The Chinese smartphone maker said Wednesday it made 14.6 billion yuan ($2.1 billion) in the three months to June 30, beating industry estimates. Revenue grew 68% compared to the same period last year to 45.2 billion yuan ($6.6 billion).
Xiaomi stock closed up 1.6% in Hong Kong on Wednesday, ahead of the earnings report. The company went public in Hong Kong in July after raising $4.7 billion in the world’s biggest tech IPO since Alibaba’s(BABA) New York listing in 2014.
Xiaomi is trying to position itself as an internet company, asserting that it’s more than just a hardware maker because of the services it offers with its devices, such as music and video streaming apps.
But internet services revenue grew at a slower pace than overall revenue in the quarter, and at 4 billion yuan ($584 million) accounted for about 9% of the total. Apple(AAPL), by comparison, reported $9.55 billion in software and services revenue last quarter, about 20% of its total revenue.
Xiaomi has aggressively pushed into markets outside of China.
But luring customers into using internet services outside China has been a challenge.
“We don’t see many people getting a Xiaomi phone because they want to use Xiaomi’s internet services,” said Kiranjeet Kaur, an analyst with research firm IDC. “Outside of China, there are a lot of options.”
The struggle underlines analysts’ concerns that Xiaomi can successfully diversify away from smartphones, which is a very low margin business for the company. Although Xiaomi sells a lot of phones in places like India and Southeast Asia, most of them are cheap models that cost under $100.
Xiaomi also announced last year that it would cap smartphone profit margins at 5%.
CNNMoney (Hong Kong) First published August 22, 2018: 7:00 AM ET