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By Xie Fang

Chinese smartphone maker Xiaomi released its audited financial statements for the third quarter of 2018 on Monday, reporting a lower-than-expected revenue growth and a worrisome profit decline, the China Securities Journal reported.

During the reporting period, the Hong Kong-listed company generated a total of 50.85 billion yuan (7.33 billion U.S. dollars) for its operating revenue, which grew by 49.1 percent from a year earlier but daunted the analysts’ expectation for 54.76 billion yuan (7.89 billion U.S. dollars).

Meanwhile, the company’s net profit slumped by 38.4 percent year over year to 2.21 billion yuan (318.5 million U.S. dollars) during the quarter, adding to a net loss of 2.02 billion yuan (291.1 million U.S. dollars) for the first three quarters of this year.

Xiaomi explained that the depreciation of the Chinese yuan and the Indian rupee against the U.S. dollar during the third quarter posed a considerable challenge to its profitability, leading to a 7.1 percent slump in the company’s profit margin.

Despite that, Lei Jun, founder and CEO of the company, promised that the company would offset the impact of the currency fluctuations in the exchange rates by improving its operational efficiency rather than raising the prices of its products.

The company’s profitability also suffered from the rising costs on multiple counts. During the reporting period, Xiaomi saw its costs for sales, marketing and R&D surge by 53.2 percent, 51.2 percent and 90.7 percent respectively.

Nonetheless, during the reporting period, Xiaomi’s smartphone business brought it a total of 34.98 billion yuan (5.04 billion U.S. dollars) in operating revenue, which rose by 20.4 percent from the previous year and accounted for 68.8 percent of its total revenue.

The company realized a total smartphone output of 34.3 million units during the quarter with a market share of 9.7 percent worldwide, ranking fourth among global smartphone manufacturers.

The company also saw a rapid revenue growth on other business fronts, with the revenue from its Internet of things (IoT) and consumer electronics products and that from its Internet services increasing by 89.8 percent and 85.5 percent respectively from the previous year during the third quarter.