News Reporter |
News Editor | Wen Shuqi
Huawei just posted its highest-ever first-half revenue, but the celebration comes with a catch — profits took a serious hit.
On August 31st, Huawei’s semi-annual report revealed that in the first half of 2026, the company generated a record-breaking 467.819 billion yuan in revenue, a solid 9.5% jump year-over-year. However, net profit landed at just 23.809 billion yuan, marking a steep 36.0% decline compared to the same period last year.
This is clearly a tale of two halves — growth on one side, pressure on the other. While Huawei noted that every major business segment saw year-over-year revenue increases, the company’s net profit margin shrank from 8.7% last year to 5.1% this time around. That’s the second straight year of contraction, bringing it dangerously close to the lows seen back in 2022.
It’s worth remembering that Huawei’s revenue hit rock bottom in 2021. Since then, it’s been a steady climb back: the launch of the Mate 60 series in 2023 reignited the smartphone division; the first half of 2024 saw a massive 33.3% surge in revenue to 410.823 billion yuan; growth then cooled to 3.9% in H1 2025 before bouncing back to this year’s 9.5%.
On the profit side, the story gets more complicated. Back in H1 2023, Huawei benefited from a 36.367 billion yuan gain in fair value changes, largely thanks to the sale of its Honor and Xfusion businesses, which artificially inflated profits. The following year, net profit soared to 54.865 billion yuan. But since 2025, the bottom line has been sliding consistently.
So, what’s eating into the profits despite rising revenue? The biggest culprit is R&D spending. In H1 2026, Huawei poured a record 121.382 billion yuan into research and development — a whopping 25.2% increase year-over-year. That means over a quarter of all revenue is now going straight back into innovation.
Rising memory chip prices are another major headache, and it’s not just Huawei feeling the squeeze — every consumer electronics maker is grappling with it. Richard Yu, Chairman of Huawei’s Consumer Business Group, recently warned that with memory costs climbing, smartphones across the industry will likely face widespread price hikes, or manufacturers risk selling at a loss.
Cash flow has also taken a turn. In H1 2025, Huawei saw a net cash inflow of 31.183 billion yuan from operating activities. This year, that figure flipped to a net outflow of 39.885 billion yuan. Digging deeper, cash paid for goods and services jumped 35.3% to 425.226 billion yuan. As of the end of June, inventory stood at 277.494 billion yuan — a massive 82.451 billion yuan increase from the start of the year, up 42.3%.
Interestingly, the timing of Huawei’s inventory buildup aligns almost perfectly with the surge in storage chip prices. Wu Junjie, Vice President of Huawei’s Data Storage Product Line, said back in August that the company had anticipated this price-hike cycle, secured sufficient production capacity in advance, and put multi-layered supply chain contingency plans in place to smooth out the volatility from upstream price increases.
Huawei didn’t break down revenue by individual business segment for the half year, but looking at its 2025 annual report, the Intelligent Automotive Solutions unit is clearly the fastest-growing area, with revenue up 72.1% to 45.018 billion yuan. In the first half of this year, Harmony Intelligent Mobility (HIMA) delivered approximately 240,000 vehicles, up 18.6% year-over-year. As of August 16th, cumulative deliveries have surpassed 1.5 million units.
With telecom operators tightening their capital expenditure belts, Huawei’s bread-and-butter carrier and ICT infrastructure business is seeing only modest growth. That’s putting the spotlight squarely on the computing business to deliver the next wave of growth.
This year, Huawei made headlines by showcasing the Atlas 950 SuperPoD internationally for the first time, and brought a real 1,024-card cluster to the World Artificial Intelligence Conference. The system supports high-speed interconnectivity for up to 8,192 Ascend chips, with the core strategy being to boost overall system computing power through its proprietary Lingqu interconnect and super-node architecture.
The Atlas 950 SuperPoD is clearly taking aim at the AI infrastructure market currently dominated by Nvidia. Given the restrictions on accessing advanced chip manufacturing processes, Huawei’s individual chip performance still lags behind. So the strategy is to compensate for single-card limitations with larger-scale, high-speed interconnectivity. The Atlas 950 is expected to hit the market in Q4 this year, though order numbers haven’t been disclosed yet.
According to Huawei, its previous-generation Ascend 384 super-node has already been commercially deployed in over 750 installations across more than 20 industries, including internet, finance, and healthcare. Meanwhile, Reuters reported that ByteDance and Alibaba have completed testing of the Ascend 950PR and are planning to place orders. Huawei reportedly aims to ship around 750,000 units this year, with full-scale delivery ramping up in the second half. However, none of the companies involved have officially confirmed this.
The consumer business is also showing signs of recovery. IDC data shows that in Q2 2026, China’s smartphone market shipments fell 4.3% year-over-year, marking the fifth consecutive quarter of decline. With memory prices soaring, most Android makers have either raised prices or cut back on budget models. Huawei, on the other hand, saw its smartphone shipments grow 19.4% year-over-year, capturing a 22.6% market share to take the top spot domestically.
The HarmonyOS ecosystem is also approaching what Huawei considers a critical mass. As of August 20th, over 80 million devices are running HarmonyOS 6, with projections to cross the 100 million mark in Q4. There are now more than 100,000 native HarmonyOS apps, with over 400,000 available through the mobile store. Huawei’s Rotating Chairman Eric Xu stated that hitting 100 million users means developers finally have a stable user base to monetize, signaling that the HarmonyOS ecosystem has truly “found its footing” in China.
Looking at the big picture, Huawei is still betting big on intensive R&D to secure future technological breakthroughs. The real question is when those investments will translate into more stable, consistent profits — and that will ultimately determine how strong this recovery truly is.
