Ladies and gentlemen, welcome to Xiaomi's 2026 first quarter results announcement, investor conference call, and audio webcast. Today's conference is being recorded. Now, I would like to hand the conference over to your host today, Mr. Xuerong, General Manager of Group Investor Relations and Capital Markets Department. Please go ahead. Good evening, ladies and gentlemen. Welcome to the investor conference call and audio webcast hosted by Xiaomi Corporation regarding the company's 2026 Q1 results.
Before we start the call, we would like to remind you that this call may include forward-looking statements, which are underlined by a number of risks and uncertainties and may not be realized in the future for various reasons. Information about general market conditions comes from a variety of sources outside of Xiaomi. This presentation also contains some unaudited non-IFRS financial measures that should be considered in addition to, but not as a substitute for, the company financials prepared in accordance with IFRS. Joining us on the conference today are Mr. William Lu, Partner and President of Xiaomi Corporation, and Mr. Alain Lam, Vice President and CFO of Xiaomi Corporation. To start, Mr. Lu will share recent strategic and business updates of the company. Thereafter, Mr. Lam will review the company's financial performance in the first quarter 2026. Following that, we'll move on to the Q&A session.
I will now turn the call over to Mr. Lu.
Good evening, everyone. Thank you for joining our Q1 2026 results announcement conference call. The first quarter of 2026 marks the first full quarter of our new five-year plan. Over the past five years, we have completed the strategic closed loop of our entire ecosystem encompassing human, vehicles or cars, and homes, and achieved comprehensive breakthrough in areas such as large appliances, EVs, chips, and AI. Looking ahead to the next five years in the short term, we face the challenge of a triple cycle of cost, demand, and competition. In the long term, we're entering a new phase where AI is reshaping our entire ecosystem of human, cars, and homes. Tonight, I will mainly share three aspects with you. First, we will review our key performance in the first quarter 2026.
Second, we'll respond to issues that everyone is concerned about. Third, we'll look ahead to our strategic development direction and business focus for the next few quarters. First, in Q1 2026, our group's total revenue was 99.1 billion RMB, adjusted net profit 6.1 billion RMB. Looking at business segments. First, in Q1, we proactively controlled shipments of mid to low-end products and channel inventory. While our smartphone shipment declined, our ASP reached record high. We also maintained our position among the top three globally. According to Omdia data, our market share in Q1 2026 was 11.3%, maintaining our position among the top three globally for 23 consecutive quarters. Our smartphone shipment ranked second in Latin America with market share of 17.4%, up two percentage points compared to the previous period.
We ranked third in Europe, Southeast Asia, and Middle East and Africa with market shares of 17.2%, 16.9%, 13%, and 9.2% respectively. In Q1 2026, we ranked among top three in smartphone shipment in 47 countries and regions worldwide, and among top five in smartphone shipments in 65 countries and regions worldwide. For GP margin, the sharp rise in memory costs in the short term has ushered in a new normal for the entire industry. We'll not simply pass on the increased cost linearly to consumers. Instead, we'll reposition user needs and achieve a balance between scale and profit through product matrix upgrades, software optimization, and leveraging our operational capabilities. In Q1 2026, we achieved Gross Profit margin of 10.1% for smartphone, which reflects the operational resilience brought about by our own capabilities. IoT business.
In Q1 2026, IoT business achieved revenue of CNY 24.7 billion, mainly due to a year-on-year decline in domestic revenue caused by the high base of national subsidy last year. However, thanks to expansion of overseas channels and increase in overseas product categories, overseas revenue reached record high and achieved double-digit year-on-year growth. Among them, TWS earbuds ranked second globally, wearable products ranked third globally, and tablets ranked fifth globally. For gross profit margin of our IoT business this quarter, it was 25.2%, which fully demonstrates our ability to hedge against fluctuations in a single industry through multi-business synergy. This quarter, the business can provide more profits to mitigate the risk of declining growth margins on smartphone business. For our Xiaomi EVs, we delivered 80,856 cars in the first quarter 2026, mainly the Xiaomi SU7 series.
As of May 6th, 2026, our new generation SU7 has accumulated over 80,000 preorders in 48 days since launch. This demonstrates that our EV business has withstood severe challenges and has emerged from most difficult period. As of 30th April 2026, Xiaomi SU7 has achieved cumulative delivery volume of 232,000 units in 10 months. On 21st May, we officially released Xiaomi YU7 GT, positioned at a sports car level SUV suitable for long-distance travel, priced at RMB 389,900. After extensive tuning and testing, Xiaomi YU7 GT finally broke the SUV lap record at the Nürburgring, becoming the fastest SUV in Nürburgring history. Xiaomi SU7 Standard is priced at RMB 233,500 to refine its extreme handling capabilities.
