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Ladies and gentlemen, welcome to Xiaomi's 2026 Interim Results Announcement Investor Conference Call and audio webcast. Today's conference is being recorded. If you object, you may disconnect. [Operator Instructions]

Now I'd like to hand the conference over to your host today, Ms. Isabella Gao from 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 2026 interim results.

Before we start the call, we'd 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 Lu, 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 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 Q2 2026 results announcement call. In Q2 of 2026, external environment remains challenging with the cost of core components such as memory remaining high, consumer market demand still recovering slowly and industry competition becoming more intense.

Tonight, I will take this opportunity to share with you about 3 aspects. First, a review of our key performance results for Q2 2026. Second, we will share our latest advancements in the fields of AI and embodied robots. Third, we will look at our strategic development direction and business focus for the next few quarters.

First, in Q2 2026, the group's total revenue was RMB 108.9 billion. Adjusted net profit was RMB 6.2 billion. Looking at different business segments, first, smartphone. In Q2, we proactively optimized our product structure and increased selling prices, resulting in a record high ASP for smartphones.

Although smartphone shipment declined, according to OMDIA data, we maintained our position among the top 3 globally in Q2 of 2026, marking the 24th consecutive quarter that we have ranked among the top 3 globally in market share. In Q2 2026, we ranked among top 3 in smartphone shipments in 53 countries and regions worldwide and among top 5 in smartphone shipment in 67 countries and regions worldwide.

Our smartphone shipment ranked second in Southeast Asia, Latin America and Middle East with market share of 19.3%, 16.2% and 13.5%, respectively. We ranked third in Europe and Africa with market share of 16.5% and 10.9 respectively. For gross profit margin, memory costs remained at historically high levels in Q2. We have consistently achieved a good balance between scale and profit through product mix upgrades, software optimization and improved operational capabilities.

In Q2 '26, our smartphone gross margin was 8.5%. Gross margin for the first half was 9.3%. Second, IoT business. In Q2 2026, IoT business achieved revenue of RMB 31.3 billion. Due to the high base effect of national subsidy in Chinese market last year, revenue declined year-on-year. However, thanks to the expansion of overseas channels and the increase in overseas product categories, overseas revenue increased significantly year-on-year this quarter.

As of June 30, we have opened more than 640 new retail stores overseas. In second quarter 2026, Xiaomi tablets rose to the fourth place globally. TWS earbuds ranked second globally, wearable products ranked second globally. This September, we'll also attend the EFA Exhibition in Berlin, Germany to showcase our comprehensive ecosystem of products for human car homes to the world.

Our large home appliances will begin to fully enter the European market. Xiaomi EVs. Xiaomi delivered 104,199 vehicles in Q2 2026, marking the sixth consecutive quarter of year-on-year growth in deliveries. In the first half this year, Xiaomi SU7 series ranked first in sales among pure electric sedans priced above RMB 200,000 in Mainland China.

As of 17th August cumulative delivery volume of Xiaomi 7 series exceeded 500,000 units. In July 2026, we held the Xiaomi Automotive Technology Launch Conference, officially releasing our first extended range vehicle architecture, the Xiaomi Quinlan technical architecture.

Based on this, we launched Xiaomi SkyNomad series of extended range SUVs positioned as intelligent variable space SUVs, including the Xiaomi SkyNomad N90 Max and N70 Max with presale prices of RMB 299,900 and RMB 259,900, respectively. Preorders have been enthusiastic. Xiaomi SkyNomad will be officially launched in September, and we hope to receive everyone's continued support. We continuously refine Xiaomi EV technology using the Norberg Green Nord Sleeve track.

In June 2026, Xiaomi U7 GT with track package set a new Ring Lab record with autonomous driving with a time of 10 minutes and 29.483 seconds. This achievement is the result of the joint effort of Xiaomi EV European R&D center and our Mainland assisted driving team. We hung our smart driving technology on the track to improve driving safety in extreme scenarios for mass-produced vehicles. Second, the issues of AI and embodied intelligence that everyone is concerned about.

Latest progress on Xiaomi's foundational large model. In April 2026, we released Xiaomi MiMo V 2.5 series. On 2nd August 2026, CCTV reported on the latest weekly global large-scale model car volume ranking of open router. With Xiaomi MiMo V2.5 topping the list, its core volume increased more than sixfold from CNY 1.5 trillion to CNY 10.5 trillion in 2 months. Developers choose MiMo primarily because of its outstanding full model perception, intelligent agent and code capabilities, highly competitive pricing and the fact that the entire series is open source.

