland open market sales, we target number three. So we have completed comprehensive technology benchmarking, and so we need to enhance our product capability. Our smart manufacturer and factory will start production this year, thanks to enhancement of our multi-facet capabilities in Q1. Revenue of large home appliance business doubled year-on-year with shipments of air conditioners, refrigerators and washing machines or achieving high growth rates of more than 65%. ASP increased significantly. Product mix improved significantly.

For tablets, relying on our improved product portfolio, our tablet product shipment hit a record high in Q1 and entered top 3 globally for the first time with shipments growing 56% year-on-year, fastest growth rates among top 5 vendors. Last Thursday, we announced Xiaomi Tablet 7 Ultra equipped with the XRING 01 which is the first time that Xiaomi tablet has launched the ultra series, meaning that it will have top quality technical specifications and experience. And this is also the first shot at Xiaomi tablets premiumization. For wearables, our wearable wrist band achieved #1 position globally in Q1. Last Thursday, we announced the Xiaomi watch, S4 eSIM 15th anniversary edition powered by our XRING T1 chip, which improves performance while significantly reducing power consumption. In Q1, we ranked second globally in TWS shipment with 63% year-on-year increase. We rank first in China with 44% year-on-year increase in shipments.

Third, EV business continued to grow at rapid rates. We continue to tap into production efficiency and increase production capacity, delivering 76,000 new EVs in the first quarter. As we shared last Thursday, Xiaomi has delivered more than 258,000 units of the SU7 Series and more than 28,000 units were delivered in April, making it the top seller of all cars in the 200,000-plus price range. Last Thursday, the long awaited wait Xiaomi YU7 was also officially unveiled, positioned as a luxury high-performance SUV, the Xiaomi YU7 both elegant styling and sporty high performance, while also offering an overall sense of luxury and spatial conference. The Xiaomi YU7 is equipped with full range of configuration, a full range of ultra-long range, standard version of the range is up to 835 km, also equipped with a standard 800V silicon carbide high-voltage platform. Xiaomi's panoramic Sky screen as well as a full range of standard LiDAR, 700 TOPS auxiliary driving arithmetic and continuous damping vehicle dampers -- variable dampers. Xiaomi YU7 has fully upgraded armor-cage steel aluminum hybrid body, which is the first to be equipped with 2200 MPa Xiaomi ultra strong steel has passed more than 50 positive safety performance development test and there are 3 versions, Standard Pro and Max, which will be officially launched in July this year.

In conclusion, I would like to say that Xiaomi is standing at a new starting point of a new journey. And although the road ahead is far, there will be countless challenges and difficulties, but we will do our best. We firmly believe that Xiaomi's values, our model, our methodology are powerful and universal. And we firmly believe that as long as we start to catch up, we are on the way to win. That's what I'd like to share with you today.

Next, let me turn the floor over to Alain, our CFO.

Thank you, Mr. Lu. Good evening, everyone. As Mr. Lu just shared with you, in 2025, Q1 with our people, EV, home, ecology, strategic guidance, once again, we have achieved very good results performance. our total revenue, core business revenue, gross margin, adjusted net profit, all these metrics have achieved historical record high. In Q1 2025, we achieved total revenue of RMB 111.3 billion, up 47.4% year-on-year. Gross margin was 22.8%, reaching a record high in history up 0.5 percentage points year-on-year. Looking at our different segments. First, our smartphone times AIoT segment revenue was RMB 92.7 billion up 22.8% year-on-year. Gross margin, 22.8%, a historical high level, up 0.5 percentage point year-on-year.