Xiaomi YU7 GT underwent testing at the Nürburgring-Nordschleife. The issues of AI and androids that everyone is concerned about, we have emphasized on multiple occasions that deep integration of AI with physical world is the next stage of intelligent technology. Xiaomi, with its hardware ecosystem reaching over 1 billion users, has a tremendous opportunity to become a leader in the AI era. If we don't create our own large-scale model, our understanding of the base model will always be like looking at flowers through the fog. Only by mastering core technologies end-to-end can we truly create products with differentiated competitiveness. The industry is still exploring the ultimate form of the combination of AI and hardware. Only those with core technologies and application scenarios can quickly keep up when the trend becomes clear. Latest progress. In April 2026, we released Xiaomi MiMo V2.5 series.
Xiaomi MiMo-V2.5 series includes MiMo-V2.5-Pro, MiMo-V2.5-TTS series, and MiMo-V2.5-ASR. This represents a comprehensive leap from usable to easy to use. On Artificial Analysis, a global authoritative comprehensive intelligence ranking list for large open source models, Xiaomi MiMo-V2.5-Pro ranks first in the comprehensive intelligence index among global open source large models and is among the top five in the overall global ranking of large models. At the same time, the agent index ranks first among global open source large models. At end of March, MiMo-V2-Pro set another record on OpenRouter platform, achieving first place in the daily, weekly, and monthly rankings. In the week of March 31st, MiMo-V2-Pro's weekly token consumption surpassed 4 trillion. After free trial period ended, our average weekly token retention rate reached 35%.
On April 3rd, 2026, we launched Xiaomi MiMo Token Plan, offering 4 tiers: light, standard, pro, and max, aiming to help users improve productivity at reasonable prices. Since launch of our token plan, the pro and max tiers have accounted for over 50% of revenue. According to OpenRouter data released on May 12th, MiMo ranked first in terms of hummus agent model call volume, contributing a cumulative 1.45 trillion token calls in the past month. This means that the world's fastest growing open source agent product has chosen Xiaomi MiMo as its preferred inference engine in real-world high-intensity task scenarios. To reward global developers, Xiaomi officially launched MiMo Orbit 100T Token Program, distributing token benefits to AI users worldwide for free, with a plan to distribute a total of 100 trillion tokens within 30 days. As of morning of 12th May, nearly 80 trillion tokens have been distributed.
We'll continue to iterate on our base model. The moment of AI mobile phone has arrived. Perhaps 2026 will be a pivotal year for AI smartphones. Arrival of such a moment will profoundly influence future changes in mobile phones. AI phones are not simply adding AI features to existing smartphones, nor are they simply creating an agent app. Instead, a shift from an app-centric interaction approach to an OS agent-centric interaction approach. miclaw is our initial attempt. Recently, CAICT launched an evaluation of mobile smart assistants. Xiaomi miclaw became one of the first mobile smart agents in China to pass this authoritative evaluation. At the same time, the packaging and testing categories of our miclaw have expanded to multiple terminals such as tablets, PCs, Macs, and speakers with screens marking significant upgrade in cross-platform capabilities.
In the future, mobile phones will be upgraded from operation tools to effective assistants and digital clones for people. We will deeply evolve our Agent OS, taking the agent as the core, and further increase the deep coupling between model and upper-level framework. We continuously enhance product experience of assisted driving. In March of this year, we officially released Xiaomi XLA holistic model architecture, enabling Xiaomi's assisted driving to move from perception and imitation to understanding and reasoning. In May 2026, building upon XLA, we took it a step further and officially released and fully open-sourced the Xiaomi-Robotics-0 autonomous driving model, a one-step latent space language visual reasoning framework. It unifies the three major technical approaches, VLA, world model, and latent space reasoning into a unified framework. Embodied robots. We continuously explore the boundaries of physical intelligence.