Ultimately, the value of technology lies in the breadth of its use. We continue to explore how to extend MiMo from model capabilities to the agent ecosystem. In June this year, we officially released an open source MiMo code, an exploratory AI programming assistant. It's not just a useful AI coding tool, but also an AI teammate who lives in your computer and gets better at understanding you the more you use it.

In the same month, we released official version of Xiaomi MiMo Claw and partnered with Kingsoft's Office ecosystem to launch a full chain document office efficiency improvement solution. At the same time, we officially released Miloco 2.0, an open source whole house smart AI solution centered on the MiMo Big Data model. This represents a further step in exploring the next generation of smart homes, enabling home devices to go beyond simply following commands and begin to thing, thus exploring a new form of smart home in greater depth.

Benefiting from the continued growth in call volume, our API calls and token plan began contributing revenue this quarter. We'll continue to iterate on our foundational model, striving to place it among the top tier of models with the same parameter levels. It is gratifying to see that Chinese models have entered the forefront of the world. Next AI mobile phones. We have always emphasized that AI phones must integrate AI capabilities into OS.

The Xiaomi HyperOS 4 that we just released is an important start. We have upgraded AI from simple question-and-answer function in individual software to a user-friendly assistant that can remember user habits, understand user thoughts and truly help users get things done.

Based on Xiaomi self-developed MiMo model and the AI-driven transformation of the OS has been fully upgraded to Hyperiai2.0, bringing a brand-new interactive experience with the island and inspiration ball features while also offering 2 modes, quick and expert. The powerful expert mode with its comprehensive integration with operating system applications can seamlessly complete complex tasks across applications and devices.

For expert mode, we have launched HyperSiai2.0, expert mode points-based membership subscription plan. Each user will receive 1,000 points per month for free. Hey AI users can flexibly choose their subscription plan with monthly special offer starting at just RMB 19. Latest advance in embodied robots. In June 2026, our robotics team won 2 championships at CVPR 2026 and ICRA 2026 WBC.

In July this year, we released several more important updates. At Xiaomi's EV factory after a quarter of effort, Xiaomi's embodied robots have improved the success rate of dual-side task at the self-tapping threaded insert loading station to 98%. At the same time, our embodied robots have begun to explore new workstations in the logistics area of the final assembly workshop, sorting the center console site cover returnable box folding with success rate of 90%.

We have also officially released Xiaomi Robotics U0 and Xiaomi Robotics-1. Robotics 0 is the first unified generative model in embodied intelligence field that can handle all 4 types of tasks, driving solutions to data challenges faced by the embodied intelligence industry. Robotics One was pretrained on 100,000 hours of real-world data and then trained using cross-ontology data, ranking first in multiple simulation evaluations. On August 5, we officially open sourced this model.

Finally, I would like to say that in July this year, we were included in the Fortune Global 500 list for the eighth consecutive year, ranking 232nd, an improvement of 65 places from last year, marking a new high since we first appeared on the list in 2019. In 2026, Kantar Brands top 50 global brands in China list , Xiaomi ranked second. Our expanding global brand influence will help us balance our regional impact and help Xiaomi navigate cycle economic cycles.

Looking ahead to Q3, several factors that will put pressure on short-term operations remain. Storage costs will remain high, consumer demand recovery will take time and competition will remain fierce. However, as we have mentioned many times before, Xiaomi has always ushered in a new growth cycle after facing each difficulty by improving its capabilities. After proactive adjustments over the past 2 decades, past 2 quarters, we have a clearer understanding of the external environment and our capabilities are steadily improving.

Short-term pressure will not change our long-term strategy. We remain committed to our goal of becoming a global leader in next-generation hardcore technologies and continue to increase our investment in hardcore technologies such as AI chips, operating system and embodied intelligence to build strength for the next stage of growth.

That concludes my part. Now over to our CFO, Alain.

Thank you, Mr. Lu. In Q2 2026, our total revenue was RMB 108.9 billion. Our gross margin was 19.8% our mobile times AIoT segment revenue was RMB 84 billion. Smartphone times AIoT segment gross margin reached 20%. In the smartphone sector, the continued significant increase in memory cost has had an overall impact on the smartphone industry. We proactively optimized our product mix and increased pricing, resulting in a record high ASP for our smartphones.

