by BLOOMBERG

Xiaomi Corp. reported a 37% increase in quarterly profit as China’s top smartphone maker took advantage of Huawei Technologies Co.’s retreat to consolidate its lead in the market.

Adjusted net income was 3.2 billion yuan ($491 million) in the December quarter, beating the analysts’ average estimate of 2.89 billion yuan. Profit included one-time gains on the fair value of investments. Revenue jumped 25% to 70.5 billion yuan, according to a filing to Hong Kong Stock Exchange. That compared with the 74.6 billion average of analyst estimates compiled by Bloomberg.

The Beijing-based firm grew smartphone shipments by 32% in the last three months of the year, leading the crop of Chinese phonemakers grabbing market share from Huawei, whose shipments fell more than 40% under the weight of U.S. sanctions. More than one in 10 smartphones shipped during the December holiday season came from Xiaomi, behind just Apple Inc. and Samsung Electronics Co., according to research firm International Data Corp. But growth in the next few quarters may be capped by a shortage of vital components including semiconductors, executives told reporters.

”The chip shortage will become a big challenge this year and the next,” President Wang Xiang said on a call after the earnings were released. “We are working with partners to have a better supply situation.” He added that he’s “optimistic” that Xiaomi is on track for growth this year despite the component shortages.

Chew Shou Zi, president of international operations, is resigning from Xiaomi for family reasons, the company said in a separate filing. Chew said in a tweet he will be joining social media giant ByteDance Ltd. as chief financial officer in Singapore.

The executive had served as chief financial officer when the firm went public in Hong Kong two years ago and was leading its expansion overseas, a key growth area. Revenue from overseas market rose 28% in the fourth quarter.

Xiaomi’s share of the China smartphone market climbed to 14.6% last quarter from 9.2% a year earlier, the company said in a statement. It retained its lead in India in the quarter, and was ranked no. 1 in central and eastern Europe for the first time, Xiaomi said, citing data from Canalys.

Shares of Xiaomi fell 2.5% in Hong Kong on Wednesday before the results were released. The stock has rebounded from this month’s lows after the company unveiled a HK$10 billion ($1.3 billion) stock-buyback plan and a U.S. federal judge temporarily halted a Trump administration order to restrict U.S. investment in the firm.

Xiaomi has denounced the Defense Department’s decision to place the company on a list of companies with alleged ties to the Chinese military as “unlawful” and it’s working on a full reversal of the blacklisting. S&P Dow Jones Indices said on Tuesday that the stock is eligible for index inclusion, following the court ruling.

Founded by billionaire entrepreneur Lei Jun more than a decade ago, Xiaomi has built a consumer electronics empire beyond smartphones. It relies on “ecosystem” companies to sell a wide spectrum of devices from robot vacuum cleaners to smart door locks in an attempt to ease dependence on smartphone sales, which contributes roughly two-thirds of the company’s total revenue.

Xiaomi’s effort to expand offline stores in China will not only directly drive sales, but also serve as service spots and display centers that could magnify its online strength, according to a report by Citigroup analysts Andre Lin and Arthur Lai. The analysts expect Xiaomi’s global smartphone shipments in 2021 could jump 34% to around 200 million units.

“Xiaomi’s fundamental outlook has improved,” the analysts wrote in the report.