Huawei is ramping up spending on R&D — The Huawei logo at the World Artificial Intelligence Conference in Shanghai in July 2026. Go Nakamura/Reuters

China’s Huawei Technologies reported a 36% plunge in first-half net profit on Monday as soaring input costs and heavier spending on research and development outweighed revenue growth.

The Shenzhen-based tech and telecoms giant said net profit for January to June fell to C¥23.8-billion (R57-billion), a steeper fall than the 32% drop recorded in the same period a year earlier. Revenue rose 9.6% to C¥467.8-billion as the company continued to recover from US sanctions.

The results underscore the cost of Huawei’s push to reduce its reliance on foreign technology and to expand its AI computing and chip capabilities after years of US export restrictions. The company claimed a chip design breakthrough in May that it said would let it produce cutting-edge semiconductors without Western lithography equipment. Rising memory chip prices have also weighed on profitability at its consumer business division, which includes smartphones.

Huawei said R&D spending rose 25.2% to C¥121.4-billion, equivalent to 25.9% of revenue, as it stepped up investment in AI, communications technology, smart devices and intelligent automotive solutions. That is well above the 21.8% of revenue it devoted to R&D across the 2025 financial year.

The cost of making its products rose 12.4%, faster than revenue growth, while administrative costs also increased sharply.

Huawei said its first-half results were in line with its forecasts, but that its full-year outlook remained under review because of external uncertainty and higher input costs.

Spending more

Huawei, whose business spans smartphones, AI chips and telecoms equipment, did not provide a breakdown of revenue by business segment. It said all its businesses recorded year-on-year revenue growth in the first half.

The company, which is privately held and discloses its financial results voluntarily, has made a strong revenue recovery since US sanctions and export controls restricted its access to advanced chips and Google’s Android operating system, contributing to a 29% fall in annual revenue in 2021.

Huawei, one of the Chinese technology groups most heavily affected by US curbs, has since poured investment into developing domestic alternatives in chips, software and AI computing infrastructure. Its 2025 revenue rose 2.2% to C¥880.9-billion, its second-highest annual total after a record C¥891.4-billion in 2020.

This year, Huawei has promoted AI-focused telecoms products, new computing hardware and smart-driving technology, while launching new smartphones, tablets and wearable devices in China and abroad.

Its day-to-day operations consumed C¥39.9-billion in cash in the first half, against C¥31.2-billion generated a year earlier — a swing of about C¥71-billion. Spending on goods and services rose much faster than cash received from sales, while inventories rose 42% from the end of 2025.