Xiaomi Posts Profit of $2 Billion for First Earnings Since IPO

Last month Xiaomi went public and on Wednesday posted a profit of over $2 billion in the first earnings the smartphone maker has reported since its IPO.

The China based smartphone maker earned 14.5 billion yuan or $2.1 billion for the quarter ending June 30, which beat estimates in the industry. Revenue was up 68% in comparison to the same three months in 2017 ending the quarter at 45.2 billion yuan or $6.6 billion.

Xiaomi shares were up 1.6% on Wednesday in Hong Kong prior to the earnings being released. The company became public during July in Hong Kong after it raised $4.7 billion in the largest IPO worldwide for the tech industry since Alibaba’s 2014 listing in New York.

The strong earnings report came for Xiaomi despite the doubts that exist over the long-term business model of the company.

Xiaomi is attempting to put itself in the position of being an internet company, by asserting it is more than a maker of hardware since it has many services that it offers with the devices it makes, such as video and music streaming apps.

However, revenue from internet services expanded at a much slower rate than the company’s overall revenue during the quarter, and was 4 billion yuan or $584 million which represented 9% of the overall revenue.

Apple in comparison posted revenue in its software and services for last quarter of $9.55 billion, representing 20% of the total revenue.

In is now rivaling Samsung as the top seller of smartphone in India. Sales in other places in Asia are healthy, and it is competing strongly in multiple European countries such as Greece and Spain.

However, luring clients to use its internet services in places other than China has been challenging. One research analyst said that not many people are seen getting a phone made by Xiaomi because they have a desire to use the internet service offered by Xiaomi. Outside China, said the analyst, several options are available.

That struggle underscores the concerns of analysts that Xiaomi can diversify successfully away from its smartphones, which is a business that has low margins for the company. Although the Chinese company sells many of its phones in places such as Southeast Asia and India, the majority of them are inexpensive models that cost less than $100.

Xiaomi announced as well in 2017 that it would be capping its profit margins for smartphone at 5%.

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