Q2 2026 Xiaomi Corp Earnings Call

August 18, 2026

Speaker #1: 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 have any objection, you may disconnect at this time.

Operator: 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 have any objection, you may disconnect at this time. If you have any question and would like to raise during the Q&A session later, please press star 11 on your telephone keypad to register your question. Should you wish to cancel your question, please press star 11. 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.

Speaker #1: If you have any questions you would like to raise during the Q&A session later, please press star one one (★11) on your telephone keypad to register your question.

Speaker #1: Should you wish to cancel your question, please press *11. Now, I'd like to hand the conference over to your host today, Ms. Isabella Gao from Group Investor Relations and Capital Markets Department.

Speaker #1: Please go ahead. Good evening, ladies and gentlemen. Welcome to the Investor Conference Call, an audio webcast hosted by Xiaomi Corporation regarding the company's 2026 interim results.

Operator: 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.

Isabella Gao: 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.

Speaker #1: 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.

Isabella Gao: 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 H1 of 2026. Following that, we'll move on to the Q&A session.

Speaker #1: 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.

Speaker #1: Joining us on the conference today are Mr. Weibing Lu, Partner and President of Xiaomi Corporation, and Mr. Sai Lam, Vice President and CFO of Xiaomi Corporation.

Speaker #1: To start, Mr. Liu 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.

Speaker #1: Following that, we'll move on to the Q&A session. I'll now turn the call over to Mr. Liu. Good evening, everyone. Thank you for joining our Q2 2026 results announcement call.

William Lu: I'll 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 environments remained 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 three aspects. First, a review of our key performance results for Q2 2026. Second, we'll 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 CNY 108.9 billion. Adjusted net profit was CNY 6.2 billion. Looking at different business segments. First, smartphone.

Isabella Gao: I'll now turn the call over to Mr. Lu.

William Lu: Good evening, everyone. Thank you for joining our Q2 2026 results announcement call. In Q2 of 2026, external environments remained 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 three aspects. First, a review of our key performance results for Q2 2026. Second, we'll 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.

Speaker #1: In Q2 of 2026, external environments remain challenging, with the cost of core components such as memory remaining high, consumer market demand still recovering slowly, and industry competition becoming more intense.

Speaker #1: Tonight, I will take this opportunity to share with you three aspects. First, a review of our key performance results for Q2 2026. Second, we'll 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.

Speaker #1: First, in Q2 2026, the group's total revenue was RMB 108.9 billion, and adjusted net profit was RMB 6.2 billion. Looking at different business segments—first, smartphone.

Speaker #1: In Q2, we proactively optimized our product structure and increased selling prices, resulting in a record-high ASP for smartphones. Although smartphone shipments declined, according to Omdia data, we maintained our position among the top three globally in Q2 2026, marking the 24th consecutive quarter that we have ranked among the top three globally in market share. In Q2 2026, we ranked among the top three in smartphone shipments in 53 countries and regions worldwide, and among the top five in smartphone shipments in 67 countries and regions worldwide.

William Lu: 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 three globally in Q2 of 2026, marking the 24th consecutive quarter that we have ranked among the top three globally in market share. In Q2 2026, we ranked among top three in smartphone shipments in 53 countries and regions worldwide, and among top five 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.

Speaker #1: Our smartphone shipment ranked second in Southeast Asia, Latin America, and the Middle East, with market shares of 19.3%, 16.2%, and 13.5%, respectively. We ranked third in Europe and Africa, with market shares of 16.5% and 10.9%, respectively.

Speaker #1: For gross profit margin, memory cost 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 2026, 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.

William Lu: We have consistently achieved a good balance between scale and profit through product mix upgrades, software optimization, and improved operational capabilities. In Q2 2026, our smartphone gross margin was 8.5%. Gross margin for H1 was 9.3%. Second, IoT business. In Q2 2026, IoT business achieved revenue of CNY 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 30 June, we have opened more than 640 new retail stores overseas. In Q2 2026, Xiaomi tablets rose to the fourth place globally. TWS earbuds ranked second globally. Wearable products ranked second globally.

William Lu: We have consistently achieved a good balance between scale and profit through product mix upgrades, software optimization, and improved operational capabilities. In Q2 2026, our smartphone gross margin was 8.5%. Gross margin for H1 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 30 June, we have opened more than 640 new retail stores overseas. In Q2 2026, Xiaomi tablets rose to the fourth place globally. TWS earbuds ranked second globally. Wearable products ranked second globally.

Speaker #1: Due to the high base effect of the national subsidy in the 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.

Speaker #1: As of June 30, we have opened more than 640 new retail stores overseas. In Q2 2026, Xiaomi tablets rose to fourth place globally.

Speaker #1: TWS earbuds ranked second globally; wearable products ranked second globally. This September, we'll also attend the IFA exhibition in Berlin, Germany, to showcase our comprehensive ecosystem of products for human, car, and home to the world.

William Lu: This September, we will also attend the IFA exhibition in Berlin, Germany, to showcase our comprehensive ecosystem of products for human car homes to the world. Our larger home appliances will begin to fully enter the European market. Third, Xiaomi EVs. Xiaomi delivered 104,199 vehicles in Q2 2026, marking the sixth consecutive quarter of year-on-year growth in deliveries. In H1 this year, Xiaomi SU7 series ranked first in sales among pure electric sedans priced above CNY 200,000 in mainland China. As of 17 August 2026, cumulative delivery volume of Xiaomi SU7 series exceeded 500,000 units. In July 2026, we held the Xiaomi EV Technology Launch, officially releasing our first extended range vehicle architecture, the Xiaomi Kunlun Technical Architecture.

William Lu: This September, we will also attend the IFA exhibition in Berlin, Germany, to showcase our comprehensive ecosystem of products for human car homes to the world. Our larger home appliances will begin to fully enter the European market. Third, Xiaomi EVs. Xiaomi delivered 104,199 vehicles in Q2 2026, marking the sixth consecutive quarter of year-on-year growth in deliveries. In H1 this year, Xiaomi SU7 series ranked first in sales among pure electric sedans priced above RMB 200,000 in mainland China. As of 17 August 2026, cumulative delivery volume of Xiaomi SU7 series exceeded 500,000 units. In July 2026, we held the Xiaomi EV Technology Launch, officially releasing our first extended range vehicle architecture, the Xiaomi Kunlun Technical Architecture.

Speaker #1: Our large home appliances will begin to fully enter the European market. Third, Xiaomi EVs. Xiaomi delivered 104,199 vehicles in Q2 2026, marking the sixth consecutive quarter of year-on-year growth in deliveries.

Speaker #1: In the first half of this year, the Xiaomi SU7 series ranked first in sales among pure electric sedans priced above 200,000 RMB in mainland China. As of August 17, 2026, the cumulative delivery volume of the Xiaomi SU7 series exceeded 500,000 units.

Speaker #1: In July 2026, we held the Xiaomi Automotive Technology Launch Conference, officially releasing our first extended-range vehicle architecture, the Xiaomi Kunlun Technical Architecture. Based on this, we launched the 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 259,900 respectively.

William Lu: 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 pre-sale prices of CNY 299,900 and CNY 259,900 respectively. Pre-orders 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 Nürburgring Nordschleife track. In June 2026, Xiaomi YU7 GT with track package set a new Nürburgring lap 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 Europe Research and Development and Design Center and our mainland assisted driving team. We hone 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.