Now let's take a look at different business segments. First, smartphone. In this quarter, revenue was RMB 50.6 billion, accounting for 45.5% of total revenue, 8.9% year-on-year. In this quarter, our global smartphone shipments was 41.8 million units. For 7 consecutive quarters, we achieved year-on-year growth in shipments. According to Canalys data in this quarter, our global smartphone shipments ranked #3 , market share was 14.1%. For 19 consecutive quarters, we are within top 3 in the world. At the same time, in 58 markets in the world, we are within top 3 in global 68 markets, we are within top 5. In Q1, our smartphone gross margin was at a healthy level. Smartphone gross margin in the last quarter was 12%. It rose to 12.4% in this quarter. This quarter, our smartphone ASP reached RMB 1,211, up 5.8% year-on-year. Again, a historical high level. According to Canalys data, in Q1 2025 in Mainland China, our smartphone shipments came first and our market share was 18.8%. Shipments grew 40% year-on-year or performance far surpassed the overall industry. For IoT, in Q1, our IoT business achieved breakthrough in both revenue and profit. IoT revenue and gross margin recorded historical high level. In this quarter, our IoT revenue was RMB 32.3 billion, 58. 7%. Our IoT business gross margin reached 25.2%, significantly improved by 5.4 percentage points.

For Internet, we continue to expand our user scale. In March 2025, our global MAU number reached 719 million, up 9.2% year-on-year of which in Mainland China, MAU number reached 181 million, up 12.9% or 13%. In Q1 2025, our Internet service business revenue was RMB 9.1 billion, up 12.8% year-on-year, of which our Mainland China Internet revenue reached a historical high level of almost 15% year-on-year to RMB 6.4 billion. Internet gross margin continued to improve. This quarter, gross margin reached 76.9%, up 2.7 percentage points year-on-year. Our advertising business continued to drive our Internet business growth. This quarter, our advertising revenue was RMB 6.6 billion, up 19.7% year-on-year.

AI strategy is a very important strategy. So since Q1 2025, our smart EV and related innovative business segment will be renamed as smart EV and AI innovative businesses. So we will increase AI-related investment, which will be incorporated into the new business. In Q1, our smart EV and AI Innovative Business segment had revenue of RMB 18.6 billion, accounting for 16.7% of total revenue, of which smart EV sales reached RMB 18.1 billion. Other related business revenue was RMB 500 million. Consolidated GP margin, 23.2%. This quarter, Xiaomi SU7 series altogether, 75,869 units have been delivered and ASP was RMB 238,301.

For our new business operating loss, it continued to narrow. This quarter, Smart EV and AI innovative business operating loss was RMB 500 million. Large-scale investment into bottom layer core technology and to become new generation global hardware technology leader. This is now 10-year goal -- new 10-year goal, we'll continue to enhance our R&D investment and technology innovation strength to build our long-term technology mode.

In Q1 2025, R&D expenses reached RMB 6.7 billion, up 30% year-on-year. As of 31st March 2025, our number of R&D people reached 21,731 reaching a historical record. While we promote R&D innovation for expense control, we continue to be highly effective. In Q1 2025, our overall operating expenses totaled RMB 15.4 billion. If we exclude new business investment of RMB 4.8 billion, our core business operating expenses amounted to RMB 10.6 billion. Expense ratio was 11.4%, down 1.4 percentage points year-on-year.

For profit, our single quarter adjusted net profit for the first time exceeded RMB 10 billion, reaching RMB 10.7 billion, creating a historical record and it is up 64.5% year-on-year. Adjusted net profit margin also reached a new record high at 9.6%. For ESG, in April 2025, for consecutive 7 years, we published Xiaomi Group's ESG report. We reported on our 2024 work in Xiaomi concerning low carbon transformation, circular economy, sustainable supply chain, talent development and corporate governance strategies and results and outcomes. So we plan that in 2022 to 2026 in these 5 years. Total volume of recovery should reach 38,000 tons of electronic waste.

Right now, we have already completed 95.94% of this target, and we actively lead industrial chain working partners towards green transformation in order to continue to lower Scope 3 emission. We have set 2 goals. First, by 2030, for smartphone business suppliers, their annual average carbon emission comparing with 2024 should not be lower than 5%. And for usage of green power, it should not be lower than 25%. Number two, by 2050, smartphone business suppliers, green power utilization ratio should reach 100%, besides the Ministry of Industry and Information published the 2024 Green Manufacturers List. And we successfully were included in the list of green supplier chain management enterprises.