Revenue for this quarter was RMB 42.1 billion, accounting for 38.7% of total revenue. Our global smartphone shipments reached 31.2 million units. According to third-party data, in Q2 2026, our high-end or premium smartphone sales in Mainland China accounted for 32.1% of total smartphone sales in China, a record high.

Despite the significant increase in memory costs, thanks to our continued product mix upgrades and strategies to balance scale and profit through our operational capabilities, our smartphone gross margin for this quarter was 8.5%. In the IoT area, our revenue reached RMB 31.3 billion in Q2 2026. Overseas revenue saw a significant year-on-year increase driven by expansion into overseas channels and a wider product range.

Gross margin for IoT segment was 20.1% this quarter. Although some product categories were affected by memory costs and the reduction in national subsidies, from product category perspective, we ranked second globally in wearable wristband device shipments and second globally in TWS earbud shipments. Our tablet business rose to fourth place globally this quarter.

For Internet services, we have accumulated a large user base globally. In June 2026, our global MAUs reached 770 million. up 4.8% year-on-year. Among them, MAUs in Mainland China reached a record high of 198 million, up 7% year-on-year. In Q2 this year, our Internet services revenue was RMB 9 billion. Gross margin for Internet services this quarter was 76.8%, up 1.4 percentage points year-on-year.

Now let me turn to Smart EV, AI and other new initiatives. For this segment, revenue was RMB 24.9 billion this quarter, up 17.1% year-on-year, accounting for 23% of the group's total revenue. In this quarter, we delivered a total of 104,199 new vehicles with smart EV sales revenue reaching RMB 23.9 billion. Other related business revenue was RMB 1 billion, including revenue from AI big models or large models.

Gross margin of smart EVs, AI and other new initiatives segment was 19.2% this quarter. In Q2 2026, we continued to increase investment in AI and other new initiatives. result resulting in an operating loss of RMB 2.6 billion for this segment. In this quarter, our R&D expenses was RMB 9.2 billion, up 18.9% year-on-year.

In first half 2026, our R&D expenses was RMB 18.2 billion, up 25.6% year-on-year with AI-related investments accounting for nearly 30%. In terms of net profit, the group's adjusted net profit for Q2 2026 was RMB 6.2 billion. In Q2 2026, our CapEx reached RMB 3.6 billion, of which innovative businesses such as Smart EVs and AI accounted for 65.8%.

We remain committed to enhancing shareholder value and actively buy back shares in the open market. Since 2026, our share buyback amount has reached about HKD 11.7 billion, exceeding the total amount bought back for the entire past year or previous year. Regarding ESG, in the research and development of low-carbon materials, we continue to increase our independent R&D investment in core materials.

Xiaomi's self-developed Xiaomi Titan Alloy 2.0 released in July reduces carbon emissions by approximately 93% compared to traditional primary aluminum. It has passed international environmental production international environmental product declaration certification and completed registration and public announcement, while maintaining strength, its toughness is further improved and all indicators meet the stringent standards for automotive structural components.

It has already been mass produced and applied to the new generation SU7 Series and Xiaomi U 7 series. This breakthrough in material technology further strengthens our independent technological capabilities and high-end product competitiveness in the smart EV business and helps enhance the low-carbon competitiveness of Xiaomi products in the international market. In terms of disaster relief, in July 2026, Guangxi, Hubei, Gansu, Lianing, Jilin, Hubei and other places suffered from floods, hail, storm and other disasters.

The Xiaomi Foundation donated RMB 10 million in cash to support emergency relief, transitional resettlements and post-disaster reconstruction in the affected areas. In terms of technological innovation, as of 30th June 2026, Xiaomi Innovation Joint Fund had funded a total of RMB 274 million in research grants, supporting 182 teams in Mainland China.

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

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

I have 2 questions. First, about smartphone. In Q2, we saw that memory costs continued to rise significantly. That's the overall background in the industry. In Q2 for your results, your smartphone ASP rose to record high, even though shipment came down. However, the 2 factors offset one another. So the scale exceeded TWD 40 billion gross margin, 8.5%.

though shipment came down.