Speaker #1: Pre-orders 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 Nürburgring Nordschleife track.

Speaker #1: In June 2026, the Xiaomi U7 GT with the track package set a new Nürburgring lap record for autonomous driving with a time of 10 minutes, 29.483 seconds.

Speaker #1: This achievement is the result of the joint effort of Xiaomi EV, the European R&D Center, and our mainland assisted driving team. We applied our smart driving technology on the track to improve driving safety in extreme scenarios for mass-produced vehicles.

William Lu: This achievement is the result of the joint effort of Xiaomi EV Europe Research and Development and Design Center and our mainland assisted driving team. We hone 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.

Speaker #1: 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 the Xiaomi MIMO V2.5 series.

William Lu: Latest progress on Xiaomi's foundational large model. In April 2026, we released Xiaomi MiMo-V2.5 series. On 2 August 2026, CCTV reported on the latest weekly global larger scale model core volume ranking of OpenRouter, with the Xiaomi MiMo-V2.5 topping the list. Its core volume increased more than sixfold from 1.5 trillion to 10.5 trillion in two 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 and exploratory AI programming assistant.

Speaker #1: On August 2, 2026, CCTV reported on the latest weekly global large-scale model core volume ranking of open routers, with Xiaomi MIMO V2.5 topping the list.

Speaker #1: Its core volume increased more than sixfold, from 1.5 trillion to 10.5 trillion, in two months. Developers choose MIMO primarily because of its outstanding full model perception, intelligent agent, and code capabilities.

Speaker #1: 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.

Speaker #1: We continue to explore how to extend MIMO from model capabilities to the agent ecosystem. In June this year, we officially released an open-sourced MIMO code and an exploratory AI programming assistant.

Speaker #1: 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.

William Lu: 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 MiClaw and partnered with Kingsoft's Office ecosystem to launch a full chain document office efficiency improvement solution. At the same time, we officially released MiLocal 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 think, thus exploring a new form of smart home in greater depth. Benefiting from the continued growth in core volume, our API calls and token plan began contributing revenue this quarter.

Speaker #1: In the same month, we released the official version of Xiaomi MIMO Claw and partnered with Kingsoft's office ecosystem to launch a full-chain document office efficiency improvement solution.

Speaker #1: 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 think.

Speaker #1: Thus, exploring a new form of smart home in greater depth. Benefiting from the continued growth in core volume, our API calls and token plan began contributing revenue this quarter.

Speaker #1: 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.

William Lu: We'll continue to iterate on our foundational models, 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've 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's self-developed MiMo model and the AI-driven transformation of the OS, HyperXiao AI has been fully upgraded to HyperXiao AI 2.0, bringing a brand-new interactive experience with the island and inspirational features, while also offering two modes, quick and expert.

Speaker #1: Next, AI mobile phones. We have always emphasized that AI phones must integrate AI capabilities into the OS. The Xiaomi HyperOS 4 that we just released is an important start.

Speaker #1: With upgraded AI, transitioning from a 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.

Speaker #1: Based on Xiaomi's self-developed MIMO model and the AI-driven transformation of the OS, Hyper Xiao I has been fully upgraded to Hyper Xiao I 2.0, bringing a brand-new interactive experience with the Island and Inspiration Bar features, while also offering two modes: Quick and Expert.

Speaker #1: 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've launched Hyper Xiao I 2.0.

William Lu: 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 a HyperXiao AI 2.0 expert mode points-based membership subscription plan. Each user will receive 1,000 points per month for free. Heavy AI users can flexibly choose their subscription plan with monthly special offers starting at just CNY 19. Latest advance in embodied robots. In June 2026, our robotics team won two championships at CVPR 2026 and ICRA 2026 WBC. In July this year, we released several more important updates. At Xiaomi's EV factory, after quarters of effort, Xiaomi's embodied robots have improved the success rate of dual-side tasks at the self-tapping threaded insert loading station to 98%.

Speaker #1: Expert Mode points-based membership subscription plan: Each user will receive 1,000 points per month for free. Heavy AI users can flexibly choose their subscription plan, with monthly special offers starting at just 19 RMB.

Speaker #1: Latest advances in embodied robots. In June 2026, our robotics team won two championships at CVPR 2026 and ICRA 2026 WBC. In July this year, we released several more important updates.

Speaker #1: At Xiaomi's EV factory, after quite a bit of effort, Xiaomi's embodied robots have improved the success rate of dual-side tasks at the self-tapping threaded insert nut loading station to 98%.

Speaker #1: At the same time, our embodied robots have begun to explore new workstations in the logistics area of the final assembly workshop, sorting the sensor console side cover returnable box, folding with a success rate of 90%.

William Lu: 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 side cover returnable box folding with success rate of 90%. We have also officially released Xiaomi-Robotics-U0 and Xiaomi-Robotics-1. Robotics-U0 is the first unified generative model in embodied intelligence field that can handle all four types of tasks, driving solutions to data challenges faced by the embodied intelligence industry. Robotics-1 was pre-trained on 100,000 hours of real-world data and then trained using cross-ontology data, ranking first in multiple simulation evaluations. On 5 August, 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.

Speaker #1: We have also officially released Xiaomi Robotics U0 and Xiaomi Robotics Dash 1. Robotics Dash U0 is the first unified generative model in the embodied intelligence field that can handle all four types of tasks.

Speaker #1: Driving solutions to data challenges faced by the embodied intelligence industry. Robotics 1 was pre-trained on 100,000 hours of real-world data and then trained using cross-ontology data.

Speaker #1: 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.

Speaker #1: An improvement of 65 places from last year, marking a new high since we first appeared on the list in 2019. In 2026, among the top 10 brands and top 50 global brands in China, Xiaomi ranked second.

William Lu: An improvement of 65 places from last year, marking a new high since we first appeared on the list in 2019. In 2026 Kantar Brand's 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 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 two 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.

Speaker #1: Our expanding global brand influence will help us balance our regional impact and help Xiaomi navigate psycho-economic cycles. Looking ahead to Q3, several factors that will put pressure on short-term operations remain.

Speaker #1: 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.

Speaker #1: After proactive adjustments over the past two decades and past two quarters, we have a clearer understanding of the external environment, and our capabilities are steadily improving.

Speaker #1: 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 will continue to increase our investment in hardcore technologies such as AI, chips, operating systems, and embodied intelligence to build strength for the next stage of growth.

Alain Lam: 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 RMB108.9 billion. Our gross margin was 19.8%. Our mobile times AIoT segment revenue was RMB84 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 RMB42.1 billion, accounting for 38.7% of total revenue. Our global smartphone shipments reached 31.2 million units.

William Lu: 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.

Speaker #1: That concludes my part. Now, over to our CFO, Alan. Thank you, Mr. Lu. In Q2 2026, our total revenue was RMB 108.9 billion. Our gross margin was 19.8%.

Alain Lam: Thank you, Mr. Lu. In Q2 2026, our total revenue was RMB108.9 billion. Our gross margin was 19.8%. Our mobile times AIoT segment revenue was RMB84 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 RMB42.1 billion, accounting for 38.7% of total revenue. Our global smartphone shipments reached 31.2 million units.

Speaker #1: Our Mobile x AIoT segment revenue was RMB 84 billion. Smartphone x AIoT segment gross margin reached 20%. In the smartphone sector, the continued significant increase in memory costs has had an overall impact on the smartphone industry.