Embodied robots are the ultimate integrated platform for AI capabilities, chip and OS capabilities, and manufacturing capabilities, and have extremely high barriers to entry. On April 27th, we'll bring a new capability demonstration and officially release the full process of cleaning on a real device with Xiaomi-Robotics-0. On the same day, Xiaomi Robot, which had turned from tightening screws in a factory, came to the Xiaomi Investor Day event and made a handshake with guests, winning praise from many friends. The current progress is just the beginning. Robots will open up entirely new industrial and market opportunities for Xiaomi. We believe that we are going to achieve a lot of good results. We are going to be a leader in hardcore technology. We'll continue to do more in innovation and many other smart areas.
We'll continue to innovate and upgrade and support our healthy development of various segments. That's all on my part. I'll pass the floor to Mr. Alan.
hank you, Mr. Lou. Hello, everyone. Good evening. As Mr. Lou shared with everyone, 2026 will be a year of both short-term challenges and long-term opportunities. Let me talk about our results. In Q1 2026, our total revenue was RMB 99.1 billion. Overall gross margin was 22%. Looking at various segments, our smartphone times AIoT segment revenue was RMB 79.3 billion. Smartphone times AIoT segment gross margin was 22.5%, up 2.5 percentage points quarter-on-quarter. For smartphones, the continued significant increase in memory costs has had an overall impact on the smartphone industry. We focused on optimizing our sales structure and channel management. Revenue in this quarter was RMB 44.3 billion, accounting for 44.7% of our group's total revenue.
Our global smartphone shipments reached 33.79 million units. Our average selling price for smartphones, thanks to our strategic adjustments, reached a record high of CNY 1,310, representing a year-on-year increase of 8.2%. According to third-party data, in first quarter 2026, our high-end or premium smartphone sales in mainland China accounted for 23.5% of our overall smartphone sales. According to Omdia data, in the first quarter of 2026, we ranked among the top three globally in smartphone shipments, with market share of 11.3%, maintaining our top three ranking for 23 consecutive quarters. Despite rising memory prices, through proactive control of mid to low-end phone shipments and channel inventory, our smartphone gross margin remained relatively healthy at 10.1%. Regarding IoT, in Q1, our revenue of IoT business reached CNY 24.7 billion, with overseas revenue maintaining steady growth, achieving double-digit year-on-year growth and setting a new record.
We prioritized profitability, refrained from participating in industry price competition, and simultaneously expanded our overseas channels and increased our overseas product categories. This quarter, gross profit margin for IoT reached 25.2%, up 5.1 percentage points quarter-on-quarter. From product category perspective, this quarter, we ranked third globally in wearable band shipments and second globally in TWS earbuds shipments. Our tablet business performed steadily, ranking among the top five globally this quarter. Regarding internet services, we have accumulated a large user base globally. In March 2026, our global MAUs reached 760 million, up 3.8% year-on-year. Among them, MAUs in mainland China reached a record high of 196 million, up 8.1% year-on-year. In the first quarter of 2026, our internet services revenue was 9.5 billion RMB, up 4.3% year-on-year. In this quarter, gross margin for internet services was 76.1%. Advertising business continued to drive internet business growth.
Advertising revenue of this quarter reached RMB 7.1 billion, up 7.8% year-on-year. Let me talk about intelligent or smart EVs, AI, and other new initiatives segments. Revenue reached RMB 19.9 billion this quarter, up 6.9% year-on-year, accounting for 20% of the group's total revenue. Specifically, due to a decrease in quarterly deliveries of the SU7 series, we delivered a total of 80,856 new cars in Q1 2026. For smart EV sales revenue, it reached RMB 19 billion. For other related business revenue, it was RMB 900 million. Our average after-tax selling price this quarter was RMB 235,000. Affected by purchase tax subsidies and rising raw material costs, gross profit margin of smart EVs, AI, and other new initiatives segment was 20.1% this quarter. In Q1 2026, our smart EVs, AI, and other new initiatives segment incurred an operating loss of RMB 3.1 billion.
As of 23rd April 2026, cumulative deliveries of the new generation SU7 exceeded 26,000 units. As of 30th April 2026, cumulative delivery of Xiaomi SU7 in the past 10 months reached 232,000 units. In the first quarter of 2026, our R&D expenses was 8.95 billion RMB, up 33.4% year-on-year. CapEx reached 3.27 billion RMB, up 20% year-on-year. Of this, smart EVs, AI, and other new initiatives business accounted for 45.6% of total CapEx. For net profits in the first quarter of 2026, adjusted net profit was 6.1 billion RMB. At the same time, we focused on enhancing shareholder value and actively repurchased shares in the open market. Since the beginning of 2026, our share buyback amount has reached about HKD 8.4 billion, exceeding the total amount for the entire previous year, demonstrating the company's confidence in our long-term development. We actively practice the concept of sustainable development.