After this test in the first half, can you say that Xiaomi smartphone business is such that price shipment and gross margin can be dynamically balanced. In the coming quarters, Xiaomi can continue to raise price and control volume and improve product mix in order to maintain the stability of your smartphone business. Can you do that? That's my first question.

here are a few points that will affect our smartphone results and performance at the same time. First, as you said, memory costs increase and the extent of increase and the rhythm of increase. Last year, we already predicted that memory costs would increase over a long cycle. And to be honest, regarding last year and Q4 and also Q1, Q2 this year, we believe that the increase exceeded our expectation. The cost increase was indeed alarming.

And memory costs increased. There is no way for us to just pass on the whole cost increase to our consumers. We have to rationalize our product lines and adjust our product mix. So from product launch planning, there is the need for a bigger cycle. So we have to work on that. Secondly, we have to adjust our sales strategies.

For low-end phones, the entry-level phones, they are subject to the biggest blow or threat. So for the memory version, looking at Q2 cost, Well, smartphone retail price of over JPY 1,500 is being subject to the impact of memory costs, not to mention other costs. So that means that for entry-level product, it has to be sold at JPY 2,000 -- if we talk about normal memory capacity, not super memory capacity. So these factors added together mean that we need consensus on different fronts, not only unilateral consensus.

After this round of adjustments, for Q2, we achieved this report card. Our shipments declined on a year-on-year basis. However, we are still #3 globally. Our ASP was at. It rose by almost CNY 30. And then our gross margin was at 8.5%. So I think last time you are worried about our gross margin. However, we still kept it at 8.5%. I think this exceeded your expectation. So overall speaking, I would like to say that when we move into Q3, memory increase still there in Q4, well, I think it would be a slowing process of cost increase.

For smartphone business, I think we are now in an appropriate and controllable situation. In the past, when the increase was a big extent, well, of course, that was a big blow to us. Now I think we are in a controllable situation. In Q3, I think you saw already so in the Redmi flagship product, well, in the past, we launched in October. Now we advanced it to August. So Pro and Pro are launched together.

So I think they are doing well. For K Pro, -- so I think more than 62% was 16. And then the ASP is 5,000-odd. And today, sales have not been completed yet. But then comparing with the last generation, I think the growth is 60%. So I think you can see that given this product, well, first of all, it sells well because of its product capability.

And then for future trend, memory cost increase trend and price trend, I think we have formed an expectation. Final conclusion is that now we are in a controllable condition for this business.

My next question is about EV. In July, you introduced the Sky series, which had a market attention. And there are many very unique innovations for this model. In July, you announced the price of the 2 models and you started to accept orders. So Mr. Lu, based on the current order situation for SkyNomad, what are some unique characteristic with other competitors, SUV what are some points that will attract car owners favor?

Right. For SkyNomad, I think we said clearly that they must be different in terms of user targets for SU7 and U7. So right now, I think we have very well achieved this target for user base. The duplication with SU7 is very small. So looking at the duplication situation, I think we are talking about the drivers, we attach importance to drive first experience for SU7, U7. But then for SkyNomadwe are focusing on the spatial experience for the space. So it is very different.

It's -- we want to create a very good space, and there are a lot of breakthroughs in terms of user scenario. So after launch, we have received many small orders, and we have done some analysis. First, I think family buyers or household buyers and also bigger number of passengers. They will be the main buyers for SkyNomad. And age is -- their age is a few years older than the SU7 buyers. This is a clear unique point besides for our very flexible space, I think there has been a lot of attention paid to it.

Users have not really experienced that yet, but then they have got already a lot of imaginations. When we designed this call we had not thought of so many special features. But now I think it can already satisfy many scenarios. And so I think in terms of order expectation, we are optimistic.

Timothy Zhao from Goldman Sachs.

My first question is about AI progress. We can see that in the China AI industry in the past few years, innovations came fast and there were many good progress. So can you systematically share with us the pathway of AI monetization, what is your consideration in the short term, medium term and long term? What are your directions and what is the progress so far at the beginning of the year for the full year, you mentioned JPY 16 billion of AI investment budget.

So this year in the first half and also in Q2, how much is the overall AI investment? What do you think of the whole year AI investment plan? That's my first question.

Let me take this question. As you can see, and I think you pay close attention to our MiMo development. In the first half, we introduced MiMo V 2.5 after that well, it is well received by global users. In terms of token call volume at the end of July in 1 week, we came first globally and monthly core volume also reached #1 globally.

