Nokia Oyj Q4 FY2025 earnings call

Management Statement and Operational Highlights

• 2025 performance: Q4 net sales EUR 6.1B (+3%), full year net sales EUR 19.9B; operating profit full year EUR 2B (slightly above guidance); free cash flow conversion 72% consistent with guidance.
• Strategic moves: 2025 was foundational, with acquisition of Infinera, simplified operating model, and Capital Markets Day setting strategy to focus on differentiation, scale, etc.
• Network Infrastructure details: Q4 net sales growth 7%, optical networks up 17%, order intake solid. IP Networks expanded into data center switching, mission-critical enterprise had strong book-to-bill.
• Fixed Networks: Fiber OLT grew 16%, but deemphasized certain products.
• Mobile Infrastructure: Core Software grew with 5G core deal, Radio Networks invested in 5G and 6G, Technology standards had net sales run rate ~EUR 1.4B.
• Nokia Defense: New incubation unit for defense portfolio.
• China operations: Closed transaction to fully own Nokia Shanghai Bell, expecting cost synergies.

Segment Performance

• Network Infrastructure: Q4 net sales grew 7%, driven by 17% growth in optical networks. Full year 2025 saw EUR 2.4 billion in orders from AI and cloud customers. Optical networks had 800-gig ZR and ZR+ products shipping, with multiple design wins. IP Networks launched new products and secured a data center switching design win. Mission-critical enterprise had book-to-bill well above 1 in Q4.
• Fixed Networks: Stable in Q4, fiber OLT grew 16%, but deemphasized certain products led to flat performance overall.
• Mobile Infrastructure: Formed by core software, radio networks, and technology standards. Core Software grew faster with a 5G core deal, Radio Networks invested in 5G and 6G, Technology standards had a net sales run rate of ~EUR 1.4 billion. Nokia Defense launched as a new incubation unit for defense portfolio.
• Portfolio Businesses: Fixed Wireless Access, Site Operations, Microwave Radio, and Enterprise Campus Edge had net sales of EUR 850 million and an operating loss of EUR 97 million in 2025, with aim to conclude future direction in 2026.

Guidance

• 2026 operating profit range: EUR 2B - 2.5B.
• Network Infrastructure: 6%-8% CAGR growth 2025-2028, Optical and IP Networks 10%-12% CAGR.
• Network Infrastructure operating margin: Target 13%-17% by 2028 (9.5% in 2025).
• Mobile Infrastructure: Focus on gross margin and operating profit, target at least EUR 1.5B operating profit.
• Portfolio Businesses: Aim to conclude future direction in 2026.
• 2026 Q1: Net sales expected to decline more than normal seasonality; full year CapEx EUR 900M-1B; free cash flow conversion 65%-75%.

Risks

• External: Market conditions, supply chain issues (e.g., memory prices), regulatory impacts (Cybersecurity Act, Digital Network Act).
• Internal: Execution risks, integration challenges (e.g., Infinera acquisition integration).

Question and Answer

Q: On Optical growth guidance conservatism A: Balanced on base from telco-centric past, focusing on scaling production.

Q: Q1 sub-seasonal trend A: More than normal seasonality due to telco customer buying patterns.

Q: CapEx visibility for Optical/IP A: Confidence in long-term market trend, investing in manufacturing capacity.

Q: IP Networks growth A: Focus on product offering, design wins, need time to ramp, but tailwind from AI/data center build.

Q: Cybersecurity Act impact A: Supportive, clarity on replacement schedules, within capacity, important for 6G readiness.

Q: Optical supply constraints A: Supply constraints normal with scale build, investing in ecosystem and capacity.

Q: Mobile Networks North America A: Focus on profitable market share, AT&T focus on commitments, improving customer collaboration.

Q: Operating guidance EUR 2B-2.5B A: New product launches impact gross margin, visibility on growth cycles.

Q: Memory prices impact gross margin A: Not material part of bill of materials, managed through long-term agreements.

Q: CapEx capacity utilization A: Investing in new fab for demand, indium phosphide technology differentiation.

Q: Margin phasing A: Second half expected to have better margin profile due to new product ramps.

Q: Mobile Infrastructure market share A: Stable market, aim to improve profitability, focus on gross margin and profit.