So this shows that in promoting industrial chain, green transformation and the geocarbon target achievement, we were recognized by the authority. In the future, we will continue to promote various strategies of our group. We'll continue to enhance the building of our bottom layer building and management system reform. We will move towards higher targets and goals.

Thank you all. The above is the presentation that I would like to share with you tonight. Now we can start our Q&A session.

Thank you, Alain. Now we will move on to Q&A. In order to enable more investors to ask questions, can you please limit the number of questions to 2 at most.

[Operator Instructions] First question is from Morgan Stanley, Andy.

Congratulations Xiaomi for the best quarterly results in history. I have 2 questions, question about your AIoT business. In Q1, in this segment, you achieved very rapid growth, the pace is much faster than the average growth rate in the industry. So investors have seen this and also your competitors have also paid attention to that. Recent research shows that some of your peers have already formulated plans to target Xiaomi in the future, IoT competitive landscape will be more intense. What strategies will you put in place to face up to the situation? Will that be different tactics between China and overseas?

The second question is about EV. After the technology launch, some investors said to me that they are worried that the EV will sell well, but then there will be impact on data sales, and that would be lowering in price in order to promotion to promote sales. So what do you think? How can you make sure or what strategies can you put in place to ensure that you will achieve your expectation?

Right? You said that some peers have formulated strategies in relation to our products. Well, I think we are still in a high growth stage and there are many products that's out of stock. So for example, when the peak season of air conditioner is approaching, well, we are worried about production capacity. So we have not felt our competitors' impact on us. So if we have aroused attention from our competitors, I think this is good for the industry.

Now for the home appliance industry, I think it has been too mature and too rigid changes have been too slow. In fact, we have seen that there are a number of market behavior that are not that good for consumers. For example, some peers for the same product have just changed the model number, and they place them in different channels, selling a different price. So for us, we think that no matter which channel users go to buy the products they should, get the same product and the same right to know same price. Well, I think development or evolution has been too slow on user dimension.

So there has been some negative phenomenon. So if we have done had aroused improvement in the peers, then this is something good. For the industry, we hope that we can become a value creator in the industry and also a promoter of industrial improvement. I think for me, I don't think there has been much impact on Xiaomi and today in the large appliance business, I think we have not reached a satisfactory level so far. If you look at our strategies, we started in 2023, we have only spent 1.5 year or so time. Internally, we believe that there is still much room for improvement.

So today, I am thinking of building our large appliance factories. For example, when should we build the refrigerator factory, we have still not reached many breakthrough. So there are a lot of things that we have still not finished. So for our large appliance, high growth, I think that is just a start. For overseas, well, I don't think there would be a big difference with the tactics in China. So -- of course, the overseas share may not be as high, but then I think -- I don't think there is too much difference. There will be a difference in the competitive landscape, but 80% of the home appliances are Japanese brands not Chinese brands. I think the competitors will change for user demand. There isn't a fundamental change. I think there is a difference in purchasing power, leading to a change in the product demand, but that is not an intrinsic difference in the users.

And for SU7 for the impact on SU7, well, I think, first of all, I do not worry at all. But the sales of SU7 will be impacted, that price has to be reduced. I think capacity is very significantly inadequate. And for SU7, I think the biggest advantage is that capacity replication or replicability is very high for SU7. For these 2 models, what kind of ratio will they constitute, we don't know yet. So I think after launch for some time, then after the situation normalize, then we will know the reasonable ratio between the 2 models.

Next question is from CITIC, Yingbo.

Congratulations management for the excellent results. I have 2 questions. One, recently, we read the news for smart factory, and also smart home appliance factories in the future for IoT plan, the plan apart from product plan. Can you talk about the smart appliance factory and also Smart EV factory in terms of efficiency and profitability enhancement, how much help will they do? That's my first question.

Let me raise the second question as well. Now looking at the expectation for LiDAR and also the safety equipment, they are in the standard configuration. This is good. But from a profitability point of view, with such standard configuration, will that affect your pricing strategy and your profitability?

