Huawei Technologies increased first-half revenue in 2026 while profit fell sharply, highlighting the growing cost of its effort to build a self-sufficient technology stack spanning AI chips, smartphones, operating systems and computing infrastructure.
Huawei Investment & Holding, the group's parent company, reported revenue of CNY467.82 billion (approx. US$69.55 billion) for the six months ended June, up 9.55% from CNY427.04 billion a year earlier. Net profit fell to CNY23.43 billion from CNY37.05 billion, according to company disclosures filed through Cninfo and Huawei.
The divergence largely reflects heavier investment. Research and development spending reached a record CNY121.38 billion, up more than 25% year-over-year from CNY96.95 billion. R&D absorbed 25.9% of revenue, compared with about 22.7% a year earlier.
Huawei has said it intends to keep investing across connectivity, computing, cloud services, consumer devices, intelligent driving and artificial intelligence (AI), while embedding AI and security more deeply across its products and building out the Ascend, Kunpeng and HarmonyOS ecosystems.
The strategy is increasingly visible in the financial statements. Revenue continues to recover, but more of every yuan Huawei earns is being redirected towards technologies it can control.
Self-reliance carries a rising price
Huawei's profit decline reflects both heavier R&D spending and rising component costs. Operating cash flow swung to negative CNY39.9 billion from positive CNY31.2 billion a year earlier, according to the South China Morning Post, underscoring the near-term cost of its technology self-reliance strategy.
US restrictions have made that trade-off more consequential. Huawei is rebuilding its smartphone business while developing domestic AI processors and expanding software platforms designed to reduce dependence on foreign technology.
The consumer business has nevertheless regained momentum. Huawei led China's smartphone market with a 22.6% share in the second quarter of 2026, while shipments rose 19.4% year-over-year, according to IDC. The broader Chinese market contracted 4.3%.
Huawei also benefited from keeping handset prices relatively stable while several Android rivals raised prices in response to higher memory and component costs. That advantage may prove temporary. Richard Yu, chairman of Huawei's Consumer Business Group, has warned that surging memory prices could eventually force vendors to raise prices or accept losses.
HarmonyOS is strengthening another layer of Huawei's domestic technology stack. Huawei rotating chairman Eric Xu said on August 28 that native HarmonyOS applications had surpassed 100,000, while more than 400,000 apps were available on HarmonyOS phones.
Huawei began migrating its full "1+8" device portfolio to OpenHarmony-based HarmonyOS in 2025. Devices running HarmonyOS 6 exceeded 80 million as of August 20, 2026, with the company expecting more than 100 million in the fourth quarter.
Ascend expands the self-reliance equation
Huawei's Ascend processors have become one of China's most important domestic alternatives to Nvidia accelerators restricted by US trade controls. AI developers including DeepSeek, Z.ai and iFlyTek have explored Ascend hardware for inference and training, extending its role beyond Huawei's own systems.
That shift is gaining momentum. TrendForce said Chinese cloud providers are reducing reliance on Nvidia hardware and adopting domestic accelerators, with Huawei among the main beneficiaries. A survey cited by TrendForce found domestic chips were expected to account for 46% of Chinese AI accelerator budgets over the following 12 months, up from 30%.
Huawei is also scaling at the system level. Its AI infrastructure strategy combines Ascend processors into large clusters and SuperNode architectures, partly offsetting limits on access to the most advanced semiconductor manufacturing technology.
That helps explain Huawei's unusually high R&D intensity. The company is funding multiple layers of the stack at once, including chip architectures, AI accelerators, computing systems, operating systems, smartphones and software ecosystems.
The cost is visible in the financials. First-half revenue rose nearly 10%, while net profit fell by more than one-third and R&D absorbed roughly one-quarter of sales. Reuters also attributed the decline to higher input costs and a 25.2% increase in R&D spending.
The payoff is becoming clearer across smartphones, HarmonyOS and Ascend, but so is the price of sustaining that momentum. Huawei's next challenge is no longer simply replacing individual foreign technologies, but proving that its increasingly integrated domestic ecosystem can generate returns commensurate with the capital required to build it.
Article edited by Jack Wu
