Nokia Oyj Q2 FY2025 earnings call

Management Statement and Operational Highlights:

• Justin Hotard highlighted increased optimism about connectivity in the AI super cycle, need to evolve working to be more integrated for customers, and progress with the Infinera acquisition with a book-to-bill well above 1.
• Marco Wiren discussed overall growth, net sales by region (North America mix trends, APAC India flat but growth in other segments, Europe strength), cash performance (ended quarter with EUR 2.9 billion net cash), and currency exposure including impact from venture funds and euro-dollar rate movements.

Segment Performance:

• Network Infrastructure: Delivered 8% growth. Fixed Networks grew 17%, Optical Networks 6%, IP networks 3%. Hyperscalers accounted for 5% of net sales in Q2. Gross margin relatively stable despite tariff impact.
• Mobile Networks: Net sales declined 13% due to accelerated revenue recognition in prior year. Gross margin 41.1%, a 70 basis points decline year-over-year.
• Cloud and Network Services (CNS): Net sales grew 14% driven by Core Networks. Gross margin improved 520 basis points, operating margin 850 basis points.
• Nokia Technologies: Net sales increased 3% on constant currency basis, with a run rate of approximately EUR 1.4 billion.

Guidance:

• Lowered full-year comparable operating profit outlook from EUR 1.9 billion-EUR 2.4 billion to EUR 1.6 billion-EUR 2.1 billion. Headwinds include EUR 230 million currency impact (including EUR 90 million from venture funds) and EUR 50-80 million tariff impact. Free cash flow conversion remains unchanged at 50%-80% of comparable operating profit.

Risks:

• Currency fluctuations, particularly the weaker U.S. dollar posing a headwind to profitability, including a EUR 50 million noncash negative impact from venture funds in Q2.
• Tariff situation with an expected impact of EUR 50-80 million on full-year operating profit related to preexisting customer orders.
• Supply chain constraints impacting growth in Optical Networks.

Question and Answer: Q: Richard Kramer asked about winning large hyperscaler deals and increasing sales to hyperscalers.

A: Justin Hotard mentioned functional changes, customer intimacy, and portfolio alignment as key factors.

Q: Fredrik Lithell inquired about drivers for Europe's healthy momentum.

A: Marco Wiren stated broad-based development in Europe across all businesses.

Q: Ulrich Rathe asked about guidance revision.

A: Justin Hotard discussed inclusion of currency and tariff impacts, and underlying operational optimism.

Q: Sami Sarkamies asked about integrating for customers and near-term changes.

A: Justin Hotard and Marco Wiren discussed unified functional organizations and P&L responsibility.

Q: Simon Leopold asked about staffing and cost structure.

A: Justin Hotard mentioned ongoing restructuring and focus on productivity.

Q: Rob Sanders asked about Mobile Networks business and R&D allocation.

A: Justin Hotard and Marco Wiren discussed Mobile Networks as a strategic asset and opportunities in fixed wireless access.

Q: Sandeep Deshpande asked about Optical business growth and routing in hyperscalers.

A: Justin Hotard discussed market share penetration and focus on product intercepts.

Q: Felix Henriksson asked about Q3 outlook and mix improvement.

A: Marco Wiren discussed seasonality and normal phasing.

Q: Sebastien Sztabowicz asked about order intake and pricing.

A: Justin Hotard stated consistent order intake and normal pricing dynamics.

Q: Jakob Bluestone asked about phasing and order book.

A: Marco Wiren discussed seasonality and order book coverage.

Q: Emil Immonen asked about Mobile Networks revenue growth.

A: Justin Hotard discussed preserving market share in a flat market.

Q: Francois-Xavier Bouvignies asked about the integrated end-to-end strategy.

A: Justin Hotard discussed customer-centric approach, BG accountability, and functional consistency as keys to success.