Speaker #1: 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.

Speaker #1: 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.

Alain Lam: 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 cost, 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 RMB31.3 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 cost 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.

Speaker #1: 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%.

Speaker #1: 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.

Speaker #1: Gross margin for the IoT segment was 20.1% this quarter. Although some product categories were affected by memory costs and the reduction in national subsidies, from a product category perspective, we ranked second globally in wearable wristband device shipments and second globally in TWS earbuds shipments.

Speaker #1: 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.

Alain Lam: 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 RMB9 billion. Gross margin for internet services this quarter was 76.8%, up 1.4 percentage point year-on-year. Now let me turn to Smart EV, AI, and other new initiatives. For this segment, revenue was RMB24.9 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 RMB23.9 billion. Other related business revenue was RMB1 billion, including revenue from AI big models or large models. Gross margin of Smart EVs, AI, and other new initiative segment was 19.2% this quarter.

Speaker #1: 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.

Speaker #1: 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.

Speaker #1: 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.

Speaker #1: 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.

Alain Lam: In Q2 2026, we continued to increase investment in AI and other new initiatives, resulting in an operating loss of RMB2.6 billion for this segment. In this quarter, our R&D expenses was RMB9.2 billion, up 18.9% year-on-year. In H1 2026, our R&D expenses was RMB18.2 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 RMB6.2 billion. In Q2 2026, our CapEx reached RMB3.6 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 HK$11.7 billion, exceeding the total amount bought back for the entire past year or previous year.

Speaker #1: This resulted in an operating loss of RMB 2.6 billion for this segment. In this quarter, our R&D expenses were RMB 9.2 billion, up 18.9% year-on-year.

Speaker #1: In the first half of 2026, our R&D expenses were 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.

Speaker #1: 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 are actively buying back shares in the open market.

Speaker #1: Since 2026, our share buyback amount has reached about HK$11.7 billion, exceeding the total amount bought back during the entire previous year.

Speaker #1: 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.

Alain Lam: 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 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 YU7 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.

Speaker #1: It has passed international environmental product declaration certification and completed registration and public announcement. While maintaining strength, its toughness is further improved.

Speaker #1: 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 U7 series.

Speaker #1: 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.

Speaker #1: In terms of disaster relief, in July 2026, Guangxi, Hubei, Gansu, Liaoning, Jilin, Hubei, and other places suffered from floods, hail, storms, and other disasters.

Alain Lam: In terms of disaster relief, in July 2026, Guangxi, Hubei, Gansu, Liaoning, Jilin, Hebei, and other places suffered from floods, hail, storm, and other disasters. The Xiaomi Foundation donated RMB10 million in cash to support emergency relief, transitional resettlements, and post-disaster reconstruction in the affected areas. In terms of technological innovation, as of 30 June 2026, Xiaomi Innovation Joint Fund had funded a total of RMB274 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. Thank you, Allen. We will now proceed to the Q&A session. Please limit your questions to a maximum of 2, so that we could allow more investors to ask questions. The Q&A session is now open. To register your question, please press star one one on your phone keypad.

Speaker #1: The Xiaomi Foundation donated 10 million RMB in cash to support emergency relief, transitional resettlements, and post-disaster reconstruction in the affected areas. In terms of technological innovation, as of 30 June 2026, the Xiaomi Innovation Joint Fund had funded a total of 274 million RMB in research grants, supporting 182 teams in mainland China.

Speaker #1: Thank you, everyone. That concludes what we wanted to share with you today. Now we can begin the Q&A session. Thank you, Ellen. We will now proceed to the Q&A session.

Operator: Thank you, Allen. We will now proceed to the Q&A session. Please limit your questions to a maximum of 2, so that we could allow more investors to ask questions. The Q&A session is now open. To register your question, please press star one one on your phone keypad.

Speaker #1: Please limit your questions to a maximum of two, so that we can allow more investors to ask questions. The Q&A session is now open to register your question.

Speaker #1: Please press 11 on your phone keypad. Should you wish to cancel your question, please press 11. The first question is from Morgan Stanley.

[Analyst] (Morgan Stanley): Should you wish to cancel your question, please press star one one. First question is from Morgan Stanley. Andy, please. Thank you. Thank you, Mr. Lu and Allen for the results presentation. 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 RMB40 billion, gross margin 8.5%. After this test in the H1, can you say that Xiaomi's 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?

Operator: Should you wish to cancel your question, please press star one one. First question is from Morgan Stanley. Andy, please.

Speaker #1: Andy, please. Thank you. Thank you, Mr. Liu and Ellen, for the results presentation. I have two questions. First, about smartphones. In Q2, we saw that memory costs continued to rise significantly.

Andy Saperstein: Thank you. Thank you, Mr. Lu and Allen for the results presentation. 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 RMB40 billion, gross margin 8.5%. After this test in the H1, can you say that Xiaomi's 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?

Speaker #1: That's the overall background in the industry. In Q2, for your results, your smartphone ASP rose to a record high. Even though shipments came down, the two factors offset one another.

Speaker #1: So, the scale exceeded ¥40 billion, with a gross margin of 8.5%. After this test in the first half, can you say that the Xiaomi smartphone business is such that price, shipment, and gross margin can be dynamically balanced?

Speaker #1: In the coming quarters, Xiaomi can continue to raise prices and control volume, as well as improve product mix, in order to maintain the stability of our smartphone business.

Speaker #1: Can you do that? That's my first question. Thank you. There are a few points that will affect our smartphone results and performance at the same time.

William Lu: That is my first question. Thank you. There 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. To be honest, regarding last year in Q4 and also Q1, Q2 this year, we believe that the increase exceeded our expectation. The cost increase was indeed alarming. 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. Adjust our product mix. From product launch planning, there is the need for a bigger cycle. We have to work on that. Secondly, we have to adjust our sales strategies.

Andy Saperstein: That is my first question. Thank you.

William Lu: There 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. To be honest, regarding last year in Q4 and also Q1, Q2 this year, we believe that the increase exceeded our expectation. The cost increase was indeed alarming. 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. Adjust our product mix. From product launch planning, there is the need for a bigger cycle. We have to work on that. Secondly, we have to adjust our sales strategies.

Speaker #1: First, as you said, memory costs increase—the extent of the increase, and the rhythm of the increase. Last year, we already predicted that memory costs would increase over a long cycle.

Speaker #1: And to be honest, regarding last year and Q4, and also Q1 and Q2 this year, we believe that the increase exceeded our expectations. The cost increase was indeed alarming.

Speaker #1: And memory costs increased. There's 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.

Speaker #1: So, from product launch planning, there's the need for a longer, bigger cycle—a cycle. So we have to work on that. Secondly, we have to adjust our sales strategies.

Speaker #1: 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 over 1,500 yen is being subject to the impact of memory costs, not to mention other costs.

William Lu: For low-end phones, the entry-level phones, they are subject to the biggest blow or threat. For the memory version, looking at Q2 cost, smartphone retail price of over CNY 1,500 is being subject to the impact of memory cost, not to mention other costs. That means that for entry-level product, it has to be sold at CNY 2,000, if we talk about normal memory capacity and not super memory capacity. 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 number 3 globally. Our ASP was at a record high. It rose by almost CNY 300, and then our gross margin was at 8.5%. I think last time you were all worried about our gross margin.

