Huawei’s 2024 Performance - Trading Billions in Profit for a Shot at Technological Sovereignty

By
Reynold Cheung
9 min read

Huawei’s 2024 Performance: Trading Billions in Profit for a Shot at Technological Sovereignty

Is Huawei Sacrificing Today’s Profit to Buy Tomorrow’s Dominance?

In an era where short-term performance drives stock prices and executive bonuses, Huawei is taking a radically different route—one paved with steep R&D bills, razor-thin operating margins, and a laser focus on China. The company’s 2024 annual report revealed RMB 862.1 billion ($119B) in revenue—up 22.4% year-on-year—but also flagged a troubling slide in profitability. Behind the double-digit growth lies a bold strategic gamble: to trade immediate profits for long-term control over critical technologies in AI, cloud, and automotive.

Huawei's research and development campus (scmp.com)
Huawei's research and development campus (scmp.com)

This is more than a growth story—it’s a declaration of economic self-reliance in response to geopolitical pressure. Huawei is making a high-stakes move to build a full-stack ecosystem independent of Western technology. But how sustainable is this strategy? Can Huawei’s model thrive under global constraints, or will its ambition outpace its financial runway?


Strong Revenue Rebound, But Margins Take a Hit

Top-Line Surge Across Multiple Segments

Huawei’s 2024 financials tell a story of recovery and momentum:

  • Total revenue: RMB 862.1B (+22.4% YoY)
  • Net profit: RMB 62.6B, down sharply from 2023, despite higher revenues
  • Operating margin: Down to 9.2% (vs. 14.8% in 2023)

Huawei Revenue Breakdown by Business Segment (2024 vs 2023).

Business Segment2024 Revenue (Billion CNY)2023 Revenue (Billion CNY)
ICT Infrastructure369.9352.8
Consumer Business (CBG)339.0245.1
Cloud Computing38.535.5
Digital Power68.755.2
Intelligent Automotive Solution (IAS)26.44.6
Other19.611.0
Total862.1704.2

What drove this growth?

  • Consumer Business (Terminal): RMB 339B (+38.3%), powered by HarmonyOS and domestic smartphone launches.
  • Smart Automotive Solutions: Explosive +474.4% growth, reaching RMB 263.5B—first time this unit turned a profit.
  • ICT Infrastructure: RMB 369.9B (+4.9%), stable growth in legacy segments.
  • Cloud Computing & Digital Energy: RMB 385.2B (+8.5%) and RMB 686.8B (+24.4%) respectively, signaling gradual expansion beyond hardware.

These numbers reflect a diversified revenue base, but one heavily skewed toward the domestic Chinese market—71% of revenue is now homegrown. International expansion remains sluggish: EMEA (+2.1%), Americas (+2.7%), APAC (+5.5%).

Huawei Revenue Distribution by Geographic Region (2024).

RegionRevenue (CNY Million)Percentage of Total Revenue
China566,25565.7%
EMEA148,35517.2%
Asia-Pacific (ex-CN)44,2735.1%
Americas42,5444.9%
Other60,6457.0%
Total862,072100.0%

The Profit Paradox: Growing Bigger, Earning Less

Why Profits Don’t Match Growth

Despite higher revenues, Huawei’s bottom line declined. Here’s why:

  1. Revenue Mix Shift: New high-growth segments like Automotive and Cloud offer scale but not immediate margins. The mature ICT unit, once the margin engine, now makes up a smaller piece of the pie.
  2. COGS Pressure: Gross margins fell slightly to 44.4% (from 46.2%), likely due to new component sourcing costs and internalization of supply chains under sanctions.
  3. R&D Overdrive: Huawei spent RMB 179.7B on R&D—20.8% of its revenue. This included a jaw-dropping RMB 523B in Q4 alone.

Huawei R&D Expenditure as a Percentage of Revenue (Historical).