Well, your first question is about the production platform building. I don't know whether my understanding is correct. Yes. We have EV factory, smartphone factory and home appliance factories. And in the front end, you see different products in the rear end, you will see how we build our smart manufacturing platform. So for these 3 factories behind them, a lot of things are about supply chain. For example, our system HongHai system, I think it is the main so -- core so, and then there are the core suppliers, which will be shared. And so I think the overall logic and methodology, they are the same for smart production or manufacturing, basically, we have already found the commonness among different categories and also the differences as well.

When we face the future, I think we are talking about how to globalize, how to go abroad. So basically, we have gone through the initial learning curve and then now for the product strength, we are very strong. We have the standard configuration with a long range and also other functionality. So the product is very strong. You asked about pricing and profitability. Well, so far, we have not fixed the pricing yet. So we -- I cannot discuss that with you now. But for a not strong enough product capability, it is not possible to have good profitability. Profit is the result. It is not a goal or a target to pursue. So if your product is strong, then profitability should not be a problem. If we look at SU7 after launch, it is around 14 months already. And right now in the market, what other products can catch up, not even one. So I think where many competitors who try to use different tactics to fight the battle, but today, there has not been 1 which can match us not even 5%, not even 1 quarter. So you need to have good product strength and then you won't have competitor. Without competitor, then you will have the bargaining power and pricing power, then you can maintain reasonable profit margin, okay?

Thank you. Next question. Timothy of Goldman Sachs.

Congratulations on your excellent results. I have two questions. First, about your core business, that is sometimes AIoT, I would like to focus on smartphone this year for Xiaomi smartphone shipments and also price outlook, how will that be in Q1 in the global markets. In the overall performance, there is much variance and there are many variables. In the handset or smartphone business, what are some updates in your strategies?

Second question is about EV, AI and new business. So for EV gross margin, it's above 23%. And can you analyze the reason behind. In the future, what will be the outlook for the gross margin. If we look at the new business loss, I don't know whether you can share with us about EV and AI and other new business like chip investment. How will the level be?

Okay. For smartphone this year. I think that, overall speaking, the growth should be different from your expectation at the beginning of the year, especially in the Chinese market. I think this year, but there is national subsidy in China. So overall speaking, in the past, people were more optimistic. This year, it seems that the extent is not as big. But for product structure, there are changes in mid- to high end for global markets. I think there is just 1 or 2 points that may be even negative growth in some markets, there was negative growth already. So in Europe, for example, for Xiaomi, in terms of strategies, I don't think there would be much adjustment. When it comes to fine-tuning in the past for volume growth rate, we are more concerned. For example, in 2024, 2023, we got 20-odd million. And this year, given the current situation, we may appropriately relax our requirement on sales volume. So we should focus more on improvement of product structure, so in the past, we reduced the volume or stopped production of low-end products.

So as in Japan, in the past, well, there were many businesses that we did, but now we can stop those. For example, in Hong Kong, we also wanted to focus more on the higher-end business. Xiaomi this year or last year, RMB 170 million this year perhaps around RMB 180 million. So given such volumes, I think we need to improve product structure, that will be more important than enhancing sales volume. Of course, in Africa, there is -- we have a market share of like 13 points, given our product and brand strength, I think we can reach 20% in market share. So in other words, in this market, I think there is still big room in Africa. Basically, we have to build a bigger scale and overall speaking, I don't think that would be a big adjustment. That's the first point.

The second point is about EV gross margin. Now this -- starting this quarter, we have disclosed gross margin for 4 quarters. In first quarter, last year, we disclosed a gross margin of 15.4% and then 17.1% and then 20.4% and then 23.2%. So you can see that every quarter, our gross margin keeps improving steadily. So there are a few points. First of all, I think our product strength is strong till now for SU7, for some cars after they are launched they are being challenged. And then for us, for a single model or best seller, they would definitely lead to optimization of cost. When we look at volume, we have to look at the single product efficiency under the volume. You don't look at only the total volume. For some cases, there are only scale, but no economies of scale. And there are some also some bestsellers that you can look at. And then you should look at the efficiency. Our internal management efficiency, our expense ratio and also our channel efficiency. So for our efficiency, it may be 2 to 3x efficiency of traditional automobile companies. At same retail price in the channels, well, we have a lot more room. So all these added together will lead to the current results.