Speaker #1: So that means that for entry-level products, it has to be sold at ¥2,000. If we talk about normal memory capacity, not super memory capacity, these factors added together mean that we need consensus on different fronts, not just unilateral consensus.

Speaker #1: After this round of adjustments, for Q2, we achieved this report card. Our shipment declined on a year-on-year basis; however, we're still number three globally.

Speaker #1: Our ASP was at a record high. It rose by almost 300 yen. And then our gross margin was at 8.5%. So, I think last time, you were all worried about our gross margin.

Speaker #1: However, we still kept it at 8.5%. I think this exceeded your expectations. So, overall speaking, I would like to say that when we move into Q3, memory costs increase.

William Lu: However, we still kept it at 8.5%. I think this exceeded your expectation. Overall speaking, I would like to say that when we move into Q3, memory cost increase was still there in Q4. 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 of big extent, that was a big blow to us. Now, I think we are in a controllable situation. In Q3, I think you saw already. In the Redmi flagship product, in the past, we launched in October. Now, we advanced it to August, so Pro Max and Kimi Pro are launched together. I think they are doing well for Kimi Pro.

Speaker #1: We're still there in Q4. Well, I think it would be a slowing process of cost increase. For the smartphone business, I think we are now in an appropriate and controllable situation.

Speaker #1: In the past, when the increase was of big extent—well, of course, that was a big blow to us. Now, I think we're in a controllable situation.

Speaker #1: 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.

Speaker #1: So Pro Max and Camera Pro are launched together. So I think they are doing well for Camera Pro. So I think more than 62% was 16 plus, and then the ASP is 5,000-odd.

[Analyst] (Morgan Stanley): I think more than 62% was 16 plus, and then the ASP is CNY 5,000 odd. Today, our sales have not been completed yet. Comparing with the last generation, I think the growth is 60%. I think you can see that given this product, first of all, it sells well because of its product capability. 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. Thank you, Mr. Lu. My next question is about EV. In July, you introduced the SkyNomad series, which had aroused 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.

William Lu: I think more than 62% was 16 plus, and then the ASP is CNY 5,000 odd. Today, our sales have not been completed yet. Comparing with the last generation, I think the growth is 60%. I think you can see that given this product, first of all, it sells well because of its product capability. 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.

Speaker #1: And today, our 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.

Speaker #1: And then for future trend, memory costs 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.

Speaker #1: Okay. Thank you, Mr. Liu. My next question is about EVs. In July, you introduced the Skynomad series, which has aroused market attention. There are many very unique innovations for this model.

Andy Saperstein: Thank you, Mr. Lu. My next question is about EV. In July, you introduced the SkyNomad series, which had aroused 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.

Speaker #1: In July, you announced the price of the two models, and you started to accept orders. So, Mr. Liu, based on the current order situation for Skynomad, what are some unique characteristics and changes compared with other competitors' SUVs?

William Lu: Mr. Lu, based on the current order situation for SkyNomad, what are some unique characteristics and changes comparing with other competitors' SUV? What are some points that will attract car owners' favor? For SkyNomad, I think we said clearly that they must be different in terms of user targets for SU7 and YU7. Right now, I think we have very well achieved this target for user base. The duplication with SU7 is very small. Looking at the duplication situation, I think we are talking about the drivers. We attach importance to drivers' experience for SU7, YU7, but for SkyNomad, we are focusing on the spatial experience for the space. It is very different. We want to create a very good space, and there are a lot of breakthroughs in terms of user scenario.

Andy Saperstein: Mr. Lu, based on the current order situation for SkyNomad, what are some unique characteristics and changes comparing with other competitors' SUV? What are some points that will attract car owners' favor?

Speaker #1: 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 Q7 and U7.

William Lu: For SkyNomad, I think we said clearly that they must be different in terms of user targets for SU7 and YU7. Right now, I think we have very well achieved this target for user base. The duplication with SU7 is very small. Looking at the duplication situation, I think we are talking about the drivers. We attach importance to drivers' experience for SU7, YU7, but for SkyNomad, we are focusing on the spatial experience for the space. It is very different. We want to create a very good space, and there are a lot of breakthroughs in terms of user scenario.

Speaker #1: So, right now, I think we have very well achieved this target for user base. The duplication with Q7 is very small. So, looking at the duplication situation, I think we are talking about the drivers.

Speaker #1: We attach importance to drivers' experience for Q7 and U7, but for Skynomad, we are focusing on the spatial experience of the space. So it is very different.

Speaker #1: We want to create a very good space, and there are a lot of breakthroughs in terms of user scenarios. So after launch, we have received many small orders.

William Lu: 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. 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 they have got already a lot of imaginations. When we designed this car, we had not thought of so many special features, but now I think it can already satisfy many scenarios. I think in terms of order expectation, we are optimistic. Thank you, Mr. Lu. Very clear answer. Thank you. Timothy Zhao from Goldman Sachs.

Speaker #1: And we have done some analysis. First, I think family buyers or household buyers, and also buyers with a greater number of passengers, will be the main buyers for Skynomad.

Speaker #1: And their age is a few years older than the Q7 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.

Speaker #1: Users have not really experienced that yet, but they already have a lot of imaginations. When we designed this car, we had not thought of so many special features.

Speaker #1: But now, I think it can already satisfy many scenarios. And so, I think in terms of order expectation, we are optimistic. Thank you, Mr. Liu.

Andy Saperstein: Thank you, Mr. Lu. Very clear answer.

Speaker #1: Very clear answer, thank you. Timothy Zhao from Goldman Sachs. Thank you, Mr. Liu and Ellen, for taking my questions. My first question is about AI progress.

Operator: Thank you. Timothy Zhao from Goldman Sachs.

Timothy Zhao: Thank you, Mr. Lu and Alain, for taking my questions. 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. 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 CNY 16 billion of AI investment budget. This year in the H1 and also in Q2, how much is the overall AI investment? What do you think of the whole year AI investment plan? That is my first question. Thank you. Let me take this question. As you can see, and I think you pay close attention to our MiMo development.

Speaker #1: We can see that in the China AI industry in the past few years, innovations have come fast, and there has been a lot of good progress. So, can you systematically share with us the pathway of AI monetization?

Speaker #1: What are your considerations 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 a 16 billion RMB AI investment budget.

Speaker #1: 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?

Speaker #1: That's my first question. Thank you. Let me take this question. As you can see—and I think you pay close attention to our MIMO developments.

Alain Lam: Let me take this question. As you can see, and I think you pay close attention to our MiMo development.

Speaker #1: In the first half, we introduced MIMO V2.5. After that, it was well received by global users. In terms of token call volume at the end of July, in one week, we came first globally.

William Lu: In the H1, we introduced MiMo-V2.5. 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 call volume also reached number 1 globally. We think that this means that global developers had really voted for our model, and when it comes to model capability and efficiency and also cost control capabilities, there is a systematic advantage. Let me give you a preview. In the future, recently, we will introduce some new applications so that people can use our MiMo. We will 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. There are many MiMo developments.

Alain Lam: In the H1, we introduced MiMo-V2.5. 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 call volume also reached number 1 globally. We think that this means that global developers had really voted for our model, and when it comes to model capability and efficiency and also cost control capabilities, there is a systematic advantage. Let me give you a preview. In the future, recently, we will introduce some new applications so that people can use our MiMo. We will 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. There are many MiMo developments.