In April 2026, we released the Xiaomi Group 2025 ESG report, marking our eighth consecutive year publishing ESG report. The report comprehensively showcases our strategies and achievements in 2025 regarding data privacy governance, responsible marketing and service, circular economy, sustainable supply chain, talent development, and corporate governance. In terms of ESG ranking, in March 2026, we maintained our A rating in the MSCI ESG rating. Besides, we received the top 1% of Chinese companies honor in the S&P Global CSA score and were included in the S&P Global Sustainability Yearbook (China Edition) 2026, demonstrating continued recognition of our ESG initiatives. Thank you, everyone. That concludes what I wanted to share with you today. Now we can begin the Q&A session.
Thank you, Alain Lam. Now we will move on to Q&A. In order to allow more investors to ask questions, please limit your questions to a maximum of two. Thank you.
Thank you. The Q&A session is now open. To register your questions, please press star 11 on your telephone keypad. Should you wish to cancel, please press star 11. First question is from Morgan Stanley, Eddie, please.
Mr. Lu, Alain Lam, good evening. Congratulations. Given the pressure in smartphone industry, you still performed and exceeded expectation. I have two questions. First question for AIoT business in Q1, gross profit was very good, and last week after the launch, your earbuds also sold well. This year for AIoT business, while achieving high profit, high gross profit, in terms of revenue scale, can you achieve good performance in the coming two quarters? When it comes to new product launch and overseas market developments, what are some significant highlights? Thank you.
AIoT business, I am sure you all are interested in that.
Last year in Q3, we already expected that there would be memory cost increase, and it is going to be a super long cycle, and the extent of cost increase is also big. For products relying on big memory, like tablets and so on, there would be bigger impact. Memory cost accounted for quite a big share of some of these products. AIoT business to our group is important. We want to achieve a balance and also alleviate the pressure from memory cost. In Q3 last year, for AIoT business, we enhanced its importance. In mainland China and overseas, we adopted different strategies. For China market, we focused on premiumization. This year, I think you gradually see many of our products. Our products are doing well. They are well received by users. We achieve good word of mouth.
In recent launch, we introduced a very good product with good external appearance and also sound quality, and also the connection with super AI assistant and so on. At the same time, you also see our air conditioner. It became very hot, and it also sells very well. Users like our air conditioner because it cools very fast, and also the fan effect is very good. For our refrigerator, it keeps the freshness of food in a very good way. It is well received, especially when people need to redecorate their homes. Progress has been very good within mainland market. For overseas, we are expanding our scale. Our share in overseas market is still very small. For our AIoT business, there are many markets that we need to enter.
Given this situation, last year, basically, we have solved the issues in many countries. Now we are in many countries, and we have expanded our product mix. Besides, we collaborated with many other e-commerce players, and so we're able to double our growth. Here, if you look at our overall AIoT business growth, we're able to achieve a good gross profit margin. In the future, I think potential is still huge. If you look at the China market, our earbuds, our watch, well, our share is still on the low side. There is still a long journey for us for overseas. Overseas market is two times the potential of the Chinese market, and the competitive environment of overseas is different from the China market. I think for IoT business, that's my answer. Let me supplement with some numbers.
Just now, Mr. Lu talked a lot about strategies and categories and channels, and also about our overseas expansion of IoT. This is not a peak season or busy season. For AIoT revenue overseas in Q1, it reached double-digit growth year-on-year. It already reached a record high in history, and it is around 40% of the overall AIoT total.
Okay. Thank you, Mr. Lu and Alain. My second question is about Xiaomi EVs. After the launch of SU7 and also looking at the buyer profile, regarding new generation SU7 and last year SU7, what are the differences in user profile? With the launch of the two new models in terms of sales volume and profits, comparing with the situation without these two models, regarding sales volume, revenue and profit and important metrics, what will be the impact of these two new models?
For SU7, you can see that we have introduced 2 new products. The SU7 Standard and also, we have introduced a YU7 GT model. For the 2 models or versions, one important idea is for SU7, comparing with Model 3, I think they may be rather similar. For SU7, I think there are still differences. After doing some analysis for what Model Y Standard or entry-level version, it accounted for 70% of the sales, and we realized that we may have some disadvantages in terms of cost. For user scenario, 600 km range, I think the needs can be met. When it comes to even longer range, well, there may be cost issue. Given all these considerations, we have introduced a Standard version and also a YU7 GT version. Regarding the YU7 GT version, we have already broken the SUV seat in the Nürburgring King.
