Xiaomi Corp. has posted a smaller-than-expected decline in quarterly profit, offering investors some reassurance that the company can weather a persistent memory chip shortage that has dampened global smartphone demand.

The Beijing-based tech giant reported a net profit of 9.46 billion yuan for the quarter ending in June, surpassing the average analyst projection, though still down 21% compared to the same period last year. Revenue also slipped 6.1% year-on-year to 108.92 billion yuan.

Amid the ongoing worldwide shortage of memory chips, Xiaomi has emerged as one of the hardest-hit players among the world's top smartphone manufacturers. Major suppliers such as Samsung Electronics and SK Hynix have redirected their production capacity toward advanced memory chips used in artificial intelligence applications for data centers, resulting in a scarcity of conventional memory products and a sharp escalation in costs.

Investors have been questioning whether Xiaomi has effectively managed to keep soaring raw material expenses under control. Since late June, the company's shares listed in Hong Kong have climbed nearly 21%, reflecting a degree of market confidence in its prospects.

However, according to data from market research firm Counterpoint, Xiaomi recorded the steepest decline in smartphone shipments among the world's top five brands during the June quarter. Its strategy of covering the full spectrum of smartphone demand—ranging from high-end models equipped with foldable screens to budget devices priced under $100—has left it particularly vulnerable to the memory supply crunch.

At the same time, founder Lei Jun's strategic pivot toward electric vehicles, along with the intensely competitive landscape of China's auto market, has added further pressure on Xiaomi's net earnings. In recent weeks, the launch of two new hybrid models at price points below market expectations has triggered concerns among investors.

While most automakers are grappling with declining sales in the Chinese market, Xiaomi is banking on its Xiaomi Pengcheng SUV lineup to reignite consumer enthusiasm. The company plans to begin selling electric vehicles overseas starting next year, a move that could cultivate this segment into a stronger growth engine and pose a challenge to established Western brands in markets such as Europe.

Nevertheless, the expansion path is fraught with hurdles, including tariffs, regulatory scrutiny, and more rigorous safety standards that the company must navigate.