Speaker #1: And monthly call volume also reached number one globally. We think that this means global developers have really voted for our model.

Speaker #1: And then, when it comes to model capability and efficiency, as well as cost control capabilities, there is a systematic advantage. Now, let me give you a preview.

Speaker #1: In the future—well, recently—we will introduce some new applications, so that people can use our MIMO. We'll launch the first desktop application, so that on your PC, you can use our MIMO.

Speaker #1: 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.

Speaker #1: There are many MIMO developments. Just now, you asked a question about the progress of our commercialization. For AI, we are currently in a large-scale investment phase.

Alain Lam: 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 will continue to promote AI development in a steady and practical way, so we will put our focus on human car, home ecosystem. When we launch our HyperOS 4.0, MiMo Large Model and the HyperOS are already integrated. HyperXiao AI 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. 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.

Speaker #1: So, we are not too anxious to pursue monetization. We'll continue to promote AI development in a steady and practical way. We will put our focus on the human, car, and home ecosystem.

Speaker #1: When we launch our OS 4.0, the MIMO large model and HyperOS are already integrated. Hyper XiaoI 2.0 is also a very critical step.

Speaker #1: 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.

Speaker #1: And then, in terms of foundational models, we have opened up some API and token plans. Earlier, I mentioned our token plan and API, which have already contributed some revenue.

Speaker #1: However, this business is just at a start. We do not treat monetization as our primary goal. So we are now iterating on our model capabilities.

Alain Lam: We do not treat monetization 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. Thank you, Alain. My second question is about EV and new initiative segment gross margin. In Q2, there is volatility on a year-on-year and quarter-on-quarter basis. Can you give us a breakdown on the gross margin? What are the reasons behind the volatility in Q2? What will be the impact on AI gross margin? Can you give us an analysis? For SkyNomad N70, SkyNomad N90 Max pre-sale price after its launch feedback has been positive.

Speaker #1: 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.

Speaker #1: So, I hope I have answered your questions. Okay. Thank you, Ellen. My second question is about the EV and New Initiative segment gross margin. In Q2, there is volatility on a year-on-year and quarter-on-quarter basis.

Timothy Zhao: Thank you, Alain. My second question is about EV and new initiative segment gross margin. In Q2, there is volatility on a year-on-year and quarter-on-quarter basis. Can you give us a breakdown on the gross margin? What are the reasons behind the volatility in Q2? What will be the impact on AI gross margin? Can you give us an analysis?

Speaker #1: So can you give us a breakdown of the gross margin? What are the reasons behind the volatility in Q2? What will be the impact on AI gross margin?

Speaker #1: Can you give us an analysis? For N17, N19 Max, presale price after it is launched feedback has been positive. In Q3, Q4, what are some factors that will affect gross margin of EV and other new initiative gross margin?

Alain Lam: For SkyNomad N70, SkyNomad N90 Max pre-sale price after its launch feedback has been positive.

Alain Lam: In Q3, Q4, what are some factors that will affect gross margin of EV and other new initiative gross margin? Regarding gross margin, you can see that our gross margin had 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 SU7 Ultra. Ultra gross margin is better, relatively speaking. So gross margin in Q2 last year was relatively higher because of Ultra contribution. In this quarter, for Ultra, it worsened a bit. Then if you compare Q2 and Q1, we delivered more new generation SU7. It was launched in March, and you can see SU7 and SU7 share or breakdown are different from Q1. In the launch, we said that SU7 costs increased quite a lot.

Speaker #1: Regarding gross margin, 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 SU7 Ultra.

Speaker #1: Ultra gross margin is better, relatively speaking. So, gross margin in Q2 last year was relatively higher because of the Ultra contribution. In this quarter, for Ultra, it worsened a bit.

Speaker #1: And then, if you compare Q2 and Q1, we delivered more new-generation SU7. It was launched in March. And you can see SU7 and U7 share or breakdown are different from Q1.

Speaker #1: And in the launch, we said that SU7 cost increased quite a lot. Besides, well, that's why for SU7 delivery, when its share is bigger in our deliveries, gross margin came down on a quarter-on-quarter basis.

Alain Lam: That is why for SU7 delivery, when its 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 three main factors. Thank you, Alain. Now, regarding your second question, just now, we said that for SkyNomad N70 and SkyNomad N90, in September, they will be launched to the market. 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. Very clear answer. Thank you, Alain. Next question is from Kyna Wong of Citi. Can you hear me? Yes. Please go ahead. Thank you.

Speaker #1: The third reason was already explained. When our large model revenue started, there was a negative impact to the gross margin of the whole segment. So these are the three main factors.

Speaker #1: Okay, thank you, Ellen. Now, regarding your second question—just now, we said that for SkyNomad N70 and N90, in September, they will be launched to the market.

Timothy Zhao: Thank you, Alain.

Alain Lam: Now, regarding your second question, just now, we said that for SkyNomad N70 and SkyNomad N90, in September, they will be launched to the market. 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.

Speaker #1: Well, looking initially, the response has been quite good. But we have not set the final price yet, so GP margin will rely on the final price.

Speaker #1: So that would affect Q3 and Q4 gross margin of SkyNomad. Okay, very clear answer. Thank you, Ellen. Next question, it's from Kin Wong of Citi.

Timothy Zhao: Very clear answer. Thank you, Alain.

Operator: Next question is from Kyna Wong of Citi.

Speaker #1: Can you hear me? Yes. Please go ahead. Okay, thank you. Mr. Lu and Ellen, my first question is about smartphones. So, regarding inventory and raw materials, in the first half there was a big increase.

Kyna Wong: Can you hear me?

Operator: Yes. Please go ahead.

Kyna Wong: Thank you.

Kyna Wong: Mr. Lu and Alain, my first question is about smartphone. Regarding inventory and raw materials in H1, 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 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 a big gross margin pressure. In the coming quarter, will this happen? What is your strategic plan or preparation? Should I ask my second question or leave it later? Regarding our inventory, there are two reasons. First, raw materials inventory rose on a quarter-on-quarter basis. Last year or last quarter, it is almost CNY 30 billion in raw material inventory.

Speaker #1: 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?

Speaker #1: For finished goods, it’s also come down quickly. Originally, it was from finished goods inventory to support, and now we can anticipate significant gross margin pressure. So, in the coming quarter, will this happen?

Speaker #1: What is your strategic plan or preparation? Should I ask my second question now, or leave it for later? Okay. Regarding our inventory, there are two reasons.

Alain Lam: Regarding our inventory, there are two reasons. First, raw materials inventory rose on a quarter-on-quarter basis. Last year or last quarter, it is almost CNY 30 billion in raw material inventory.

Speaker #1: First, raw materials inventory rose on a quarter-on-quarter basis. Last year, or last quarter, it was almost 30 billion in raw material inventory. Now, in Q2, it is about 40-odd billion of inventory.

Alain Lam: In Q2, it is about CNY 40 odd billion of inventory. There are two reasons here. The first point is we need to prepare some inventory for the future, especially about memory. Mr. Lu had shared with you his evaluation, so that is one point. At the same time, for memory unit price, it is rising. It is 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 618, we prepared some inventory, and we actually released some inventory for sale, so I think it is easy to explain the reasons behind the decline. Looking at inventory reserve, Q3 pressure. Sorry. Another factor I just forgot. As you know, for new generation SU7, delivery started in early February.