YearR&D Expenditure (CNY Billion)Total Revenue (CNY Billion)R&D as % of Revenue
2024179.7862.120.8%
2023164.7704.223.4%
2022161.5642.325.1%
2021142.7636.822.4%
2020141.9891.415.9%
  1. Loss of One-Time Gains: In 2023, Huawei booked RMB 62.7B in “Other Net Income”—from events like asset sales (e.g., Honor divestiture) and government subsidies. In 2024, this dropped to just RMB 8.3B, wiping out a major tailwind.

Table summarizing the key aspects, principles, and examples of technological sovereignty.

CategoryDescription
Key AspectsControl over technological infrastructure, ensuring data privacy, fostering innovation, and influencing global standards.
Control and AutonomyReducing reliance on foreign technologies and enabling independent decision-making in critical areas.
Data Privacy & SecurityProtecting citizens' data and ensuring cybersecurity by validating ICT components and systems.
Innovation & DevelopmentBuilding domestic capabilities for mastering and applying key technologies.
Global Standards ParticipationShaping international technology standards to align with national values and interests.
PrinciplesPolicy frameworks, collaboration among stakeholders, and capability-building initiatives.
Policy FrameworksEstablishing regulations to encourage domestic innovation while safeguarding security.
CollaborationFostering partnerships between academia, industry, and civil society for robust ecosystems.
Capability BuildingTraining programs and research initiatives to strengthen technical expertise.
ExamplesEU's Digital Markets Act (DMA) and Artificial Intelligence Act (AI Act); Germany's FITS2030 program focusing on innovation in AI and battery production.

This last point is crucial: Huawei didn’t just lose margin—it lost non-operational income that previously made its numbers shine. Without that cushion, the true pressure on profitability became clear.


Cash Flow, Debt, and Financial Health: A Mixed Bag

Huawei’s Operating Cash Flow remained robust at RMB 88.4B. That’s the good news. But it came alongside a significant drop in cash reserves, now down to RMB 372.2B. Why?

  • Debt Reduction: Borrowings fell by RMB ~43.5B, showing fiscal conservatism.
  • Heavy Reinvestment: Capex and working capital needs surged, funding AI, cloud, and smart vehicle initiatives.

Did you know that Huawei has seen significant growth in its operating cash flow, reportedly increasing by around 400% in recent years? This robust performance is attributed to the company's strategic expansion into overseas markets and its ability to navigate challenges like U.S. sanctions. Despite a 28% decline in net profit to 62.6 billion yuan in 2024, Huawei achieved a revenue increase of 22.4%, reaching 862.1 billion yuan. The company's substantial investment in research and development—20.8% of its total revenue—may have impacted its cash reserves, though specific figures for 2024 were not disclosed.

Huawei’s asset–liability ratio stayed stable around 57.8%, suggesting no immediate solvency concerns. But the drop in cash, combined with thin margins and high R&D intensity, reduces financial flexibility if macro or regulatory shocks hit.


Auto, AI, HarmonyOS: The New Pillars of Growth

Huawei’s transformation from a hardware-first company to an ecosystem player is now visible across three fronts:

1. Smart Automotive: A Calculated Leap

  • 474.4% growth in revenue.
  • First profitable year—signaling real traction.
  • Partnerships like AITO and Luxeed suggest Huawei is becoming the “brain” of the car, not just a supplier.

An AITO M9 SUV, showcasing Huawei's smart automotive solutions integrated into the vehicle. (carscoops.com)
An AITO M9 SUV, showcasing Huawei's smart automotive solutions integrated into the vehicle. (carscoops.com)

But beware: this growth is off a low base. Volatility is high. Regulatory, supply chain, or demand shifts could upend this fragile success.

2. HarmonyOS and Ecosystem Dominance

  • Over 1 billion active installations
  • 7.2 million developers
  • Developer-native app adoption over 80% in top 2,000 apps

HarmonyOS interface. (huaweicentral.com)
HarmonyOS interface. (huaweicentral.com)

Huawei’s “all-intelligence” strategy is less about devices and more about locking in users and developers across platforms—from smart homes to wearables and cloud.

