SHENZHEN, China — It's a mixed bag when it comes to Chinese tech giant Huawei, where profits are largely flat and sales continue to rise.
Net profit edged up 0.4 percent to 37.1 billion yuan ($5.3 billion) in 2016, while overall revenue jumped 32 percent to 521.6 billion yuan ($75.1 billion), according to the company. Profit growth was much weaker than analysts expected, though sales came in line with the company's own guidance released earlier this year.
Huawei holds firm as the world's third-largest smartphone maker, but the company is starting to feel a pinch. Both profit and sales are no longer rising as quickly as before, and analysts say increased spending on R&D and marketing are beginning to thin out margins. Indeed, net profit margin sat at 7.1 percent for 2016 — the lowest rate in at least a decade.
But executives continue to defend Huawei's position. "Margins ranging around 7 percent is appropriate," said acting CEO Eric Xu.
The firm's enterprise unit, involved in developing smart solutions for areas like urban planning and transport, is the smallest in terms of sales, but saw the fastest growth at 47 percent.
Moving forward, the company will also need to consider broader economic conditions, he said.
The Shenzhen-based company remains extremely ambitious, and has continued to spend massively on R&D, shelling out 76.4 billion yuan ($11 billion) to further its business.