Speaker #1: There are two reasons here. The first point is that we need to prepare some inventory for the future, especially for memory. Mr. Lu has shared with you his evaluation.

Speaker #1: So that's one point. At the same time, memory unit prices are rising. So it's not only about volume, but also about selling price.

Speaker #1: It is rising, so the value will increase. That is about strategic inventory preparation and also the selling price impact. Second, finished goods inventory came down.

Speaker #1: This is normal. Because at 6/18, we had prepared some inventory and we actually released some inventory for sale. So I think it is easy to explain the reasons behind the decline.

Speaker #1: Okay, so looking at inventory reserve, Q3 pressure—oh, sorry, sorry. Another factor I just forgot: as you know, for the new generation SU7, its delivery started in early February.

Speaker #1: So at the end of Q1, we also advanced some production of next-generation SU7. In Q2, overall inventory will come down, so there is also some impact from EVs.

Alain Lam: At the end of Q1, we also advanced some production of new generation SU7, and in Q2, overall inventory will come down. There is also some impact from EVs. Understood. Thank you, Alain. Then I have a question about overseas business. IoT overseas revenue increased significantly in Q2. 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 EV, and you are going to have an overseas plan. Are you going to do some preparation? For example, are you going to find land in overseas? Are you going to set up plants? For large area stores, do you have a plan about expansion?

Alain Lam: At the end of Q1, we also advanced some production of new generation SU7, and in Q2, overall inventory will come down. There is also some impact from EVs.

Speaker #1: Okay, understood. Thank you, Ellen. I have a question about overseas business. IoT overseas revenue increased significantly in Q2. For retail stores overseas, you have over 600 stores.

Kyna Wong: Understood. Thank you, Alain. Then I have a question about overseas business. IoT overseas revenue increased significantly in Q2. 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 EV, and you are going to have an overseas plan. Are you going to do some preparation? For example, are you going to find land in overseas? Are you going to set up plants? For large area stores, do you have a plan about expansion?

Speaker #1: 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?

Speaker #1: That would mean even more products, and also EV. And you are going to have an overseas plan. So, are you going to do some preparation?

Speaker #1: For example, are you going to find land overseas? And also, are you going to set up plants? And then, for large-area stores, do you have a plan for expansion?

Speaker #1: So, for IoT and EV overseas business, how is your preparation and what will be your future outlook? Regarding IoT and also room for development overseas, I think that there will be big room for growth.

William Lu: For IoT and EV overseas business, how is your preparation and what will 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. We have 630 odd Mi Home stores in overseas, and next year, I will continue our store expansion for Mi 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. Secondly, IoT. Especially for large appliances, we have been blank overseas in the past. I think in H2, we would accelerate our development. Next year, we will see very big growth in this area.

Kyna Wong: For IoT and EV overseas business, how is your preparation and what will be your future outlook?

William Lu: 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. We have 630 odd Mi Home stores in overseas, and next year, I will continue our store expansion for Mi 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. Secondly, IoT. Especially for large appliances, we have been blank overseas in the past. I think in H2, we would accelerate our development. Next year, we will see very big growth in this area.

Speaker #1: Now we are on track in implementation. So we have 630-odd Xiaomi Home stores overseas, and next year, I will continue our store expansion.

Speaker #1: 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.

Speaker #1: This is going to lay a very big foundation for overseas business. Secondly, for IoT, especially large appliances, we have previously had a blank slate overseas.

Speaker #1: But I think in the second half of the year, we will accelerate our development. Next year, we will see very big growth in this area.

Speaker #1: And then, in different countries, I think there are a lot of barriers and thresholds in market access or entry. So there is a lot of compliance-related work to do.

William Lu: 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. We will accelerate our work, and then we will go into more and more countries. That is about IoT. For EV, going global, it is on track. In H2 2027, we will go overseas, and this year we have been to many countries. For overseas EV working partners and dealers, they pay close attention to us. They want to carry our products. They want to be our dealers. I think they are very passionate. Behind that, there are several judgments. First, China EVs going global is going to be a mainstream in the future. This will not change.

Speaker #1: And that takes time, so we will accelerate our work. Then we will go into more and more countries. That's about IoT. As for EV, going global is on track.

Speaker #1: In the second half of 2027, we'll go overseas. And this year, we have been to many countries. And for overseas, EV, working partners and dealers.

Speaker #1: 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.

Speaker #1: First, China EVs are going global. They are going to be mainstream in the future; this won't change. Secondly, when there are so many Chinese brands going global, which ones will they choose to work with?

William Lu: 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 or premium brands. So we are very rare. Third, they see Xiaomi as a tech company producing EVs, not traditional vehicles. In our experience, communicating with dealers in different countries, they are mostly top dealers, top 10 dealers. There are at least 7 to 8 who approached us on their own initiative. We also visit many countries and many customers. Thank you. Thank you for your question. Next question, please. Wen Hanjing from CICC. Mr. Lu, Alain, good evening. Thank you for the opportunity. I have two questions. First, internet business.

Speaker #1: So, this is a very important standard. I think that Xiaomi is very different and outstanding. We can be regarded as unique, and there are very few in China who can work on premium products.

Speaker #1: Or 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.

Speaker #1: Top 10 dealers. And there are at least seven to eight who approach us on their own initiative. And then we also visit many countries.

Speaker #1: And many customers. Okay, thank you. Thank you for your question. Next question, please. Wenhan Ding from CICC. Mr. Lu Weibing, good evening.

Kyna Wong: Thank you.

Isabella Gao: Thank you for your question. Next question, please.

Operator: Wen Hanjing from CICC.

Hanjing Wen: Mr. Lu, Alain, good evening. Thank you for the opportunity. I have two questions. First, internet business.

Speaker #1: Thank you for the opportunity. I have two questions. First, regarding the internet business: this year, in Q1 and Q2, smartphone shipments were under pressure because of memory cost.

Wen Hanjing: This year in Q1 and Q2, smartphone shipment was under pressure because of memory cost. Internet service revenue still grew steadily. In the future, you have to consider pressure from memory that might be alleviated or that might stabilize. For internet business, what will be future growth trend and what will be its growth margin? Thank you. For internet service business, as you know, there are two parts. First is related with shipments. Second, is related to our existing users. On these two fronts, for our existing users, MAUs reached historical high already, 770 million globally. In mainland China, almost 200 million users. So for the existing users, they bring stability to our internet business revenue. In the past few years, we expanded premium phones, and we achieved some progress. Regarding MAUs, premium users account for a bigger share.

Hanjing Wen: This year in Q1 and Q2, smartphone shipment was under pressure because of memory cost. Internet service revenue still grew steadily. In the future, you have to consider pressure from memory that might be alleviated or that might stabilize. For internet business, what will be future growth trend and what will be its growth margin? Thank you.

Speaker #1: Internet service revenue still grew steadily. In the future—well, you have to consider the pressure from memory. That might be alleviated or that might stabilize.

Speaker #1: So for internet business, what will be the future growth trend and what will be its growth margin? Thank you. Thank you. For internet service business, as you know, there are two parts.

Alain Lam: For internet service business, as you know, there are two parts. First is related with shipments. Second, is related to our existing users. On these two fronts, for our existing users, MAUs reached historical high already, 770 million globally. In mainland China, almost 200 million users. So for the existing users, they bring stability to our internet business revenue. In the past few years, we expanded premium phones, and we achieved some progress. Regarding MAUs, premium users account for a bigger share.

