Chinese tech giant Huawei saw net profit drop 36 percent in the first six months of the year, the company said on Monday, attributing the slump to AI-related research and rising costs.

Huawei's net profit from January to June was 23.8 billion yuan ($3.54 billion) -- down from the 37.2 billion yuan it saw during the same period in 2025, according to a company report.

Revenue rose 9.5 percent on-year to reach 467.8 billion yuan.

A quarter of that revenue was put towards research and development as the technology giant invests in building computing products intended for AI use.

Those research and development expenses reached 121 billion yuan in the first half of 2026, up from 97 billion yuan during the same period a year earlier.

"Throughout 2026, we have maintained strategic focus and we continue to hone our competitive edge," a company spokesperson said.

"At the same time, we continue to face a number of challenges, including external uncertainty and the rising costs of raw materials."

The spokesperson added that declining net profit was in part due to increased "investments in future-oriented basic research, as well as innovation in domains like AI".

Cutting-edge chips that can train and power artificial intelligence systems are a crucial and highly sensitive element of the technology rivalry between the United States and China.

In May, Huawei said it had developed a new way of making semiconductors that could get around its lack of access to the most advanced chipmaking equipment due to US sanctions against the firm since 2019.