Huawei's H1 2025 Net Profit Plunges 32% as R&D Spending Reaches 22.7% of Revenue

Chinese technology giant Huawei Technologies Co. reported its financial results for the first half of 2025, revealing a significant 32% year-on-year drop in net profit despite a modest revenue increase. The company's performance was influenced by surging demand for AI compute solutions and a notable rebound in smartphone sales, alongside substantial investments in research and development. "Huawei reports H1 2025 revenue up 3.9% YoY to ~$58.5B, driven by soaring AI compute demand and a rebound in phone sales, and net profit down 32% YoY to ~$5.2B," as stated by Techmeme. This financial snapshot reflects Huawei's ongoing strategic adjustments amidst global technological shifts.

For the first six months of 2025, Huawei recorded an operating revenue of 427.039 billion yuan (approximately $59.8 billion), marking a 3.9% increase from the previous year. However, net profit fell to 37.195 billion yuan (around $5.2 billion). This decline was primarily attributed to a substantial increase in research and development (R&D) expenditure, which surged by 9.04% year-on-year to 96.95 billion yuan, accounting for 22.7% of the total revenue. The company prioritizes technology and supply-chain independence over immediate profitability.

A significant driver for Huawei's revenue growth was the "soaring AI compute demand." The company's Ascend AI chips gained considerable momentum, particularly as U.S. export restrictions limited Chinese access to advanced chips from companies like Nvidia. This geopolitical context has fostered a domestic market favoring Huawei's technology, with Chinese AI developers increasingly adopting its solutions. Huawei has also restructured its cloud business to further prioritize AI and computing capabilities.

The rebound in phone sales also contributed to the revenue uptick. Huawei became China’s top smartphone vendor in the second quarter of 2025, shipping 12.2 million units and capturing an 18% market share. This marks its first lead in over four years in its home market. The majority of these smartphone shipments, approximately 95%, were destined for the China market, highlighting the company's strong domestic focus.

Huawei's substantial R&D investment underscores its long-term strategy of achieving technological self-reliance, particularly in critical areas like semiconductors. The company continues to expand its smart driving technology, reporting significant pre-orders for its Maextro S800 sedan. These strategic outlays aim to reduce dependence on foreign suppliers and strengthen its internal capabilities in the face of ongoing external challenges.