REG-Nokia Corporation Report for Q2 and Half Year 2025
24/07/2025 06:00
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Nokia Corporation
Half year financial report
24 July 2025 at 08:00 EEST
Nokia Corporation Report for Q2 and Half Year 2025
Solid performance offset by currency impact
* Q2 comparable net sales declined 1% y-o-y on a constant currency and
portfolio basis (2% reported) due to a 13% decline in Mobile Networks which
had benefited from accelerated revenue recognition in the prior year. Network
Infrastructure grew 8% while Cloud and Network Services grew 14%. Nokia
Technologies grew 3%.
* Comparable gross margin in Q2 was flat y-o-y at 44.7% (reported increased
10bps to 43.4%). Gross margins were broadly stable in Network Infrastructure
and Mobile Networks and improved in Cloud and Network Services.
* Q2 comparable operating margin decreased 290bps y-o-y to 6.6% (reported up
790bps to 1.8%), driven by a negative EUR 50 million venture fund impact which
includes a EUR 60 million negative currency revaluation. Operating profit was
also impacted by tariffs.
* Q2 comparable diluted EPS for the period of EUR 0.04; reported diluted EPS
for the period of EUR 0.02.
* Q2 free cash flow of EUR 0.1 billion, net cash balance of EUR 2.9 billion.
* As announced on 22 July 2025, full year 2025 comparable operating profit
outlook revised to between EUR 1.6 and 2.1 billion (was between EUR 1.9 and
2.4 billion) with free cash flow conversion from comparable operating profit
unchanged at between 50% and 80%.
This is a summary of the Nokia Corporation Report for Q2 and Half Year 2025
published today. Nokia only publishes a summary of its financial reports in
stock exchange releases. The summary focuses on Nokia Group's financial
information as well as on Nokia's outlook. The detailed, segment-level
discussion will be available in the complete financial report hosted at
www.nokia.com/financials. Investors should not solely rely on summaries of
Nokia's financial reports and should also review the complete reports with
tables.
JUSTIN HOTARD, PRESIDENT AND CEO, ON Q2 2025 RESULTS
In the following quote, net sales comments and growth rates are referring to
comparable net sales and are on a constant currency and portfolio basis.
During my first quarter as CEO, I’ve spent significant time engaging with
our stakeholders. One message has stood out: Connectivity is becoming a
critical differentiator in the AI supercycle, not only for communication
service providers and hyperscalers, but also for new areas like defense and
national security. With our portfolio in mobile and fiber access, data center,
and transport networks, Nokia is uniquely positioned to be a leader in this
market transition. Customer conversations have increased my optimism about our
opportunity: There’s been a strong validation of what sets us apart – our
technology, partnering culture, and the exceptional talent of our people.
At the same time, our customers expect us to engage with them as one
integrated company as they partner with us across our portfolio. Further it is
clear we need to continue to evolve how we work so we move faster, improve
productivity and focus on what brings value to our customers. As a result,
we’re unifying our corporate functions to simplify how we work, build a more
cohesive culture and begin to unlock operating leverage.
We have a great opportunity to drive a unified vision for the future of
networks, and I am looking forward to discussing our strategy and full value
creation story at our Capital Markets Day in New York on November 19.
Turning to our second quarter results, the significant currency fluctuations,
particularly the weaker USD, had a meaningful impact on both our net sales and
operating profit. On a constant currency and portfolio basis our overall net
sales declined 1%, however excluding a settlement benefit in the prior year,
sales would have grown 3%. Network Infrastructure grew 8% in Q2. Mobile
Networks’ net sales declined 13%, primarily related to the aforementioned
prior year settlement benefit and also due to project timing in India. Cloud
and Network Services grew 14% with strong momentum in 5G Core. Nokia
Technologies grew 3% and secured several new agreements in the quarter.
Q2 comparable gross margin was stable year-on-year at 44.7%. Operating profit
in the quarter was impacted by a non-cash negative impact to venture funds of
EUR 50 million which included a EUR 60 million negative currency revaluation
and the effect of tariffs we highlighted in Q1, contributing to our comparable
operating margin declining 290 bps to 6.6%. Despite the cash impact of 2024
incentives during Q2, we had a strong cash performance and have generated free
cash flow of over EUR 800 million in the first half.