On the contrary, in the industry, there may be a lot of nodes that need to be improved. I think Xiaomi's data can serve as reference for the industry and help everyone to improve and advance. I think this is the value of Xiaomi in the industry. And you talked about loss -- the amount of loss. At present, looking at our disclosure and our current way of disclosure, there is still a loss of around 500 million.

Let me supplement. You can see that in the past few quarters, for our delivery, it has been rising. Last year Q2, 27,000 units, Q3, 40,000 units; and in the recent quarter, 70,000 quarters, now we have already delivered 75,000 units in Q1. So there is the sharing of fixed costs. So in other words, efficiency will rise, and this is helpful to gross margin.

Secondly, Mr. Lu said, we sell cars for performance already. We have not lowered price, and there is some equity that is being gradually phased and then it will lead to enhancement in gross margin. And Thirdly, in Q1, we started to deliver our Ultra products, which will help our gross margin. And finally, if you look at our peripheral products last quarter, around RMB 500 million. So, since disclosure, this is the highest number in other income. So as a result, these have brought help to our gross margins. That's all for me to add.

Next question is from CICC.

Congratulations on your outstanding results. I have 2 questions. First, about premiumization of smartphone in Q1, Xiaomi in the Chinese market, our market share is rising for RMB 4,000 plus for your, 15 Ultra is selling well, and then you have the XRING SoC model as well. So in the past, in terms of smartphone premiumization, you have been progressing. In the future, what is your plan in this regard?

And then my next question is about AI. In April, you introduced Xiaomi MiMo first large model. And then some time ago, you said that you will increase investment into AI. So my question is, in the future for AI smartphone area, what kind of pleasant surprise can we expect or look forward to right for premiumization?

In Q1, we conducted a premiumization seminar. During that seminar, we did two things. So we have been concluding our past 5 years of premiumization, what have we done right? And in the coming 5 years, how should we carry out premiumization. Now we have reached some conclusions in the premiumization process. We think that we have done several things right.

First, we adhere to premiumization. 5 years ago in 2020, when we started internally, there were many different views. There were many doubts on us. So this is the first thing that we have done correctly. Second, we use Xiaomi brand to do premiumization. At that time, many people are of the view that we should perhaps start a new brand to do premiumization. We decided to use Xiaomi. Xiaomi is one Xiaomi. So when we do that, all our other products will benefit. Number three, what category should we start with? And we decided to start with smartphone and EV. For other products, they do not have the capability yet. And we limit that to the Chinese market, after forming the right methodology, then we can go overseas. Now with these 4 main strategies, we think they are all correct. In the past 5 years, I think we have also paid quite a lot of price and the price has been quite high as well.

In the coming 5 years, what should we do, first of all, based on the original exploration to future planning, we cannot just pay the price again in each and every country. We need coordination and plan, we should follow a rhythm. And secondly, in terms of the premium foundation. For example, our smartphone RMB 4,000 to RMB 6,000. Our market share was 78% from 6,000-plus smartphone, we still haven't got enough layout. We only got 5%. And I think we need to do something with a higher price, and then we have to extend that to all our other categories. And the fourth thing is we need to move from China to overseas. We can adopt the Chinese methodology to overseas. So in the coming 5 years, these are things we need to do. And then for Xiaomi SU7, our air conditioner and also our recently launched tablet. They are moving towards ultra-high-end products. And so we are exploring. And so far, we have achieved quite good feedback. And then, for AI, a few days ago, we launched the MiMo Large model. We have achieved some results. Xiaomi has to do some accumulation. And I think large model is very important. We decided to invest greatly into large model. And I think this is to serve our own business. Our user base is very big. There are many user scenarios. There are many user data as well. So if we can do a good job with infrastructure, use our data and scenario as well, then I believe we will be able to explore a very good way of improving user experience. Now this is 1 of our equipment only, not the entirety for smartphones. We have to do a good job and also deeper integration with AI, then we can achieve a lot of advancements.

