Huawei H1 profit drops 36% on higher costs

Generic smartphone and telecom equipment display illustrating profit squeeze and higher costs at major electronics maker

Key Points

01Huawei H1 2026 net profit fell 36% to 23.81 billion yuan
02Revenue still grew 9.6% in H1 to 467.82 billion yuan
03R&D spending surged 25% to 121.38 billion yuan, 25.9% of revenue
04Rising memory chip and input costs pressured Huawei margins

Huawei posts weaker H1 profit despite revenue growth

Huawei reported a sharp decline in first-half 2026 profitability even as its top line continued to expand. Net profit for the January–June period fell 36% year on year to 23.81 billion yuan. Over the same period, revenue increased 9.6% to 467.82 billion yuan, indicating that higher sales were not enough to offset rising costs and heavier investment.

The company said that all of its businesses achieved year-on-year revenue growth during the first half. However, it did not provide a segment-by-segment revenue breakdown, limiting visibility into the relative contributions of individual divisions such as carrier, enterprise and consumer.

Rising costs and memory prices weigh on margins

Huawei highlighted cost pressures as a major factor behind the earnings decline. Rising memory chip prices have increased input costs and weighed on profitability, particularly in the consumer business that includes smartphones. Broader input-cost inflation also contributed to the squeeze on margins across the company.

Management indicated that these cost pressures were significant enough to overshadow the benefit of revenue growth. The impact was especially visible in activities exposed to component price volatility, underscoring how sensitive profitability is to the memory supply environment and other key inputs.

R&D spending rises to over a quarter of revenue

Alongside higher component costs, Huawei markedly stepped up investment in research and development in the first half. R&D spending rose 25% year on year to 121.38 billion yuan. This level of outlay represented 25.9% of the company’s revenue for the period.

The company said the increase in R&D reflects expanded investment in areas such as AI computing, chips, communications technology, smart devices and intelligent automotive solutions. These initiatives contributed to the near-term drag on profitability but are positioned as central to Huawei’s long-term technology roadmap.

Outlook in line with plan but under review

Huawei stated that its first-half results were in line with internal forecasts, despite the lower profit. Management nonetheless signaled caution on the rest of the year, noting that the full-year outlook remains under review.

The review reflects ongoing external uncertainty and persistently higher input costs, including memory chips. While all business units delivered revenue growth in the first half, the combination of elevated spending and cost pressures has reduced earnings visibility for the remainder of 2026.

Key Takeaways

01Huawei is growing revenue across all business lines, but profitability has deteriorated as costs and investment rise more quickly than sales.
02Elevated R&D spending, now more than a quarter of revenue, shows a strategic focus on technology development at the expense of near-term margins.
03Higher memory chip and input costs have become a key determinant of Huawei’s earnings trajectory, increasing sensitivity to component price trends.

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