3. AI & Enterprise: Kunpeng, Ascend, and the Cloud

  • Cloud computing is growing, but Huawei’s internal usage inflates top-line numbers.
  • The company isn’t yet a global cloud heavyweight—but it's laying groundwork with proprietary chip architectures and sovereign compute platforms.

Huawei Ascend AI chip, representing the company's investment in core AI hardware. (newtalk.tw)
Huawei Ascend AI chip, representing the company's investment in core AI hardware. (newtalk.tw)


What Most Reports Don’t Say: The Hidden Risk in the Strategy

While headlines highlight Huawei’s revenue rebound and R&D muscle, there are serious undercurrents:

1. Regional Overexposure

Huawei’s ~70% revenue reliance on China is not just a strength—it’s a vulnerability. The company is insulated from some global pressures but overly exposed to domestic economic or policy shifts. If the Chinese market slows or regulation tightens, Huawei could take a direct hit.

Table: Summary of the Impact of U.S. Sanctions on Huawei's Business and Its Responses

CategoryImpactHuawei's Response
Loss of Technology AccessRestricted access to U.S.-made chips, software, and semiconductor equipment.Invested in domestic semiconductor supply chain and R&D.
Revenue DeclineSignificant revenue losses in 2021 and 2022 due to tightened restrictions.Focused on diversifying revenue streams and entering new industries.
Smartphone MarketReduced global market share; challenges in producing high-end devices.Launched HarmonyOS and Mate 60 series with domestically produced chips.
DiversificationImpacted core business operations due to sanctions.Expanded into electric vehicles, autonomous driving, and cloud computing.
Revenue Recovery$118 billion revenue in 2024, marking a return to growth.Leveraged innovation and domestic partnerships to boost sales.
Geopolitical ImplicationsStrengthened China's push for technological self-reliance.Led efforts in domestic chip production and AI development.

2. Normalized “Other Income” Unmasks Margin Truth

The collapse of one-off “Other Net Income” items reveals Huawei’s real operational margin—and it's not pretty. The profit collapse in Q4, despite rising revenue, speaks volumes. Net profit stayed flat between Q3 and Q4, even though Q3 alone delivered over RMB 620B.

Why? R&D spending in Q4 alone reached RMB 523B—more than BYD’s entire 2024 R&D budget.

3. Technological Self-Reliance is Expensive

Huawei’s path to sovereignty—building chips, operating systems, and enterprise stacks in-house—is noble and necessary in its geopolitical context. But it's also cost-intensive, slow, and unforgiving. Short-term profitability will continue to suffer unless monetization of these platforms accelerates.


The Core Thesis: A War Chest for Future Control

Huawei is deliberately sacrificing short-term profits to gain long-term control over critical tech infrastructure. The numbers prove it. This is not a company chasing quarterly EPS. It’s laying bricks for a tech stack that can't be sanctioned away.

If Huawei succeeds, it could redefine tech competition outside the Western ecosystem. If it fails, the cost of this bet—measured in billions—will leave a permanent scar on its financials.


Key Questions for Investors and Analysts to Watch

  1. Can Huawei monetize HarmonyOS and its AI stack fast enough to support its R&D intensity?
  2. What’s the sustainability of the automotive unit’s profitability in a volatile, capital-heavy market?
  3. How exposed is Huawei to a domestic slowdown or policy change, given its China-heavy revenue?
  4. Is the normalized profit margin (~9%) the “new normal” for Huawei, or can it recover to previous levels?
  5. How much longer can Huawei maintain this level of R&D spending without tapping into external capital—especially as a non-listed firm?

Huawei Is Building Its Own Operating System for the Future—Literally and Figuratively

Huawei’s 2024 annual report isn’t just a financial statement. It’s a manifesto. The company is rewriting its business model—pivoting from cash-generating telco hardware to a fully integrated, AI-native tech ecosystem. It’s doing so with limited global market access, under extreme regulatory pressure, and without the benefit of public market capital.

That’s bold.

But bold doesn’t guarantee sustainable. Investors, partners, and policymakers must recognize the tradeoff at play here: Huawei is buying future control at the cost of present comfort.

The question is no longer whether Huawei is back—but whether its new model can hold.

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