Company Overview

Huawei Investment & Holding Co., Ltd. (HUAWEI) is a Chinese multinational company known globally for providing ICT infrastructure and smart devices. It is a private, employee-owned company that was established in 1987. HUAWEI is an information technology company that provides a variety of products such as communication networks, digital power, intelligent automotive solutions, cloud computing, smartphones, wearables, PCs, tablets, audio products, and routers. The company also designs and distributes semiconductor products through its wholly-owned subsidiary, HiSilicon Technologies Co. Limited. It has operational presence in over 170 countries and regions.

In a bid to produce intelligent devices and products, HUAWEI continues to spend on Research and Development (R & D). The company is positioning itself as a major player in new technologies, such as artificial intelligence, through technological innovations. The company’s total spending on R & D over the last ten years was CNY1.4 trillion. This means that it has been committing about 19% of its revenue to R & D activities annually in the past ten years.

The board of directors comprises 17 members. Mr. Liang Hua, the board chairman, is supported by three deputy chairs, namely Mr. Xu Zhijun, Ms. Meng Wanzhou, and Mr. Wang Tao.

Investment Thesis

HUAWEI is a major provider of network infrastructure to telecommunication companies globally. It is at the forefront of the 5G revolution, providing the equipment and solutions that power the 5G network. The users of its 5G-Advanced (5G-A) are more than 60 million. Furthermore, HUAWEI has become a global technology company with over 160,00 active patents globally. The increase in demand for AI solutions has propelled the company to scale up its technological capacity. The company is being positioned as a major player in providing AI applications through innovative technology in partnership with third parties. R & D spending peaked at CNY192.3 billion in the 2025 fiscal year. The R & D to turnover ratio spending in 2025 surpassed the 10-year average of 18.8% by 3 percentage points.

The importance of semiconductors to its business cannot be overemphasised. We believe that its investment in semiconductor manufacturing is vital to enhancing supply chain security and preventing disruptions. Also, its LogicFolding technology would enhance the performance of its chips, and by extension, its products. The products produced with such chips are expected to offer performance similar to that of the most advanced chips.

HUAWEI has five major business segments, namely ICT Infrastructure, consumer, cloud computing, digital power and intelligent automotive solutions. ICT infrastructure, which is the major source of revenue, only grew revenue by 1.9% over the past three years, while the consumer segment, the second highest revenue contributor, grew revenue at a 3-year Compound Annual Growth Rate (CAGR) of 17.1%. The intelligent automotive solution segment witnessed a massive revenue increase from CNY4.7 billion in 2023 to CNY45 billion in 2025, which was a 178.8% rise on a 3-year CAGR basis. In addition, it has contributed 5.1% of the total revenue in 2025 compared with 3% in the previous year. The digital power segment is doing well, facilitating energy cost savings; it made CNY77.3 billion in 2025, amounting to a compound annual increase of 15% over the past three years. However, cloud computing has lost 10.8% in revenue over the past three years.

In spite of the huge and constant spending on R & D, HUAWEI remains a profitable company with manageable debt. The company generates a lot of cash and operating profit to meet its debt obligations. The gross profit margin averaged out to 42.2%, while the operating profit margin hovers around 11%.

Valuation

We have valued HUAWEI at a value ranging from CNY1 trillion to CNY1.9 trillion.

Financial Overview

In 2025, HUAWEI’s revenue gained only 2.2% to CNY 880.9 billion compared to a year-on-year growth of 22.4% in 2024. This was due to a slight increase in the revenue of the two main contributors to revenue, the ICT infrastructure and consumer business segments. ICT infrastructure produced a CNY375 billion revenue in 2025, translating into a 2.6% year-on-year increase. The consumer segment contributed a revenue of CNY344.5 billion in 2025 (2024: CNY339 billion). Altogether, both segments have been responsible for about 84% of the total revenue in the last three years. China remains the biggest market for the company’s products even though the revenue was more or less flat at CNY616.2 billion in 2025. In fact, China’s contribution to total revenue has risen to 70% compared to a 10-year average of 61%.

A 1.4% drop in cost of sales resulted in a 6.7% year-on-year rise in gross profit to CNY408.3 billion in 2025. The gross profit margin, expectedly, increased from 44.4% to 46.4%. The operating profit jumped by 22.2% from CNY79.4 billion in 2024 to CNY96.9 billion in 2025. R&D expenses rose from CNY179.7 billion or 20.8% of revenue in 2024 to CNY192.3 billion or 21.8% in 2025. The operating profit margin swelled by 1.8 percentage points to 11% at the end of the 2025 fiscal year. Profit Before Tax (PBT) and Profit After Tax (PAT) were CNY81.4 billion and CNY68 billion respectively in 2025, up by 14.9% and 8.7% year-on-year respectively.

Even though total debt has risen at a compound annual rate of 6.5% over the past three years, it is manageable. The total debt of CNY251 billion was 18.8% of total assets and 41.8% of shareholders’ fund at the 2025 year-end. Both ratios have been falling in the past three years. Also, the company makes adequate operating profit and cash flow to settle interest expense. In 2025, operating profit covered interest expense 4.8 times (2024: 4.8 times) while operating cash flow covered it 6.4 times (2024: 5.3 times). HUAWEI is cash-rich with cash and cash equivalents of CNY150.4 billion, which formed 11.3% of total assets. Net operating cash flow leapt by 44.1% to CNY127.4 billion in 2025.

Business Risk

Technological changes in artificial intelligence are fast-paced and unpredictable. HUAWEI has to continuously spend on R & D to stay abreast of advances in technology. The R&D spending would thin out the profit margins. Competitive pressure is building up and HUAWEI should be proactive in order not to lose ground in some of its markets, especially outside China.