Xiaomi Corporation has announced its unaudited financial results for the third quarter of 2018, ending September 30, 2018 (3Q2018).

          The company reported that its group revenue reached approximately 50.846 billion yuan, marking a 49.1% year-on-year increase. Meanwhile, global revenue surged by 112.7% year-on-year, reaching 22.3 billion yuan, accounting for 43.9% of total revenue. The net profit for the third quarter stood at 2.481 billion yuan, with adjusted profit (Non-IFRS Measure) at approximately 2.885 billion yuan, reflecting a 17.3% year-on-year increase and a 36.3% quarter-on-quarter increase.
Notable financial highlights for 3Q2018:
· Total revenue of 50,846.2 million yuan, up 49.1% year-on-year
· Total profit of 6,578 million yuan, up 26.4% year-on-year
· Net profit of 2,480 million yuan
· Adjusted profit not in accordance with IFRS at 2,885 million yuan, up 17.3% year-on-year
· Earnings per share of 0.117 yuan
          Lei Jun, Founder, Chairman, and CEO of Xiaomi, stated that strengthening performance in the high-end market, advancing the development of new retail channels, and focusing on AI development and application have all yielded impressive results during the reporting period. Additionally, Xiaomi's new high-potential businesses, including the development of platforms for monetizing internet services beyond smartphones in China, global marketing of IoT products, and entry into the white goods market (durable household appliances), represent promising beginnings. Given all these successes, we are very confident about Xiaomi's business future."
Analysis of 3Q2018 Performance
          There was rapid growth across all segments. In the third quarter of 2018, Xiaomi's smartphone business generated approximately 35.0 billion yuan, a 36.1% year-on-year increase, primarily due to rising smartphone sales volume and average selling price (ASP). As of October 26, 2018, Xiaomi's smartphone sales exceeded 100 million units, surpassing the four-year sales target by two months. Revenue from the IoT product segment and lifestyle-related products grew by 89.8% to 10.8 billion yuan, representing the fastest year-on-year growth rate.
          Meanwhile, revenue from smart TV and laptop sales increased by 100.3% to 4,227.2 million yuan in the third quarter of 2018. Furthermore, several ecosystem products, such as Mi Band, Mi Electric Scooter, and Mi VR headset, saw significant sales growth. Internet service revenue rose by 85.5% year-on-year to 4.7 billion yuan in the third quarter of 2018, largely due to the development of monetization platforms in mainland China. Advertising revenue grew by 109.8% year-on-year to 3.2 billion yuan, driven by continuous optimization of the recommendation algorithm, increased user engagement, and higher pre-installation revenue.
          Regarding positioning in the high-end smartphone market in mainland China, Xiaomi expanded its product range in the third quarter of 2018 to strengthen its business in the mid to high-end smartphone market. During the earnings report, the average selling price (ASP) of Xiaomi smartphones in mainland China increased from the previous quarter, rising 16% year-on-year and 4% quarter-on-quarter. The average selling price of Xiaomi smartphones outside mainland China also increased by 18% year-on-year, attributed to a higher proportion of exports to Western Europe. The increased share of mid to high-end smartphones has laid a stronger foundation for the development of monetization platforms in Xiaomi's internet service segment in the future.
          International revenue grew by 112.7% year-on-year, contributing to overall revenue growth. According to Canalys, Xiaomi's smartphone sales in Western Europe grew by 386% year-on-year, and Xiaomi ranked fourth in smartphone sales in the third quarter of 2018. Smartphone sales in India and Indonesia expanded by 31% and 337%, respectively, allowing Xiaomi to achieve the number one market share in India and rise to second place in Indonesia. Globally, Xiaomi ranked in the top 5 in 30 countries and regions in terms of sales in the third quarter of 2018.
          In terms of continuously strengthening its user network and developing monetization platforms, the increase in smartphone sales and user numbers led to a 43.4% rise in monthly active users (MAU) of MIUI, from 156.5 million in September 2017 to 224.4 million in September 2018. The average revenue per user (ARPU) for MIUI in the surveyed quarter increased by 29.4% year-on-year to 21.2 yuan. Additionally, Xiaomi's international internet service revenue has shown bright prospects since its inception. In the third quarter of 2018, revenue from international internet services accounted for 4.4% of total internet service revenue. Xiaomi also sees significant revenue opportunities from internet services for non-smartphone devices, with revenue from TV internet services accounting for 5.4% of total internet service revenue in the third quarter of 2018.
Development Strategy
          Artificial Intelligence + IoT (AI + IoT) is one of Xiaomi's core strategies. In the third quarter of 2018, Xiaomi further strengthened its advantage in the global AI + IoT market. In September 2018, Xiaomi's AI assistant service (小愛同學) had over 34 million monthly active users, making it one of the most widely used AI voice interactive platforms in mainland China. At the 2018 World Artificial Intelligence Conference, Xiaomi's AI assistant was nominated for the prestigious SAIL Award. By the end of the third quarter of 2018, the number of IoT devices connected to Xiaomi's IoT platform (excluding smartphones and laptops) reached approximately 132 million, an increase of 13.8% from the previous quarter. There were 1.98 million users owning more than five Xiaomi IoT-connected devices, excluding smartphones and laptops, representing a 16.5% quarter-on-quarter increase.
          Additionally, Xiaomi is focused on creating an efficient new retail system by continuously developing effective offline channels alongside enhancing online channels. As of September 30, 2018, Xiaomi had 499 Mi Home users in mainland China, primarily in first and second-tier cities. To penetrate smaller cities and rural areas, Xiaomi had over 1,100 authorized stores by the end of the third quarter of 2018, compared to 360 stores at the end of the second quarter of this year. Overall, Xiaomi's operations remain highly efficient, with an operating expense ratio decreasing by 0.3% quarter-on-quarter to 8.5% in the third quarter of 2018.
          Furthermore, Xiaomi employs a multi-brand strategy to effectively target diverse user groups. To meet the high-performance demands of Xiaomi users, the company launched POCOPHONE, a new sub-brand, which was one of the first smartphone brands launched in India on August 22, 2018, and is now available in nearly every market where Xiaomi operates. Additionally, Xiaomi introduced a gaming-focused smartphone under the Black Shark brand through its investment in Black Shark, a brand that combines powerful hardware, curated software, and player-centric services to deliver an exceptional gaming experience.