Q2 saw continued strong order momentum in Optical Networks with a book-to-bill
well above 1, driven by new hyperscaler orders. We had several key wins in the
quarter, including a deal with a large US communication service provider along
with receiving our first award for 800G pluggables from a US hyperscaler.
Across the group, Nokia generated 5% of sales in Q2 from hyperscalers. While
we still have a lot of work ahead of us, I’m pleased with the progress we
are making integrating Infinera, including executing on synergies.
Additionally, the commercial momentum we are seeing reinforces the long-term
value creation opportunity of the acquisition.
Looking ahead we expect a stronger second half performance, particularly in Q4
consistent with normal seasonality. For the full year, the underlying business
is trending largely as expected. We continue to expect strong growth in
Network Infrastructure, growth in Cloud and Network Services and largely
stable net sales in Mobile Networks on a constant currency and portfolio
basis. In Nokia Technologies we expect approximately EUR 1.1 billion in
operating profit.
However, we are facing two headwinds to our full year operating profit outlook
which are outside of our control, currency due to the weaker US Dollar, and
tariffs. Currency has an approximately EUR 230 million negative impact
relative to our expectations at the start of the year with EUR 90 million from
non-cash venture fund currency revaluations. The current tariff levels are
forecasted to impact operating profit by EUR 50 million to EUR 80 million
inclusive of those in Q2. Considering these two headwinds, we decided it was
prudent at this point to lower our comparable operating profit outlook to a
range of EUR 1.6 billion to EUR 2.1 billion from the prior range of EUR 1.9
billion to EUR 2.4 billion.
Justin Hotard
President and CEO
FINANCIAL RESULTS
EUR million (except for EPS in EUR) Q2'25 Q2'24 YoY change Q1-Q2'25 Q1-Q2'24 YoY change
Reported results
Net sales 4 546 4 466 2% 8 936 8 910 0%
Gross margin % 43.4% 43.3% 10bps 42.5% 46.5% (400)bps
Research and development expenses (1 161) (1 134) 2% (2 306) (2 259) 2%
Selling, general and administrative expenses (744) (715) 4% (1 472) (1 408) 5%
Operating profit 81 432 (81)% 32 836 (96)%
Operating margin % 1.8% 9.7% (790)bps 0.4% 9.4% (900)bps
Profit from continuing operations 83 370 (78)% 24 821 (97)%
Profit/(loss) from discontinued operations 13 (512) 13 (525)
Profit/(loss) for the period 96 (142) 36 296 (88)%
EPS for the period, diluted 0.02 (0.03) 0.01 0.05 (80)%
Net cash and interest-bearing financial investments 2 879 5 475 (47)% 2 879 5 475 (47)%
Comparable results
Net sales 4 551 4 466 2% 8 941 8 910 0%
Constant currency and portfolio YoY change ((1)) (1%) (2%)
Gross margin % 44.7% 44.7% 0bps 43.5% 47.6% (410)bps
Research and development expenses (1 126) (1 064) 6% (2 241) (2 140) 5%
Selling, general and administrative expenses (612) (610) 0% (1 199) (1 194) 0%
Operating profit 301 423 (29)% 457 1 023 (55)%
Operating margin % 6.6% 9.5% (290)bps 5.1% 11.5% (640)bps
Profit for the period 236 328 (28)% 390 840 (54)%
EPS for the period, diluted 0.04 0.06 (33)% 0.07 0.15 (53)%
Business group results Network Infrastructure Mobile Networks Cloud and Network Services Nokia Technologies Group Common and Other
EUR million Q2'25 Q2'24 Q2'25 Q2'24 Q2'25 Q2'24 Q2'25 Q2'24 Q2'25 Q2'24
Net sales 1 904 1 522 1 732 2 078 557 507 357 356 3 4
YoY change 25% (17)% 10% 0% (25)%
Constant currency and portfolio YoY change ((1)) 8% (13)% 14% 3% (25)%
Gross margin % 38.2% 38.4% 41.1% 41.8% 42.7% 37.5% 100.0% 100.0%
Operating profit/(loss) 109 97 77 182 9 (35) 255 258 (150) (78)
Operating margin % 5.7% 6.4% 4.4% 8.8% 1.6% (6.9)% 71.4% 72.5%
(1) This metric provides additional information on the growth of the business
and adjusts for both currency impacts and portfolio changes. The full
definition is provided in the Alternative performance measures section in
Nokia Corporation Report for Q2 and Half Year 2025.