We think that this is this means that global developers have really voted for our model. And then when it comes to model capability and efficiency and also cost control capabilities, there is a systematic advantage. Now let me give you a preview. In the future, well, recently, we will introduce some new applications so that people can use on MiMo. We'll launch the first desktop application. So that on your PC, you can use our MiMo.

Secondly, I think you will pay close attention to our new model launch. It is being trained now very soon, it will face the world. So there are many MiMo developments. Now just now you asked a question about progress of our commercialization. For AI, we are now in a large scale investment phase. So we are not too anxious to pursue monetization. We'll continue to promote AI development in a steady and practical way. So we will put our focus on human car home ecosystem.

When we launched our OS 4.0, MiMo large model and hyperare already integrated. Hyper Shai 2.0 is also a very critical step -- in the future, there will be more progress. So we are making use of our MiMo large model and our smartphone, our OS, so that they are deeply integrated. And then in terms of foundational models, we have opened up some API and token plan.

Earlier, I mentioned our token plan and API, which have already contributed some revenue. However, this business is just at a start. We do not tree monetization as prior -- as our primary goal. So we are now iterating on our model capabilities. We will launch some new models. At the same time, the models will be used in our OS scenarios. There is some API revenue. However, we will not treat revenue as our main monetization goal at this stage. So I hope I have answered your questions.

My second question is about EV and new initiative segment gross margin. In there is volatility on a year-on-year and quarter-on-quarter basis. So can you give us a breakdown on the gross margin? What are the reasons behind the volatility in what will be the impact on AI gross margin? Can you give us an analysis?

for 17 and 19 MAX presale price after this launch, feedback has been positive. In Q3, Q4, what are some factors that will affect gross margin of EV and other new initiatives, gross margin. Regarding gross margin, Well, you can see that our gross margin has fluctuated on a year-on-year and quarter-on-quarter basis.

On a year-on-year basis, last year, in Q2, that was the delivery stage of S7 Ultra, Ultra gross margin is that relatively speaking. So gross margin in Q2 last year was relatively higher because of ultra contribution. In this quarter for Ultra, it was worsened a bit. And then if you compare Q2 and Q1, we delivered more new generation 7. It was launched in March.

And you can see SU7 and U7 share or breakdown are different from Q1. And in the launch, we said that SU7 costs increased quite a lot besides Well, that's why for SU7 delivery, when the share is bigger in our deliveries, gross margin came down on a quarter-on-quarter basis. The third reason was already explained. When our large model revenue started there is negative impact to gross margin of the whole segment. So these are the 3 main factors.

Okay. Thank you, Alain. Now regarding your second question, just now we said that for SkyMe7andN90 in September, they will be launched to the market. Well, looking initially, response has been quite good, but we have not set the final price yet. So GP margin will rely on final price. So that would affect Q3 and Q4 gross margin of SkyNomad.

Next question is from Kyna Wong of Citi.

Can you hear me?

Yes. Please go ahead.

My first question is about smartphone. So regarding inventory and raw materials in the first half, there was a big increase. Some is related to backup or inventory for future use. And then for your strategic plan, especially for memory and also your reserve the margin or within controllable range, how much is from the inventory to support your profit and gross margin. For finished goods, it also came down fast.

Originally, from finished goods inventory to support and now, we can anticipate big gross margin pressure. So in the coming quarter, will this happen? What is your strategic plan or preparation?

So should I ask my second question or leave it later?

Okay, regarding our inventory, there are 2 reasons: first, raw materials inventory rose on a quarter-on-quarter basis. Last year or last quarter, it's almost JPY 30 billion in raw material inventory. Now in Q2, it is about billion of inventory. There are 2 reasons here. The first point is we need to prepare some inventory for the future, especially about memory.

Mr. Lu has shared with you his evaluation. So that's one point. At the same time, for memory unit price, it is rising. So it's not only about volume, also about selling price, it is rising. So the value will increase. That is about strategic inventory preparation and also selling price impact.

Second, finished goods inventory came down. This is normal, because at 18 million we prepared some inventory, and we actually released some inventory for sale. And so I think the -- it is easy to explain the reasons behind the decline. Okay. So looking at inventory reserve, Q3 pressure -- oh, sorry, sorry, another factor I just forgot.

As you know, for new generation delivery started in early February. So in -- at the end of Q1, we also advanced some production of new generation 7. And in Q2, overall inventory will come down. So there is also some impact from EVs.

