Huawei Technologies reported a 36% plunge in first-half net profit Monday as soaring input costs and heavier spending on research and development outweighed revenue growth, underscoring the financial toll of the Chinese technology giant's campaign to reduce reliance on foreign technology.
Market Context
The results arrive as Huawei continues its recovery from U.S. sanctions that restricted access to advanced chips and Google's Android operating system, contributing to a 29% fall in annual revenue in 2021. The company's 2025 revenue rose 2.2% to 880.9 billion yuan, its second-highest annual total after a record 891 billion yuan in 2020.
Analysis
The accelerated profit decline reflects the high cost of Huawei's strategic pivot toward domestic alternatives in chips, software and AI computing infrastructure. Research and development spending surged 25% to 121.38 billion yuan, consuming 25.9% of revenue as the company stepped up investment across AI, communications technology, smart devices and intelligent automotive solutions. Rising memory chip prices have weighed on profitability at Huawei's consumer business division, which includes smartphones. The increased R&D intensity combined with changes in the company's business mix toward higher-investment segments has pressured margins despite broad-based revenue growth.
Key Numbers
- Net profit for H1: 23.81 billion yuan ($3.54 billion), down 36% year-over-year
- Revenue for H1: 467.82 billion yuan, up 9.6% year-over-year
- R&D spending: 121.38 billion yuan, up 25%, representing 25.9% of revenue
- Profit decline acceleration from 32% drop in same period last year to 36% this year
What to Watch
Huawei said its first-half results were in line with forecasts but kept its full-year outlook under review due to external uncertainty and elevated input costs. The company is promoting AI-focused telecoms products, new computing hardware and smart-driving technology while expanding its portfolio of smartphones, tablets and wearable devices in China and overseas markets.