Well, it is a ceiling of SUV functionality. For these two products in the future, I am sure they can actually complement to our overall product line. After users have bought the cars, more than half of the users choose our CNY 429,900 option. That is the full configuration. More than half of them have chosen this version. I have done the market research, and I realized from the research that there are some SU7 users who are buying this, and also, many of the users are owners of Mercedes-Benz and BMW cars. Right now for SU7, at the initial launch, every month, the capacity is around 2,000 odd units. I think if you need it, you can continue to place order. The cycle will be shorter. For the Standard version, I think that it can very well solve the daily commuting needs.
A range of 600 kilometers, roughly. I think the price can also suit your budget in that case. I think in my market research, I asked the frontline colleagues, many of them joined Xiaomi from Tesla, and they said that as long as users can give it a trial of our product, then they will choose our model. When it comes to car style, degree of comfort, functionality, and so on, our products are very satisfactory. For gross profit margin, the price difference is CNY 20,000, and then for G7, I think gross margin will even be better. Now, sales volume is not out yet, so I cannot really give concrete comment, but then on the total volume, I think G7 is going to do well. Thank you.
Thank you, Mr. Lu.
Thank you.
Okay. Thank you for your question.
Next question is from Goldman Sachs, Timothy Zhao, please.
Okay, Mr. Lu, Alan, good evening. Thank you for taking my questions. I have two questions. First, AI. We are happy to see that this year, you have exceeded market expectation in your AI progress. When it comes to AI business development and also a bigger investment by many AI companies, well, this year, you're talking about CNY 16 billion of AI investment budget. From Xiaomi MiMo-V2.5 launch all the way till now, do you have other operation data to share with us? For MiMo large model algorithm, how will it be? For miclaw, what will be the future plan and also next generation AIOS roadmap and timetable, how do they look like? That's my first question. Thank you.
Okay. Let me comment on our miclaw. For AI expenses, I'll ask Alan to supplement.
For miclaw, we are promoting it with full force. With miclaw's emergence, I think we are very quickly launching miclaw, we are trying to make sure that it can be used with our tablet, our wearables, and also our future EVs, our sound box, and so on. In the future, what is important is whether we can connect user data, whether we can improve user experience. I think it is going to enhance experience a lot. Of course, all these cannot depart from large model and our framework and our AIOS, HyperOS transformation. I think all these are important. We are proceeding with full force, our team is collaborating this year for the OS launch. We are moving towards that direction. This is important. Okay. Another question is about AI token and so on.
Let me make a few points. As you can see, right now, we have already started some token attempts, and we have introduced different token packages for our users. So far, feedback has been quite good. As Mr. Lu said, 50% of the users are using our new versions. Especially for the high-end models, the use and deployment is very high. As a result, there are revenue related to AI token. You asked about our AI investment and also our judgment. At the beginning of the year, we mentioned CNY 16 billion, and when our AI business develops, we will also continue to adjust this number because we realize that there are huge opportunities about AI, and regarding model iteration, if we get users' recognition, then we will also release more volume for inference. In the future, there may be a higher budget.
This has to be based on our clear ROI calculation when making new investments. Thank you.
Okay. Thank you, Mr. Lu and Alain. My next question is about EV business. Looking at delivery in Q1, more than 80,000 units in April, more than 30,000 units comparing with the whole year 550,000 unit target. It seems that the run rate shows a difference. What is your plan about new model? For EV business and new initiatives, Gross Profit margin in Q1 on a quarter-on-quarter basis, there is decline. Alain just said that there is cost increase pressure. At the same time, there is one-off impact from cross-year order and also tax subsidies. Can you quantify the impact? For overall Gross Profit margin, how should we look at it in terms of new vehicles?
Yes. Let me first comment in Q1.
In Q1, in January and February, there is only delivery of SU7. For SU7, we are talking about this iteration. We have spent two months of not selling the old products. We have also looked at the fast iteration of our other peers. We have spent two months to work on our old products so that users know that we are launching the new product, new SU7. After doing that, users' word of mouth is very good. That's because of our huge efforts. In January and February, in Q1, only 80,000 units were delivered. In April, our delivery increased. In April, for SU7 delivery, the delivery lead time was rather short. Actual delivery was a lot more than 30,000 units. We do look forward to bigger volume.
