Huawei Technologies reported a significant 32% year-on-year drop in net profit for the first half of the year, falling to 37 billion yuan ($5.17 billion). This decline occurred despite a 4% rise in revenue, which reached 427 billion yuan, marking its highest first-half revenue since 2020. The company's heavy investment in research and development (R&D) was cited as the primary reason for the profit slump.
The Chinese tech giant increased its R&D expenditure by 9% to 96.9 billion yuan ($13.6 billion) in the first half, up from 88.9 billion yuan in the same period last year. This spending accounts for approximately 23% of its revenue, indicating a strong commitment to developing self-reliant technologies. These investments are crucial for Huawei to counter the ongoing U.S. sanctions, particularly those restricting access to advanced chips. The company has been focusing on developing its own chips, chipmaking equipment, and its Harmony operating system.
In addition to R&D costs, Huawei also booked 5.8 billion yuan ($813.4 million) in asset fair value adjustments, a substantial increase compared to just 35.3 million yuan ($5 million) a year earlier, further impacting its profitability. Despite the profit drop, analysts view Huawei's aggressive R&D strategy as a long-term strength, essential for maintaining technological independence and positioning the company as a leader in next-generation technologies, including AI and the 5G premium smartphone market, where it regained market share in China with its Mate 60 series.