SHAREHOLDER DISTRIBUTION
Dividend
Under the authorization by the Annual General Meeting held on 29 April 2025,
the Board of Directors may resolve on the distribution of an aggregate maximum
of EUR 0.14 per share to be paid in respect of financial year 2024. The
authorization will be used to distribute dividend and/or assets from the
reserve for invested unrestricted equity in four installments during the
authorization period unless the Board decides otherwise for a justified
reason.
On 24 July 2025, the Board resolved to distribute a dividend of EUR 0.04 per
share. The dividend record date is 29 July 2025 and the dividend will be paid
on 7 August 2025. The actual dividend payment date outside Finland will be
determined by the practices of the intermediary banks transferring the
dividend payments.
As previously announced, on 29 April 2025 the Board resolved to distribute a
dividend of EUR 0.04 per share. The dividend record date was 5 May 2025 and
the dividend was paid on 12 May 2025. Following these distributions, the
Board’s remaining distribution authorization is a maximum of EUR 0.06 per
share.
OUTLOOK
Full Year 2025
Comparable operating profit ((1,2)) EUR 1.6 billion to EUR 2.1 billion (adjusted from EUR 1.9 billion to 2.4 billion)
Free cash flow ((1)) 50% to 80% conversion from comparable operating profit
(1)Please refer to Alternative performance measures section in Nokia
Corporation Report for Q2 and Half Year 2025 for a full explanation of how
these terms are defined.
(2)Outlook is based on a EUR:USD rate of 1.17 for the remainder of the year.
The outlook and all of the underlying outlook assumptions described below are
forward-looking statements subject to a number of risks and uncertainties as
described or referred to in the Risk Factors section later in this report.
Along with Nokia's official outlook targets provided above, Nokia provides the
below additional assumptions that support the group level financial outlook.
Full year 2025 Comment
Q3 Seasonality Normal seasonality would imply flat net sales sequentially into Q3. The business expects somewhat more challenging product mix along with continued R&D investment. Comparable operating margin expected to be largely stable sequentially.
Group Common and Other operating expenses Approximately EUR 400 million
Comparable financial income and expenses Positive EUR 50 to 150 million
Comparable income tax rate ~25%
Cash outflows related to income taxes EUR 500 million
Capital expenditures EUR 650 million
Recurring gross cost savings EUR 400 million Related to ongoing cost savings program and not including Infinera-related synergies
Restructuring and associated charges related to cost savings programs EUR 250 million Related to ongoing cost savings program and not including Infinera-related synergies
Restructuring and associated cash outflows EUR 400 million Related to ongoing cost savings program and not including Infinera-related synergies
RISK FACTORS
Nokia and its businesses are exposed to a number of risks and uncertainties
which include but are not limited to:
* Competitive intensity, which is expected to continue at a high level as some
competitors seek to take share;
* Changes in customer network investments related to their ability to monetize
the network;
* Our ability to ensure competitiveness of our product roadmaps and costs
through additional R&D investments;
* Our ability to procure certain standard components and the costs thereof,
such as semiconductors;
* Disturbance in the global supply chain;
* Impact of inflation, increased global macro-uncertainty, major currency
fluctuations, changes in tariffs and higher interest rates;
* Potential economic impact and disruption of global pandemics;
* War or other geopolitical conflicts, disruptions and potential costs
thereof;
* Other macroeconomic, industry and competitive developments;
* Timing and value of new, renewed and existing patent licensing agreements
with licensees;
* Results in brand and technology licensing; costs to protect and enforce our
intellectual property rights; on-going litigation with respect to licensing
and regulatory landscape for patent licensing;
* The outcomes of on-going and potential disputes and litigation;
* Our ability to execute, complete, successfully integrate and realize the
expected benefits from transactions;
* Timing of completions and acceptances of certain projects;
* Our product and regional mix;
* Uncertainty in forecasting income tax expenses and cash outflows, over the
long-term, as they are also subject to possible changes due to business mix,
the timing of patent licensing cash flow and changes in tax legislation,
including potential tax reforms in various countries and OECD initiatives;
* Our ability to utilize our Finnish deferred tax assets and their recognition
on our balance sheet;
* Our ability to meet our sustainability and other ESG targets, including our
targets relating to greenhouse gas emissions;
as well the risk factors specified under Forward-looking statements of this
release, and our 2024 annual report on Form 20-F published on 13 March 2025
under Operating and financial review and prospects-Risk factors.