There is a larger model that would be launched in the second half of the year. We believe that that model is going to be like a new platform. That model is very innovative. It is highly competitive. We have a lot of confidence in that model. For the whole year targets, we have confidence that we can attain the full year targets. Regarding EVs, in this quarter, you can see that the gross margin of our EV business had declined. As you said, first of all, there is the purchase tax subsidy issue. That's the main reason. Regarding the end of last year, there were undelivered orders, and then there was the CATC subsidy. CNY 10,000-CNY 15,000 again was the amount. ASP cost impact on gross margin. That's the first point.
Secondly, we started to sell some display car, that would also affect ASP and gross margin. At the same time, for the macro environment, there are issues regarding batteries and memory, commodities, which would increase our cost. However, there are some factors that affect the whole industry, and relatively speaking, our ASP is higher than our peers. There is cost increase, it did not affect our gross margin that much. That's one point. Even though gross margin has declined, our overall gross margin within our industry is still on a high side. As Mr. Lu just said, we delivered 80,000 odd units in this quarter, which would affect the apportionment of our fixed cost. Now we are going to deliver the new generation SU7, the SU7 Standard, YU7 GT. On a quarter-on-quarter basis, I think volume will increase.
Secondly, GT delivery will drive our quarter-on-quarter ASP. Besides, regarding suppliers, we will continue to put in place some cost reduction measures. There'll be some touching. These are the few factors that will affect our gross margin in the coming few quarters.
Thank you, Mr. Lu, and thank you, Alain Lam.
Okay, thank you for your questions. Next question is from CICC, Wenhan Jing. Please go ahead.
Good evening. Thank you for the opportunity. I have two questions. First, about the smartphone business. This year, memory cost pressure was big, into one for your smartphone business, shipments and gross profit had still shown some resilience. In the future, given such crisis and challenges, how can you balance various metrics including quantity, price, and gross profit?
Right. Thank you. Well, we have discussed that many times.
This trend about the super cycle of memory cost increase did not differ a lot from our judgment. The cycle is very long. At the same time, the increase is of a big extent. Since Q2 last year, the cost started to increase, and then in Q3 as well. In that quarter, the cost increase was big in Q2 this year based on market quotation and also contract price. If we look at contract price, I think the increase is still big. When it comes to cost increase and also cost for a smartphone, this is a very big challenge. Besides, it is not going to end here. This is a very long cycle. I think we have to look towards 2027 and 2028 in Q3. Well, in the past, the increase is 60%-80%, or even 100% on a quarter-on-quarter basis.
I believe that in Q3 this year, the increase will slow down, but still the pressure is going to be huge because the base is very high. Even though there is just a small increase, the absolute value is very big already. The impact on the overall industry is big, not only for smartphone. For many products, memory cost account for a small share. I believe that there would be huge impact on the overall consumer electronic industry. Given that, we have done a few things in Q1. You can see that we have made some adjustments. First, we have to dynamically balance selling price, cost, volume, and gross profit margin, and the relationship among these factors. Short term price increase or price reduction may not be very wise. We have to come to a judgment about the market in Q1.
For volume, there is some decline, but for ASP, it's increased by about 10%, and our gross margin rose two percentage points. This shows that our strategy is effective. Besides, this year, we introduced some new products, Max, and some other new products. In terms of cost, I think we cannot just simply pass on the cost increase to the consumers. If we just increase the price linearly, it is difficult for consumers to accept. We have to look at the user's needs as well. We have to make products that can meet users' needs and then sell the products to users at a reasonable price. That should be something we need to do. We have to rationalize our product lines. Given the overall environment of price increase, I think we are still doing well in the China market.
If you look at VCA activation, we have 14% market share. This is because of our very important strategy. We tried our best not to increase price for all products. Even if we increase price, it is a small one only. We are the last to increase price. We started to increase price in mid-April. Overall speaking, users still understand our stance. We have put in place this overall strategy to face up to the coming increase in this super cycle. Given this environment, we have to seize the AI phone opportunities and AI-related opportunities.
Okay. Thank you, Mr. Lu, for the clear answer. My next question is about your going abroad plan. Just now, you shared with us your progress in EVs.
Regarding going abroad and also your rhythm of new EV launch and also the increase in number of overseas sales centers, can you do more sharing with us?
