Huawei Technologies Co., one of the world’s leading businesses in networking and electronics, has reported a considerable decline in profit, losing 300 million yuan in the last quarter. This is the first quarterly loss within a year. Due to their continued investment in R&D for EVs, chipmaking, and other areas, the company continues to experience slow growth, hindering their overall expansion.
Huawei’s Financial Transition: Shifting From Profits to Losses
Huawei’s revenue for December is estimated to reach approximately 276 billion yuan ($38.1 billion), which is a 9.5% increase. While this revenue growth follows a period of double-digit growth fueled by strong demand for Mate devices, it is still insufficient to offset the clear revenue decline and serious financial headaches the company is facing. Furthermore, the revenue cycle they currently appear to be on does not seem sustainable.
On a year-to-year basis, however, there is still reporting of loss. The company has reported an increase in revenue, boosting it further by 13.9 billion yuan alongside asset sales such as Honor Device Co. and parts of their server arms.
The R&D Spending: A Response to Restrictions
The most noticeable change in Huawei’s finances stems from its spending on R&D. With a number of US sanctions cutting off important markets and tech for Huawei, the company has had no option but to create its own substitutes.
In 2024, the company spent 179.7 billion yuan on R&D activities, an increase of 9.1% from the previous year. This investment alone constitutes approximately a fifth of the company’s revenue, showcasing how far they are willing to go to achieve technological independence.
EV Software: At Least Something to Smile About
Huawei’s investment into smart driving features for car manufacturers is finally yielding a return, despite the overarching losses. The EV software business unit registered a profit for the first time last year. This achievement correlates directly with the increasingly rapid uptake of electric vehicles in China, which is a market Huawei is slowly penetrating. Revenues in this area increased more than five times, suggesting strong potential for growth.
Customer Business: Handsets Driving the Growth
Noteworthy growth was reported in the consumer business group that includes handsets, wearables, and laptops. The segment grew by 38% in 2024, demonstrating the strong demand for Huawei’s consumer electronics.
Particularly, in the previous quarter, Huawei devices saw remarkable growth (over 20%) within the Chinese smartphone market. This growth happened as Apple Inc. was struggling with losing share, which suggests that Huawei competes strongly in its domestic market.
Cloud Computing; AI-Based Demand
Additionally, Huawei’s cloud computing segment expanded by 8.5% in 2024. This growth is primarily due to the surge in the need for AI-enabled computing resources throughout China, especially after the creation of the DeepSeek AI model.
Huawei has experienced the benefits of US sanctions that limit Chinese access to advanced Nvidia Corp. GPUs. According to Bloomberg, some enterprises, such as the Ant Group Co. backed by Jack Ma, turned to domestic semiconductors, including those produced by Huawei, to train their AI models.
Telecom Business: Global Pressure
The core telecom business, Huawei’s second oldest division and the root of its international expansion, saw slower growth with an increase of 5% last year. This business segment is under more strain due to increased US pressure on European carriers to stop dealing with Huawei. This is part of the US strategy aimed at tightening security around these operators.