Speaker #1: First, it's related to shipment. Second, it's related to our existing users on these two fronts. For our existing users, MAUs reached a historical high already—770 million globally.

Speaker #1: In mainland China, we have almost 200 million users. So for the existing users, they bring stability to our internet business revenue. In the past few years, we expanded premium phones, and we achieved some progress.

Speaker #1: So regarding MAUs, premium users account for a bigger share. Premium users made a bigger contribution to our internet output, more than low-end users. So when our existing users increase, and also with more premium users in the share, then this is very important to our internet business revenue stability.

Alain Lam: Premium users made a bigger contribution to our internet ARPU, more than low-end users. So when our existing users increase and also with more premium users in share, then this is very important to our internet business revenue stability. In the past few quarters, advertising revenue saw healthy development. In 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 two factors have brought stability to our internet business, and also some strengthening. Thank you, Alain. My next question is about AI. What are your thoughts apart from foundational models? You also mentioned some new applications. You also launched MiClaw, and you said that you are looking into smart appliance.

Speaker #1: In the past few quarters, advertising revenue saw healthy development. In the past one or two quarters, I think you saw a so-called 'war' in terms of food delivery.

Speaker #1: There was a significant amount of advertising, and this helped our smartphone advertising business. So I think these two factors have brought stability to our internet business and also some strengthening.

Speaker #1: Okay, thank you, Ellen. My next question is about AI. So, what are your thoughts, apart from foundational models? You also mentioned some new applications.

Hanjing Wen: Thank you, Alain. My next question is about AI. What are your thoughts apart from foundational models? You also mentioned some new applications. You also launched MiClaw, and you said that you are looking into smart appliance.

Speaker #1: You also launched MeClaw, and you said that you are looking into smart appliances. So, for the overall layout, in the future, at what time points are we going to see your AI and the overall human-car-home hardware integration?

William Lu: 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. It is at the foundation level. On top of it, there are a few lines. The first one is smartphone. For smartphone, we have to complete the traditional and Android OS. We will use AI to reconfigure it. For this process, it will take some time. Now with OS 4, I think we have made a big step forward. On the smartphone, we can make use of the agent to do a lot of execution. I think you can see it.

Hanjing Wen: 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?

Speaker #1: Well, for our AI plan, first of all, foundational large models. So our investment is the heaviest in this area. In the future, they will service our human-car-home full ecosystem.

William Lu: 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. It is at the foundation level. On top of it, there are a few lines. The first one is smartphone. For smartphone, we have to complete the traditional and Android OS. We will use AI to reconfigure it. For this process, it will take some time. Now with OS 4, I think we have made a big step forward. On the smartphone, we can make use of the agent to do a lot of execution. I think you can see it.

Speaker #1: 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.

Speaker #1: For smartphones, we need to complete both the traditional and Android OS, so we will use AI to reconfigure them. This process will take some time.

Speaker #1: But now, with OS 4, I think we have made a big step forward. On the smartphone, we can make use of the agents to do a lot of execution.

Speaker #1: I think you can see it. For home, I think one important factor is Miloco. Recently, there are many scenarios in which Miloco is being realized.

William Lu: For home, I think one important factor is Mi Local. Recently, there are many scenarios in which Mi Local is being realized. There is cloud as well. Time precision is very good, but cost is still quite high. 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. Smart driving. I think you are also interested in smart driving. The fourth line is robots. For our robotics business, we have introduced a number of versions. These are the few lines. I think all these lines are deeply integrated with MiMo, and they would develop independently, and they will also be integrated. For our full ecosystem support, it would be stronger.

Speaker #1: 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 costs start to come down, I think we can see better results.

Speaker #1: The third line is related to the EV business, so smart driving. I think you are also interested in smart driving. And then, the fourth line is robots.

Speaker #1: For our robotics business, we have introduced a number of versions. These are a few lines. I think all these lines are deeply integrated with MIMO.

Speaker #1: And then they will develop independently, and they will also be integrated. And for our full ecosystem support, it will be stronger. At the end of the day, we will see we will form a moat in relation to the human-car-home ecosystem.

Isabella Gao: At the end of the day, we will form a moat in relation to the human car, home ecosystem. Very clear. Thank you, Mr. Lu. I have no further questions. Thank you for your questions. Let's wait for the next question. Next question, UBS, Jimmy Yu, please go ahead. Thank you, Mr. Lu and Alain. My first question is related to AI. Looking at revenue, we can see some growth related to AI. Can you give more details? 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. 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 CNY 1 billion. Okay.

Isabella Gao: At the end of the day, we will form a moat in relation to the human car, home ecosystem.

Speaker #1: Very clear. Thank you, Mr. Liu. I have no further questions. Thank you for your questions. Let's wait for the next question. Next question: UBS.

Hanjing Wen: Very clear. Thank you, Mr. Lu. I have no further questions.

Isabella Gao: Thank you for your questions. Let's wait for the next question.

Operator: Next question, UBS, Jimmy Yu, please go ahead.

Speaker #1: Jimmy Yu, please go ahead. Thank you, Mr. Liu and Ellen. My first question is related to AI. Looking at revenue, we can see some growth related to AI.

Jimmy Yu: Thank you, Mr. Lu and Alain. My first question is related to AI. Looking at revenue, we can see some growth related to AI. Can you give more details? What would be future trend in relation to AI? That's my first question.

Speaker #1: So, can you give more details? What will be the future trend in relation to AI? That's my first question. Jimmy, regarding AI revenue, we put it under the Smart EV, AI, and Other New Initiatives segments.

William Lu: Jimmy, regarding AI revenue, we put it under smart EV, AI, and other new initiative segments. 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 CNY 1 billion. Okay.

Speaker #1: Well, now MIMO has just started to be monetized, and the revenue is not significant yet. In the future, at appropriate times, we may disclose it separately, but at this stage, we will still include it within this one billion.

Speaker #1: Okay. Well, looking at the overall operating environment, there is still significant pressure from memory costs. So, for this year and next year, when it comes to R&D expenses, is the trend consistent with what you have shared in the past?

William Lu: Looking at the overall operating environment, while there is still big pressure from memory cost, 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 adjustment. Overall speaking, I think we are quite firm on that. Okay. Thank you, Mr. Lu. Next question. JPMorgan, David Cho, please. Mr. Lu, Alain, thank you for the opportunity. My first question is about the EV market. What is the share of sale of Xiaomi Smart EV? What's the question? You mean the share for the whole year? What is the estimate of the H2 of the year or this year? It's difficult for us to disclose a specific percentage or share, but our future goal is about these 2 series.

Speaker #1: For R&D expenses, we had not made adjustment. Overall speaking, I think we are quite firm on that. Okay, thank you, Mr. Liu. Next question.

Jimmy Yu: Okay. Thank you, Mr. Lu.

Operator: Next question. JPMorgan, David Cho, please.

Speaker #1: JP Morgan, David Cho, please. Mr. Liu, Ellen, thank you for the opportunity. My first question is about the EV market. What is the share of sales of Xiaomi smart EV?

David Chou: Mr. Lu, Alain, thank you for the opportunity. My first question is about the EV market. What is the share of sale of Xiaomi Smart EV?

Speaker #1: So, what's the question? You mean the share for the whole year? So what is the estimate for the second half of the year, or for this year?