I want to supplement with a number of numbers. First, if you read our PPT, you can see that in this quarter, in China, our high-end smartphone market share reached 25%. Last year, whole year, 23.3%. And then Q1 last year, 22 percentage points. So in high-end smartphone market share, I think our shipment is also getting higher and higher for RMB 4,000 to RMB 5,000 smartphone market share, we are at 24.4% and #1 really.

And then Mr. Lu mentioned home appliance. In our disclosure, you can see our revenue. Revenue growth was 113% year-on-year growth and our shipments only grew 65%. So it is quite clear that our large home appliance ASP continues to rise. So for the third number, just now Mr. Lu said, we will invest into AI this year for R&D expenses, RMB 30 billion. One quarter will be focused on AI. So our AI investment will be quite huge. And last year, our CapEx was around RMB 10 billion, this year, it will increase significantly, and some growth will be in AI. So these are the numbers I would like to add.

Next question is from Zoe of UBS.

I have 2 questions first. Last week, the XRING chip was launched on 15 next use. So in the mid to long term, for the 6S Series, will you use your self-developed SoC. And then in the coming 3 to 5 years, apart from smartphones and wearables in other man, EV, home ecosystem will you see the use of your own chips? And in this quarter, you reached 25% gross margin. So in the coming quarters, Mr. Lu, do you think this is a sustainable level? You also mentioned other Chinese competitors. And before 18th of June, they will put in place some big competitive strategies. This year in Q2, what is your pricing strategy for 18th of June. Will that be very intense price competition?

Well, for XRING processors, I think we are very clear. We started from the most difficult. We wanted to do it well. So for our flagship chips, we want to make sure that they can reach our expectation, and then we can think of or consider other areas. At this stage, we haven't considered making our XRING chip in our non-flagship series. So we are only thinking about our flagship chips. Will they be used in other products apart from smartphones, well, chip is a platform capability.

With this platform capability, you can work on other chips that won't be very difficult. On this platform capability, it is most difficult to work on smartphone flagship SoC, it has high power consumption demand and its IT is extremely complicated. So if you can have the ability of working on a flagship smartphone SoC. And then if you move to work on other chips, that won't be that difficult. So we want to focus on the flagship SoC and then we want to make our modem well and in the future. We have to work on 4G, 5G together with 2G, 3G then there would be a complete matrix. So that is what we need to do in this stage.

And for GP margin and also competition, I think right now for IoT, we just started. We are just taking off. So we still have many capabilities that are still not built yet. We have only -- we enhanced some of our capabilities, but not all. When we have enhanced our capabilities, then you will see a very good IoT big appliance as well as small appliance. You mentioned price adjustment and competition. We haven't felt too much about that. And we just adhere to our established strategy, 20% GP margin, I don't think there would be much volatility arising from competition. I think the situation will be okay. Recently, you may be more concerned about our large appliance. You also need to look at our IoT categories, including TV, tablets, wearables and also our ecosystem products. In the past quarter, they showed a high year-on-year growth, so if you only focus on 1 category, in fact, there is growth and good profit margin in other categories as well.

Next question is from Citi, Kyna.

Congratulations on the strong results. I have two questions. Just now I heard from Mr. Lu that this year for smartphones, you have -- you are going to see some adjustments, so for smartphones. In terms of your cost structure, have you seen some change. It seems that there won't be much big cost impact affecting your profit, correct? But it seems that there are other memory vendors who are adjusting the capacity, and that will impact the overall supply situation. So in this regard, will you change your previous view? That's my first point.

Second question, regarding the EV business. Recently, some manufacturers are starting price war. Now -- right now, there is still a shortage of supply. But then in the future, for the Chinese market, there will still be some gap or consolidation and amidst this wave what position does Xiaomi has and what are your way of thinking?