For going abroad, I think comparing with the last quarter, we did not differ a lot. First of all, in Q3, Q4 2027, we have to go abroad in terms of store opening. We'll first go to advanced countries and then developing countries. First high-end and then medium to high-end. That's our strategy. So far for our team, we are doing preparation for going abroad. Because going abroad is complicated, there are a lot to do. There are a lot of legal and compliance requirements, and there are also localization needs for product match, then we have to also make plans about network and sale centers. We are actually doing all these preparation work.
Thank you.
Thank you, Mr. Lu. I have no further questions.
Thank you. Thank you for your question. Next question from CITIC. Yunxin Qi, please.
Mr. Lu, Alain, greetings. I am from CITIC Securities. Thank you for this opportunity. I have two questions. First, about MiMo large model. You just said that the daily average deployment already exceeded 1 trillion tokens. I want to ask, right now, for Xiaomi MiMo Token Plan, what is the user conversion rate and retention rate? For your AI team, in terms of future commercialization, do you also have internal appraisal targets or metrics? My second question is about AIoT business. Just now, Alain said that for overseas AIoT business in Q1, the number and share rose fast.
In the coming three quarters, especially towards the end of this year, for overseas AIoT business, how much will be the growth, and will there be new guidance for growth and share?
Thank you. Let me first comment on AIoT. Alain Lam can talk about MiMo large model. I think the first question is this. We still think that AIoT business is, in the coming few years, the way that we can balance out the increase in memory cost and the impact on our business. This is going to be a very important balancer for our business. For AIoT business, we want it to grow fast. Regarding AIoT business in the China market, we insist on premiumization. Premiumization is the key. In the recent launch, you can see that we have launched a few products. All those launched products have reached our internal targets.
For earbuds, it had exceeded our target two times. For our products, I think our product capabilities have been enhanced a lot, and market acceptance is also very good. In overseas market, the room is very big. Our share is just quite low still. We have to do more product development overseas. Some products can satisfy overseas needs, very often there are thresholds and barriers that are still high in overseas. In the past two years, I spent a lot of time to work on that. The third issue is channels. For channels, starting last year, we put in investment in e-commerce. I think that for overseas AIoT development, we'll still meet a lot of resistance. AIoT business overseas growth can be fast, and I believe this is going to be a long cycle. The room is huge.
Overseas AIoT business will see three times, four times growth potential. All right. Let me get back to your first question about deployment of MiMo. Let me make a few points. We have introduced token plan, after that, we saw a few interesting phenomena that I can share with you. First, fee paying volume is high. Token deployment exceeded 30% of fee paying. Fee paying ratio is very high. Besides, for token max version, token deployment exceeded 50%. Third point, overseas number is high. The share overseas exceeded 50%. Retention rate, we did not disclose this number, but I think retention rate is also high. We are now working on AI models, and so far, we have not reached the business closed loop stage. If you look at many analyses about China and overseas, there are many new models being launched. We are still in the iteration cycle.
We hope that when users deploy tokens, we continue to learn and iterate our model. In the future, we still need to follow the market to adjust our token plans. In the growth stage, we will collect data and iterate our models. That's the stage that we're in. We have still not reached the ultimate token plan fee model being a large business. I hope you can understand this.
Okay. Thank you, management. I have no further questions.
Right. Thank you for your questions. Next question is from Citi. Kyna Wong, please go ahead.
Thank you, Mr. Lu and Alain Lam, for the opportunity. I want to follow up on AI large models. Right now in the market, there are many large models companies that will launch some new versions in June and July. Once every two to three months, there will be an iteration.
Regarding MiMo large models, what is the renewal time point? Are you going to follow the market rhythm, or are you going to have your own plan? You have your own strategic consideration. Just now you talked about deployments. We have seen some price decrease. It seems that operators are launching large models, and they also have some sales plan. What is your positioning in the market? What are your strategies? Regarding your company's efficiency enhancements, how can it be seen? Will it be realized in OPEX? That's my question about AI. Second question is about EVs. For Q1, union AI and new initiatives business segment operation loss is CNY 3.1 billion. In the future, as Mr. Lu said, you have much confidence in reaching the target. In the coming few quarters, we will see more than 100,000 breakthrough in shipment.
For operating loss, I think in Q1, there will be the chance to cover the operating loss, but you still need to look at the AI investment of your company. EV AI and new initiative segments for this year, how will be its profitability? What will be its direction? Thank you.