William Lu: What's the question? You mean the share for the whole year?

David Chou: What is the estimate of the H2 of the year or this year?

Speaker #1: Well, it's difficult for us to disclose a specific percentage or share, but our future goal is about these two series. So I think the Sky Nomad is based on the Kunlun architecture.

William Lu: It's difficult for us to disclose a specific percentage or share, but our future goal is about these 2 series.

William Lu: So I think the SkyNomad is based on the Kunlun architecture, and our goals are in relation to the smart EV technology or driving. Okay. Thank you. My next question is about EV ASP. Will it continue to go up? What about your profit situation? For ASP volatility, it is based on our product mix. For Q1, there are more deliveries of YU7. Then in Q2, more deliveries are about SU7. SU7 price is lower than YU7. 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 ASP is 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.

William Lu: So I think the SkyNomad is based on the Kunlun architecture, and our goals are in relation to the smart EV technology or driving.

Speaker #1: And our goals are in relation to the smart EV technology or driving. Okay, thank you. My next question is about EV. EV, ESP—will it continue to go up?

David Chou: Okay. Thank you. My next question is about EV ASP. Will it continue to go up? What about your profit situation?

Speaker #1: 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.

William Lu: For ASP volatility, it is based on our product mix. For Q1, there are more deliveries of YU7. Then in Q2, more deliveries are about SU7. SU7 price is lower than YU7. 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 ASP is 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.

Speaker #1: SU7 price is lower than U7 as a result. ESP fluctuated. Last year in Q2, as I said earlier, our Ultra accounted for a bigger share than this year.

Speaker #1: And ultra ESP is a lot higher than the average. So that's why I think ESP is a result to us; it's not a goal.

Speaker #1: ESP, relatively speaking, is not related to GP margin. It doesn't mean that when ESP is low, gross margin will also be low. I think you need to understand this relationship.

Huang Luping: I think you need to understand this relationship. Thank you. Next question, please. Huatai, Huang Luping, please. I have two questions. Looking at Q2 smartphone ASP, it rose 21.9%. It is at historical high. Those at CNY 3,000 or above accounted for a bigger share. For premium products, 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 will be your new strategies? In the second half this year and next year, what will 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. Is it much higher than the past low cost level for memory?

William Lu: I think you need to understand this relationship.

Speaker #1: Thank you. Next question, please. Hua Cai. Huang Le Ping, please. I have two questions. Looking at Q2, smartphone ASP, it rose 21.9%. It is at a historical high.

David Chou: Thank you.

Operator: Next question, please. Huatai, Huang Luping, please.

Leping Huang: I have two questions. Looking at Q2 smartphone ASP, it rose 21.9%. It is at historical high. Those at CNY 3,000 or above accounted for a bigger share. For premium products, 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 will be your new strategies? In the second half this year and next year, what will be your product mix trend, please?

Speaker #1: Those at 3,000 yuan or above accounted for a bigger share. And for premium products, well, we saw some decline. So if memory costs continue to rise, then in the global smartphone overall situation, how will it change?

Speaker #1: In the future, when it comes to this product mix, what will be your new strategies? In the second half of this year and next year, what will be your product mix trend?

Speaker #1: Please. Okay, now let me share with you our judgments first. For memory, is it true that the price will stay high over a long period of time?

William Lu: 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. Is it much higher than the past low cost level for memory?

Speaker #1: I have doubts. But is it much higher than the past low-cost level for memory? I think so. Right now, it is five times that of the Q2 last year level.

William Lu: I think so. Right now, it is five times that of the Q2 last year level, but it's difficult to stay at this five times level for a long time. How many times eventually? It's difficult to say. Perhaps in the middle. So when it comes to smartphone cost and price, then we can turn to the overall situation. I think we will see a global equilibrium. In the short run, it is difficult to give a very precise estimate because this involves different type of war, so to speak. For example, this year, Apple adopted a no price increase strategy, and some time ago they said that they would also raise price for their coming new flagship phone. Some other vendors said that they would also increase price, some said they will lower price, and so on.

Speaker #1: But it’s difficult to stay at this five-times level for a long time. But how many times eventually? It’s difficult to say—perhaps somewhere in the middle.

Speaker #1: So, when it comes to smartphone cost and price, then we can turn to the overall situation. I think we will see a global equilibrium.

Speaker #1: But in the short run, it is difficult to give a very precise estimate because this involves different 'tug of war,' so to speak. For example, this year, Apple adopted a no price increase strategy.

Speaker #1: And some time ago, they said that they would also raise prices for the coming new flagship phone. And some other vendors said that they would also increase prices.

Speaker #1: Some said they will lower prices and so on. So in the long run, I think people will consider memory cost increases or changes when adjusting their selling prices.

William Lu: In the long run, I think people will consider memory cost increase or change in adjusting their 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 tend to be more optimistic. Second question is about robots. Just now you said you talked about the open source models and the smart robotic factory had been commissioned already. So for Xiaomi robots. What is its positioning internally? Is it a tool to lower costs, or in the future, will it become a new source of revenue? Do you have any quantifiable appraisal targets for this business? Well, I think for robots, for final large-scale maturity and development, I think it will take a longer time. It's difficult to share some short-term goals. Secondly, we'll continue to invest.

Speaker #1: I think that would be an equilibrium reached after dynamic adjustment. For the smartphone category, I think it is almost a necessity, so I believe that I tend to be more optimistic. The second question is about robots.

Leping Huang: Second question is about robots. Just now you said you talked about the open source models and the smart robotic factory had been commissioned already. So for Xiaomi robots. What is its positioning internally? Is it a tool to lower costs, or in the future, will it become a new source of revenue? Do you have any quantifiable appraisal targets for this business?

Speaker #1: Just now, you said you talked about the open-source models. And the smart robotics factory has already been commissioned. So, for Xiaomi robots, what is its internal positioning?

Speaker #1: Is it a tool to lower costs, or in the future, will it become a new source of revenue? And do you have any quantifiable appraisal targets for this business?

Speaker #1: Well, I think for robots, for final large-scale maturity and development, I think it will take a longer time. It's difficult to share some short-term goals.

William Lu: Well, I think for robots, for final large-scale maturity and development, I think it will take a longer time. It's difficult to share some short-term goals. Secondly, we'll continue to invest.

Speaker #1: And secondly, we will continue to invest. We are positive about the future direction, and it is going to integrate with our existing business. So that's why we are going to invest in it.

William Lu: We are positive about future direction, it is going to integrate with our existing business. That is why we are going to invest in it. Up to now, we have not thought of working in the food delivery area with our robotics. We have our own factories. 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. Chips and also systems. I think robot development will also feed back to our large model capabilities. I think we expect a lot of synergy with our other businesses. At this stage, I think we will not set too many concrete or specific goals. We will be more pragmatic. Thank you for your questions. We will conclude the session here. Thank you for your time.

Speaker #1: So, up till 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.

Speaker #1: Many of our capability realization will be integrated with robotics. For example, large models. They will also be synergized. And then chips and also systems. I think robot development will also feed back to our large model capabilities.

Speaker #1: 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.

Speaker #1: We'll 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.

William Lu: Thank you for your questions. We will conclude the session here. Thank you for your time.

Isabella Gao: I hope you will continue to give strong support to Xiaomi Group. Okay. Thank you all.

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