Huawei invests 25% of revenue in R&D as first-half profit drops 36%
Huawei Technologies spent 121.4 billion yuan on research and development in the first six months, 25.9% of revenue, while net profit fell 36% to 23.8 billion yuan.
Source: South China Morning Post · August 31, 2026 at 10:01 AM · AI-assisted report
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SHENZHEN, CHINA, 31 AUGUST 2026 —
Huawei Technologies spent 121.4 billion yuan on research and development in the first six months, 25.9% of revenue, while net profit fell 36% to 23.8 billion yuan.
Market Impact
The Shenzhen-based company attributed the decline to higher component costs and the surge in R&D, which lifted total operating expenses 32% year on year. Net operating cash flow turned negative, to minus 39.9 billion yuan from a positive inflow of 31.2 billion yuan in the same period last year.
Revenue rose 9.55% to 467.8 billion yuan from 427 billion yuan a year earlier. Huawei said the increase came from a 19.4% jump in smartphone shipments and stronger demand for its Ascend AI processors. The gains reflected cautious pricing that helped it capture 22.6% of the Chinese smartphone market in the second quarter, according to IDC. The company was the only top-10 vendor to grow shipments while rivals Oppo, Vivo, Xiaomi and Honor contracted.
“With memory prices skyrocketing, smartphone prices may be forced to rise across the board, otherwise manufacturers would be selling at a loss,” Richard Yu Chengdong, chairman of Huawei’s Consumer Business Group, said at a product launch earlier this month.
Beyond handsets, sales of Huawei’s Ascend AI chips are accelerating as Chinese AI firms including DeepSeek, Z.ai and iFlyTek adopt domestically built alternatives to banned Nvidia products. TrendForce estimates domestic suppliers will capture nearly 80% of China’s AI server market this year, further squeezing global rivals.
The company is also pushing in-house chip designs. In May, Huawei introduced a new scaling law and LogicFolding architecture aimed at delivering 1.4-nanometre-class performance by 2031 without advanced lithography tools. Analysts now await the Kirin 2026 processor, built on this architecture, expected to power the flagship Mate line launching this autumn.
Huawei has historically disclosed operational data through bond filings on the Shanghai Clearing House, reflecting limited avenues for external financing amid US restrictions. The heavy R&D commitment is taking a visible toll on near-term cash. The group has not provided a dividend update or cash-usage guidance for 2024.
Analysts say the trade-off between profit and long-term control of technology is deliberate. “Huawei is choosing resilience over returns,” said a Beijing-based tech analyst who tracks the group. “Its R&D intensity is now at levels typical of a pre-revenue startup, not a cash-rich conglomerate.”
For investors, the key question is how long Huawei can sustain the spending without eroding its balance sheet. Until it provides guidance, the market will weigh each yuan of profit sacrificed against each percentage point of market share gained.
Related: Huawei Technologies · Richard Yu Chengdong