(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.Adjust 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.“We expect the Company’s smartphone shipments to still grow rapidly in 2021,” Guotai Junan analyst Gin Yu wrote in a report before the results were released. “With the expansion of user base, we expect that internet services business will also develop steadily.”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.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.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.