(JW Insights) Nov 1 -- Although Huawei's smartphone and car business success this year has been hailed as a turning point that left the impact of the US sanctions behind, Huawei's Q1-Q3 earnings numbers don't quite add up, reported Nikkei Asia on October 30.

Despite cloud service, auto business, and Mate 60 series of smartphones gaining business success in China, Huawei's revenues in the first 9 months of 2023 increased only by 2.4%, to RMB456.6 billion ($62.4 billion) while earnings grew 177.8%. Its net profit margin was 16.0%, up from 15% reported for the first half of the year.

Huawei did not disclose the reason why its profit grew out of proportion from the modest revenue growth. The telecommunications giant told CNBC it recorded partial gains from the sale of certain businesses but did not specify which ones. There were no related merger and acquisition records to be found of Huawei's transactions, either.

The profit growth happened mostly in Q2. In the half-year report released in late August, the company said that it generated revenue of RMB308.29 billion ($42.33 billion), up 3.2% year-on-year. Its net profit reached RMB46.523 billion, surging by 218% year-on-year. However, Huawei kept mum about this outstanding performance, which is quite odd because normally companies would be proud to brag about it.

Counterpoint Research estimated that more than 1.6 million Mate 60 series devices were sold during the first six weeks of sales after its launch in late August. And Mate 60 pro, accounted for 75% of the sales.

Thanks to the Mate 60 promotion, with media reports focusing on the chip breakthroughs, Huawei's smartphone sales increased by 37% year-on-year in Q3, while the overall smartphone sales in the China market declined by 3%. Apple's sales in that quarter also declined by 10% despite the fact that it launched its new iPhone 15 products.

Huawei also started collecting licensing fees from 5G and IoT patented technologies while its cloud service business is said to have expanded to the Middle East as well. It is gaining significant growth in the car business by acquiring the car startup Seres Group in 2023 by launching AITO brand vehicles.

"The company's performance is in line with the forecast," said Ken Hu, Huawei's Rotating Chairman. "Moving forward, we will continue to increase our investment in R&D to make the most of our business portfolio and take the competitiveness of our products and services to new heights."

However, Huawei's revenue performance in the first 9 months did not match its earnings. Given the fact that Huawei's Mate 60 Pro smartphones were sold at premium price levels, it should have contributed to at least double-digit sales growth, according to the Nikkei Asia report.

(Gao J)