HTC reported improved unaudited earnings for the second quarter of 2014, but revenue once again declined.

The Taiwanese smartphone maker, which has just completed its first full quarter since launching its new flagship One M8 handset, reported revenue of 65.06 billion Taiwanese dollars (€1.6 billion), down from NT$70.70 billion in Q2 2013.

"This was well adrift of the company's own forecast of revenues at NT$65 billion-NT$70 billion," noted Richard Windsor, founder of Radio Free Mobile, in a research note on Friday.

HTC's operating profit increased to NT$2.43 billion (€59.8 million) from NT$1.05 billion a year earlier, while net profit rose to NT$2.26 billion from NT$1.52 billion in Q2 2013 and from a NT$1.88 billion net loss in the first quarter of 2014.

However, Windsor said the improved earnings are a result of cuts to marketing expenses.

"This is not trimming waste and becoming more efficient, it represents a substantial cut into the muscle of the business," he said.

"From now on, HTC will have less resources with which to market its products and consequently it will ship fewer devices," Windsor predicted. "This is extremely worrying as it paints the picture of a company in a vicious circle of decline."