Okay. Understood. Then I have a question about overseas business. IoT overseas revenue increased significantly in Q2. I for retail stores, overseas, you have 600-odd stores. This year, are you going to follow your original plan to establish stores overseas. Are you on track in relation to your plan?

For 2027, there will be even more products and also and you are going to have an overseas plan. So are you going to do some preparation. For example, are you going to find land in overseas? And also, are you going to set up plans. And then for large area stores, do you have a plan about expansion. So for IoT and EV overseas business, how is your preparation and what would be your future outlook?

Regarding IoT and also room for development overseas, I think that there will be big room for growth. Now we are on track in implementation. So we have 630-odd Xiaomi home stores in overseas. And next year, I will continue our store expansion for Xiaomi Homes. I think it is going to be for IoT and high end or premium phones. That would account for 30% of our overseas premium phones. This is going to lay a very big foundation for overseas business.

And secondly, IoT especially for large appliances, we have been blank overseas in the past. But I think in the second half of the year, we would accelerate our development next year. We will see a very big growth in this area. And then in different countries, I think there are a lot of barriers and thresholds in market access or entry. So there are a lot of compliance-related work to do, and that takes time. So we will accelerate our work, and then we will go into more and more countries. That's about IoT.

And then for EV going global, it is on track. In the second half of 2027, we'll go overseas. And this year, we have been to many countries. And for overseas working partners and dealers, well, they pay close attention to us. They want to carry our products. They want to be our dealers. I think they are very passionate and behind that, there are several judgments.

First, China EV is going global, is going to be mainstream in the future. This won't change. Secondly, when there are so many Chinese brands going global, which will they choose to work with. So this is a very important standard. I think they find Xiaomi very different and outstanding, we can be regarded as unique. And we are very few in China who can work on premium products. our premium brands.

So we are very rare. And third, they see Xiaomi as a tech company, producing EVs, not traditional vehicles. So in our experience, communicating with dealers in different countries, they are mostly top dealers, top 10 dealers. And there are at least 7 to 8 who approach us on their own initiative. And then we also visit many countries and many customers.

[indiscernible] from CICC.

I have 2 questions. First, Internet business. This year, in Q1 and smartphone shipments was under pressure because of memory can Internet service revenue still grew steadily. In the future, well, you have to consider pressure from memory -- that might be alleviated or that might stabilize. So for Internet business, what will be future growth trend? And what will be its gross margin?

Thank you. For Internet service business, as you know, there are 2 parts. First is related with shipments. Second, is related to our existing users. On these 2 fronts for our existing users, MAUs reached historical high already, 770 million globally. In Mainland China, almost 200 users. So for the existing users, they bring stability to our Internet business revenue.

In the past few years, we expand the premium phones and we achieved some progress. So regarding MAUs, premium users account for a bigger share. Premium users made bigger contribution to our Internet ARPU more than low-end users. So when our existing users increase and also with more premium users and share, then this is very important to our Internet business revenue stability.

In the past few quarters, advertising revenue saw healthy developments. -- the past 1 or 2 quarters, I think you saw a so-called war in terms of food delivery, and there was a lot of advertising and this helped our smartphone advertising business. So I think these factors have brought stability to our Internet business and also some strengthening.

Okay. My next question is about AI. So what are your thoughts apart from foundational models, you also mentioned some new applications. You also launched Milo and you said that you are looking into smart appliance. So for the overall layout in the future, at what time point are we going to see your AI and the overall human car home hardware integration.

Well, for AI plan, first of all, foundational large models. Our investment is the heaviest in this area. In the future, they will service our human car home full ecosystem. That's the first line. So it is at the foundation level. And then on top of it, there are a few lines.

The first one is smartphone. For smartphone, we have to complete the traditional an Android OS. So we will use AI to reconfigure it. And then for this process, it will take some time. But now with OS 4, I think we have made a step forward. On the smartphone, we can make use of the agents to do a lot of execution. I think you can see it. For Home, I think one important factor is local.

Recently, there are many scenarios in which Miloco is being realized. And there is cloud as well. Time precision is very good, but cost is still quite high. But when we optimize it, -- and in the future, when cost starts to come down, I think we can see better results. The third line is related with EV business. So smart driving, I think you are also interested in smart driving.