FORWARD-LOOKING STATEMENTS
Certain statements herein that are not historical facts are forward-looking
statements. These forward-looking statements reflect Nokia's current
expectations and views of future developments and include statements
regarding: A) expectations, plans, benefits or outlook related to our
strategies, projects, programs, product launches, growth management, licenses,
sustainability and other ESG targets, operational key performance indicators
and decisions on market exits; B) expectations, plans or benefits related to
future performance of our businesses (including the expected impact, timing
and duration of potential global pandemics, geopolitical conflicts and the
general or regional macroeconomic conditions on our businesses, our supply
chain, the timing of market changes or turning points in demand and our
customers’ businesses) and any future dividends and other distributions of
profit; C) expectations and targets regarding financial performance and
results of operations, including market share, prices, net sales, income,
margins, cash flows, cost savings, the timing of receivables, operating
expenses, provisions, impairments, tariffs, taxes, currency exchange rates,
hedging, investment funds, inflation, product cost reductions,
competitiveness, value creation, revenue generation in any specific region,
and licensing income and payments; D) ability to execute, expectations, plans
or benefits related to transactions, investments and changes in organizational
structure and operating model; E) impact on revenue with respect to
litigation/renewal discussions; and F) any statements preceded by or including
"anticipate", “continue”, “believe”, “envisage”, “expect”,
“aim”, “will”, “target”, “may”, “would”, “could“,
"see", “plan”, “ensure” or similar expressions. These forward-looking
statements are subject to a number of risks and uncertainties, many of which
are beyond our control, which could cause our actual results to differ
materially from such statements. These statements are based on management’s
best assumptions and beliefs in light of the information currently available
to them. These forward-looking statements are only predictions based upon our
current expectations and views of future events and developments and are
subject to risks and uncertainties that are difficult to predict because they
relate to events and depend on circumstances that will occur in the future.
Factors, including risks and uncertainties that could cause these differences,
include those risks and uncertainties identified in the Risk Factors above.
ANALYST WEBCAST
* Nokia's webcast will begin on 24 July 2025 at 11.30 a.m. Finnish time
(EEST). The webcast will last approximately 60 minutes.
* The webcast will be a presentation followed by a Q&A session. Presentation
slides will be available for download at www.nokia.com/financials.
* A link to the webcast will be available at www.nokia.com/financials.
* Media representatives can listen in via the link, or alternatively call
+1-412-317-5619.
FINANCIAL CALENDAR
* Nokia plans to publish its third quarter and January-September 2025 results
on 23 October 2025.
About Nokia
At Nokia, we create technology that helps the world act together.
As a B2B technology innovation leader, we are pioneering networks that sense,
think and act by leveraging our work across mobile, fixed and cloud networks.
In addition, we create value with intellectual property and long-term
research, led by the award-winning Nokia Bell Labs, which is celebrating 100
years of innovation.
With truly open architectures that seamlessly integrate into any ecosystem,
our high-performance networks create new opportunities for monetization and
scale. Service providers, enterprises and partners worldwide trust Nokia to
deliver secure, reliable and sustainable networks today – and work with us
to create the digital services and applications of the future.
Inquiries:
Nokia
Communications
Phone: +358 10 448 4900
Email: press.services@nokia.com
Maria Vaismaa, Global Head of External Communications
Nokia
Investor Relations
Phone: +358 931 580 507
Email: investor.relations@nokia.com
Attachment
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