Shenzhen-based Huawei Technologies reported a 36% drop in net profit for the first half of the year on Monday. This decrease was attributed to rising raw material costs and increased research and development expenses, which outweighed revenue growth.
The company's net profit for the period from January to June amounted to 23.8 billion yuan (57 billion rubles), representing a sharper decline than the 32% seen in the same period last year. Meanwhile, revenue grew by 9.6% to reach 467.8 billion yuan, as the company continues its recovery following US sanctions.
Technology Strategy and Financial Performance
These results highlight the high cost of Huawei's efforts to reduce dependence on foreign technologies and expand capabilities in AI computing and chips after years of export restrictions imposed by the US. The company announced a breakthrough in chip design in May, which it claims will allow it to produce advanced semiconductors without using Western lithography equipment.
Rising memory chip prices also negatively impacted the profitability of the consumer business division, which includes smartphones. Huawei stated that R&D expenditures increased by 25.2%, reaching 121.4 billion yuan, equivalent to 25.9% of revenue. This exceeds the 21.8% of revenue allocated to R&D during the 2025 fiscal year. It should be noted that the cost of producing products rose by 12.4%, outpacing revenue growth, and administrative expenses also increased significantly.
The company stated that the first-half results were in line with its forecasts, but long-term plans for the full year remain under review due to external uncertainty and rising raw material costs.
Although Huawei's business spans smartphones, telecommunications equipment, and AI chips, the company did not provide a breakdown of revenue by segment. Nevertheless, it was noted that all its business areas demonstrated year-on-year revenue growth in the first half.
As a private company that voluntarily publishes its financial reports, Huawei has achieved significant revenue recovery following the imposition of US sanctions and export controls, which restricted access to advanced chips and Google's Android operating system. These restrictions led to a 29% drop in annual revenue in 2021.
Huawei, one of the Chinese technology groups most affected by US restrictions, has since actively invested in developing domestic alternatives in chips, software, and AI computing infrastructure. The company's revenue in 2025 grew by 2.2% to 880.9 billion yuan, making it the second-largest annual figure after a record 891.4 billion yuan in 2020.
In the current year, Huawei is promoting AI-focused telecommunication products, new computing hardware, and intelligent driving technologies, while simultaneously releasing new smartphones, tablets, and wearables both in China and abroad. The company's operations in the first half required 39.9 billion yuan in cash, compared to 31.2 billion yuan the previous year, an increase of approximately 71 billion yuan. Cost of goods and services grew significantly faster than sales receipts, and inventories increased by 42% compared to the end of 2025. Huawei concluded that the increase in R&D and changes in business structure also affected profitability.