Core Viewpoint - Xiaomi Group's Q2 2025 financial report shows significant growth in revenue and adjusted net profit, driven by its automotive business and other segments, despite challenges in its smartphone division [6][8]. Financial Performance - Q2 revenue reached 116 billion yuan, a year-on-year increase of 30.5%, while adjusted net profit was 10.8 billion yuan, up 75.4% [6]. - The automotive business delivered 81,300 vehicles, generating 20.6 billion yuan in revenue with a gross margin of 26.4% [9][15]. Automotive Business Insights - The automotive division's operating loss decreased from 500 million yuan in Q1 to 300 million yuan in Q2, marking a 40% improvement [9][12]. - The gross margin for the automotive business improved from 23.2% in Q1 to 26.4% in Q2, indicating effective cost management and scale effects [13][14]. - Xiaomi's automotive business is close to profitability, needing to reduce costs or increase margins by approximately 6,000 yuan per vehicle to break even [16][20]. Smartphone Business Challenges - Smartphone revenue was 45.5 billion yuan, accounting for 39.3% of total revenue, but showed a decline of 2.1% year-on-year and 10.1% quarter-on-quarter [19]. - The average selling price (ASP) of smartphones fell to 1,073 yuan, down 11.3% quarter-on-quarter, reflecting increased competition and a shift to lower-priced models [21]. IoT and Internet Services Growth - IoT and lifestyle product revenue reached 38.7 billion yuan, a 44.7% increase year-on-year, with a gross margin of 22.5% [22]. - Internet services revenue was 9.1 billion yuan, growing 10.1% year-on-year, with a high gross margin of 75.4% [23][24]. Cost Management and Efficiency - Xiaomi's overall expense ratio decreased to 13.9%, down 2.2 percentage points year-on-year, showcasing effective cost control despite entering the automotive sector [28]. - The company achieved cost efficiency through scale effects and shared R&D investments across its product lines [29][30]. Future Outlook - With a backlog of over 200,000 orders for the YU7 model, Xiaomi is well-positioned to meet its annual target of 350,000 vehicle deliveries [17]. - The automotive business is expected to achieve quarterly profitability by late 2025 or early 2026, potentially ahead of competitors like Xpeng and NIO [17].