Right? I think you are talking about the cost. In Q2, I think the -- if you look at internal inventory cost decline, I think that would be a turning point to an increase. If you look at different categories. I think EFS will see a small decline in Q2 and Q3, Q4, I think that would be an upward trend. But I don't think the increase will be very drastic. I think it will be a rather slow increase. For some products there is some structural adjustment. But today, we haven't seen a big increase in demand. We haven't seen this factor. So overall speaking, our judgment is that we are quite accurate in our judgment. So we have already made some advanced planning, and I think the impact on Xiaomi will be controllable. There would be other areas or companies where costs will come down and there would be some offset for us.

Our price bargaining power is getting stronger. So to Xiaomi, for the smartphone gross margin, I think it is controllable and stable. And your next question is about EV price competition and the impact on us. In the short run, I don't think there is much impact. If you focus on strong impact, I think it is a part of market competition. I feel okay today. I think the situation is still okay. We just want to deliver the orders on hand and then our users can use our cars. And then I think from SU7, you have already seen our product strength performance.

Last year at this time, we announced SU7, you are most concerned about the excellent results of SU7, will the next model sell well? Okay, you may be able to do one model well. It is just a coincidence. There may be luck, but now you can see that we are even stronger and more competitive in our product strength. We do have some capabilities, which are much higher than the average capability of the industry. So I guess you have seen that we are not only good at making products. We have supply chain capability as well as a newcomer within such a short period, we can complete this. We have the capability to build factories. In the past, we have not done that. So we have comprehensive capabilities. So I don't think price will solve all the problems.

Because of time, we will now take the last question. Last question is from Huatai, Leping.

Congratulations on your excellent results. My first question is about chips. Last week, you announced the XRING chip and the related products. So for your smartphone business and chip business, how do you work out your new price? In the future, when it comes to your smartphone business and your overall gross margin, what will be the impact? And then for overseas smartphone market, in this quarter, we can see that in Africa market, your market share has risen a lot. In India, there is a slight decline. So Mr. Lu for overseas markets, India, Africa, what is the change in the competitive landscape? And how do you see future growth in these markets?

Okay. When it comes to the self-developed chips, first of all, our strategy is clearer. We have multiple brands for our chip. Well, it is high-end chip. I think it is our strategy, long-term strategy and I think this is an information about our high-end growth. It will continue to grow every year, there would be an increase of a few million cases. And then we have our high-end smartphones and tablets. We have a lot of confidence. I don't think there will be problems. We have communicated with Qualcomm, and we started from ourselves. We have good communication and for self-developed chips. So far, we only work on the flagship ones. Overall speaking, the self-developed usage rate won't be too high for gross margin. I think this is too early to talk about that. Perhaps right now, we do not pay much attention to financial targets. We focus more on whether we can make our products well. So today, we are investing without too much consideration about cost. And when it comes to smartphone big chips, we have to consider the coming 5 to 10 years in order to achieve a reasonable model financially.

And then for overseas smartphone markets, I think the decline in India is reasonable. Today, for the India market, it is quite special. There are still issues that are yet to be resolved. And also for natural -- for normal business visa with India, it has not been normalized yet. So for the Indian market, we wanted to lower risk in this market. For Africa, the issue is that the overall has declined quite a lot and amidst the overall industrial decline, we gave up some ultra low end or low-end products, and we focus on mid- to high-end products you may say that, oh, there is more decline in our market share, but we have improved our product structure. For Africa, it is an emerging market. Market share last year was 13% -- 12%, 13%. We still have huge room to improve. I think for Africa, we have to look at scale. So we have to look at the special characteristics of different markets and also our own position in those markets to determine the tactics of different markets. So we cannot have the same strategy for all markets.

Today, there are divergences among markets. So today, we divided the world into 8 big regions. For these 8 regions, we will refine our management based on the information -- local information. You can turn to our disclosure. The first time in Africa, we were up 2.6 percentage points. In Southeast Asia, we became #2. Latin America, #2. In Latin America, Mainland China, channel number one. So we have said that many times. So in these different sectors, we did well. Market share was up 0.1 points year-on-year, even though the overall is not good. So, I think there is still much demand in the international market.

Okay. Thank you very much. That's all for today. Okay. We will conclude the conference today. Thank you again for joining. We hope that you will continue to support Xiaomi Group. You may now disconnect. Goodbye.