Huawei reports Q2 revenue fell 38% YoY to ~$26B, greater than the 16.5% drop in Q1 and 11.2% drop in Q4, as US sanctions continue to hurt sales
Dan Strumpf / Wall Street Journal :
Context & Ripple Effects
The 38% Q2 drop is not a blip but an acceleration: Huawei had already posted an 11.2% decline in Q4 and 16.5% in Q1, and the same pace continued into the next quarter with another 38% fall — its fourth straight quarter of shrinking sales. By year-end this compounded into the company's first-ever annual revenue decline.
What makes this quarter notable in hindsight is how Huawei absorbed it: rather than cutting losses, it converted the crisis into a margin story, with net income surging even as revenue collapsed, and began rebuilding its supply chain toward domestic components.
First-order effects
- Huawei's consumer and carrier businesses lose roughly two-fifths of their quarterly revenue run-rate, forcing the company to fund operations from cash reserves and its profitable enterprise/software segments while handset sales stay sanctioned.
Second-order effects
- Competitors absorb the vacated demand: Apple and other Android vendors gain share in China's premium handset market, and Huawei's component suppliers must find new customers or shrink with the phone business.
Third-order effects
- The sanctions push Huawei toward supply-chain indigenization — teardowns later found the majority of components in flagship phones like the Mate 70 Pro made in China — and toward homegrown software stacks such as its CANN platform as a CUDA alternative, seeding a partially decoupled Chinese tech stack.
- If the pattern holds, Washington's chip curbs convert a globally integrated Huawei into a domestically self-sufficient one, trading scale abroad for control at home — a structural template other sanctioned Chinese firms may follow.
The trend: US export controls are restructuring Huawei from a global handset-and-networks giant into a domestically focused firm whose recovery runs through Chinese-made chips, components, and software ecosystems.