And then the fourth line is robots. For our robotics business, we have introduced a number of versions, so these are the few lines. I think all these lines are deeply integrated with MiMo, and then they would develop independently, and they will also be integrated. And for our full ecosystem support, it will be stronger.

And at the end of the day, we will see -- we will form a moat in relation to the human GoHome ecosystem.

Next question, UBS, Jimmy Yu.

My first question is related to AI. Looking at revenue, we can see some growth related to AI. So can you give more details. So what would be future trend? -- in relation to AI. That's my first question.

Jimmy, regarding AI revenue, we put it under smart EV, AI and other new initiative segments. Well, now MiMo just started to be monetized and the revenue is not big. In the future, at appropriate times, we may disclose it separately. But at this stage, we will still put it within this 1 billion.

Okay. Well, looking at the overall operating environment, well, there is still big pressure from memory cost. So this year and next year, when it comes to R&D expenses, is the trend based on what you shared in the past for R&D expenses?

We have not made adjustments. Overall speaking, I think we are quite firm on that.

Next question. JPMorgan, David Chou.

My first question is about the EV market. So what is the share of sale of Xiaomi, Smart EV. So what's the question? You mean the share for the whole year. So what is the estimate of the second half of the year or this year?

Well, it's difficult for us to disclose a specific percentage or share. But our future goal is about these 2 series. So I think the SkyNomad is based on the Quinlan architecture. And our goals are in relation to the smart EV technology or driving.

Okay. My next question is about EV. EV ASP. Will it continue to go up? And what about your profit situation?

For ASP volatility, it is based on our product mix. For Q1, there are more deliveries of U7. And then in Q2, more deliveries are about SU7. SU7 price is lower than U7 as a result, ASP fluctuated. Last year in Q2, as I said earlier, our ultra accounted for a bigger share than this year. And Ultra ASP is a lot higher than the average. So that's why I think -- as a result to us. It's not a goal. ASP relatively speaking, is not related to GP margin. It doesn't mean that when ASP is low gross margin will also be low. I think you need to understand this relationship.

[indiscernible]

I have 2 questions. Looking at Q2, smartphone ASP, it rose 21.9%. It is at historical high those JPY 3,000 or above accounted for a bigger share and for premium products, Well, we saw some decline. So if memory costs continue to rise, then global smartphone overall situation, how will it change? In the future, when it comes to this product mix, what would be your new strategies in the second half of this year and next year, what would be your product mix trend, please?

Okay. Now let me share with you our judgments. First, memory, is it true that the price will stay high over a long period of time, I have doubts. But is it much higher than the past low cost level for memory, I think so. Right now, it is 5x that of the Q2 last year level, but it's difficult to stay at this 5x level for a long time. But how many times eventually, it's difficult to say, perhaps in the middle.

So when it comes to smartphone cost and price, and we can turn to the overall situation. I think we will see a global equilibrium. But in the short run, it is difficult to give a very precise estimate because this involves different top of 4, so to speak.

For example, this year, Apple adopted a low price increase strategy. And some time ago, they said that they would also raise price for the coming new flagship phone and some other vendors said that they would also increase price, some that they were lower price and so on. So in the long run, I think people will consider memory costs increase or change in adjusting the selling price.

I think there would be an equilibrium reached after dynamic adjustment. For the smartphone category, I think it is almost a necessity. So I believe that I am -- I tend to be more optimistic.

Second question is about robots. Just now you said you talked about the open source models. And the smart robotics factory had been commissioned already. So for Xi robots. What is its positioning internally? Is it a tool to lower cost? Or in the future, would it become a new source of revenue? And do you have any quantifiable appraisal targets for this business?

Well, I think for robots, for final large-scale maturity and development, well, I think it will take a longer time. It's difficult to share some short-term goals. And secondly, we'll continue to invest. We are positive about future direction, and it is going to integrate with our existing business. So that's why we are going to invest in it.

So up to now, we haven't thought of working in the food delivery area with our robotics. We have our own factories, and then there will be many scenarios in which applications will come out in the future, many of our capability realization will be integrated with robotics. For example, large models. They will also be synergized. And then ships and also systems I think robot development will also feed back to our large model capabilities. So I think we expect a lot of synergy with our other businesses. But at this stage, I think we will not set too many concrete or specific goals will be more pragmatic.

Thank you for your questions. We'll conclude the session here. Thank you for your time. I hope you will continue to give strong support to Xiaomi Group. Okay. Thank you all.

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

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.]