Xiaomi's results exceeded expectations. Electric cars offset declining smartphone sales.

The company's revenue rose to 116 billion yuan ($16.2 billion), compared with the average analyst forecast of about 115 billion yuan, Bloomberg reported. Net income roughly doubled to 11.9 billion yuan .

Xiaomi sold 81,302 cars in the second quarter, bringing the total to over 157,000 in the first half of the year. The company is on track to exceed its 2024 sales target.

The new Xiaomi electric car model has been well received by the market

The company's strong results are driven by strong demand for its new YU7 SUV, which Xiaomi co-founder Lei Jun launched in late June . This is the latest step in the company's 10 billion yuan investment in the rapidly growing and highly competitive electric vehicle market.

The company aims to compete with Tesla and BYD and become one of the world's five largest automakers, despite a production crisis that is testing its ability to scale this business. The wait for the SUV has extended to over a year.

Lei said at a June meeting with investors that the automotive venture is expected to reach profitability in the second half of this year.

Xiaomi has gained about $120 billion in market value over the past year, fueled by its electric vehicle development, which is growing faster than much larger and more experienced competitors. The company appears to have recovered from a fatal accident involving one of its SU7 sedans in March, which involved Autopilot . The accident prompted regulators to restrict the deployment of advanced driver-assistance technologies.

The Chinese government also intervened in June to try to halt a long-running price war that has squeezed margins across the automotive supply chain. Xiaomi has avoided being caught up in price cuts as demand for its vehicles remains strong.

The smartphone market is struggling to cool down

Despite this, the company's shares are currently trading at higher valuations than BYD , as well as global smartphone competitor Samsung. Xiaomi is struggling with a slowdown in its core business and weak consumer spending. The company, along with rivals Apple and Huawei, offered steep discounts on its phones in June.

Artificial intelligence and chip design are another endeavor where Xiaomi is increasing its resources. The Beijing-based company unveiled a 3-nanometer chip called the Xring O1, designed to power devices like the 7 Ultra tablet. Lei announced that the company will invest $7 billion in its semiconductors this decade.