Okay, let me talk about AI, and so then Allen can comment on the next part. We do not have an internal target of iteration once every three months. We do not have a specific timeline. Regarding model iteration, we do not have the need to announce it. We should not announce for the sake of announcing. We have our own rhythm and our grasp. For AI large models, so Xiaomi MiMo large models should serve our business. It must be coupled with our business. This is very important.
Now we have many business centered around scenarios. With the data and also the AI large models, we also have to look at its cost. Without a business closed loop, it is difficult to assess. We need to strengthen our large models. At the same time, we will also sell tokens to the market. Of course, that depends on market competition that may be helpful to Xiaomi. We will take this two-pronged approach. I think it will be a balance between medium and long term and also horizontal and vertical. This will be a more favorable approach. I think this is the biggest difference between Xiaomi and other companies. Right. Yes. Let me supplement on a few points. Just now, Mr. Lu said that we are not a system focusing on large models. Our main business is not to sell tokens.
We will not announce or launch large models for the sake of launching. We will launch when we are ready. Regarding internal enhancement, we encourage our employees to use our MiMo models more, but this is to help them enhance efficiency, and they can also generate more data to help us to iterate our own models so that our models will be better. This is part of the efficiency enhancement. It is not only to enhance our own efficiency, but also the capability of our models. These are two parts. Your second question is about our EVs. EV, AI, and other new initiatives, future direction. I think you can see quite clearly that in Q1, comparing with the previous quarters, the biggest difference is deliveries have come down. Just now we have explained that in this quarter, we did not deliver SU7.
We focused on SU7, and we prepare for the new generation SU7 launch. There was some impact on revenue. In the future, in Q2, quarter-on-quarter delivery for EV will rise for sure. That's the first point. Of course, we will increase our investment into AI. In the future, I think these are the two main results of our operating profit or loss. It will be the result of these two factors together: volume, gross margin, and AI investment.
Thank you.
Thank you for your questions. Next question is from J.P. Morgan, David Cho, please.
Mr. Lu, Alain, good evening. I'm from J.P. Morgan. I have a question. My question is, in 2025 second quarter, delivery reached a peak, and then after that it declined. What are the reasons behind? How can you get back the expected growth momentum? Thank you.
Okay.
For the expected delivery, you said that there was a decline from the peak. The main reason is in Q1, first of all, when we made the expectation, at first the volume was big, but later on, delivery cycle was rather long. When consumers waited, there was also some disruption or disturbance. Some users switched to other brands. We saw some peer brands which had locked in some users' orders. Some users have switched to other brands. Looking at our product line layout, basically, we are benchmarked against Model Y, then within the cities for daily commuting, range is around 600 km. That can satisfy users' needs. We have also got another model regarding 800 km. For 600 km, I think that range can satisfy people's commuting need already. For the overall car model launch, we have already added one more model.
We have now SU7 Standard and YU7 GT. After the launch in the past weekend, we saw quite good response from users test driving. I think gradually we will get closer to our expected volume. Thank you.
Thank you, Mr. Lu. I have no further questions.
Thank you for your question. Next question is from UBS, Jimmy Yu. Please go ahead.
Thank you, management for the opportunity. My first question is about smartphone and impact on sales volume, you will try your best to achieve some balance. In Q1 this year, gross margin was rather steady on a quarter-on-quarter basis. My question is, your products have been enhanced, that is part of it, there is global inventory factor. If you look at smartphones and consumer electronics in the future, what is the outlook on gross margin?
What will be the trend, taking into consideration cost increase for memory?
I think given the cost increase, pressure will continue. That is an objective fact. We need to solve this problem. We need to balance scale, profit, and also Gross Profit margin. We need to achieve a balance. More importantly, when cost increases, we have to ask a simple question. Now users may need to spend more time. Are they still willing to do that? We cannot simply pass the cost increase to consumers. Given the new cost structure, we need to make sure that users are happy with the value for money. We have to satisfy our own values as well. That is important. Besides, we need to adjust our product structure and also quality. Scale decline is for sure, but I think ASP increase can offset part of the impact from scale decline.
We need to work on our GP margin. I think gross profit will be controllable. That is our overall thoughts and strategies about smartphone business.
Thank you for your question. Because of time, we will conclude the call here. Thank you for your time. I hope that you will continue to support Xiaomi Group. Thank you and goodbye. Okay. Thank you.