Xiaomi reported another weak quarter as higher memory costs and intense competition weighed on profitability, with gross margin falling to 19.8% from 22.5% a year earlier. The Beijing-based company said Tuesday that net profit dropped 20.5% to 9.46 billion yuan ($1.40 billion), while revenue declined 6.1% to 108.92 billion yuan for the three months ended June.

The results highlight persistent headwinds across Xiaomi's major businesses. Pricier memory chips continue to pressure smartphone margins, while reduced consumer subsidies add to subdued demand in China's consumer-electronics market. Analysts had expected net profit of 6.01 billion yuan on revenue of 109.82 billion yuan, according to Visible Alpha consensus estimates.

Uncertainty remains over whether the company's fast-growing electric-vehicle business can translate sales growth into sustainable profitability. Despite the EV segment's rapid expansion, the overall margin deterioration underscores the challenge of balancing component cost inflation with competitive pricing in a slowing domestic market.