Nokia ((NOK)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Nokia’s recent earnings call painted a picture of mixed sentiments, highlighting robust growth in Network Infrastructure and Cloud and Network Services, while also acknowledging challenges in Mobile Networks and the impact of currency fluctuations. The company has revised its outlook due to these external factors, indicating a cautious yet optimistic approach moving forward.
Strength in Network Infrastructure
Network Infrastructure emerged as a strong performer, delivering an impressive 8% growth. This was largely driven by Fixed Networks, which grew by 17%, Optical Networks by 6%, and IP Networks by 3%. The demand in Optical Networks and the positive reception to the Infinera acquisition were significant contributors to this growth.
New Deals and Partnerships
Nokia secured several significant deals, marking a successful quarter in terms of partnerships. Notably, the company received its first award from a hyperscaler for 800 gig ZR/ZR+ pluggables. Additionally, Nokia signed new 5G deals with major players such as T-Mobile U.S., Elisa in Finland, and Optus in Australia, showcasing its expanding global footprint.
Strong Cloud and Network Services Performance
The Cloud and Network Services segment reported a 14% increase in net sales, reflecting strong momentum in Core Networks. This growth was particularly pronounced in North America and the Asia Pacific regions, underscoring Nokia’s strategic focus on these markets.
Advancements in AI and Technology
Nokia is making strides in AI and technology, actively participating in consortiums bidding for the EU’s EUR 20 billion program to build AI gigafactories. This involvement indicates Nokia’s commitment to long-term growth opportunities in AI infrastructure.
Decline in Mobile Networks
Despite successes in other areas, Mobile Networks saw a 13% decline in net sales. This was primarily due to a EUR 150 million accelerated revenue recognition from a contract settlement in the previous year, highlighting challenges in maintaining growth in this segment.
Profitability Impacted by Currency Fluctuations
Currency fluctuations posed a significant challenge, with the company experiencing a EUR 50 million noncash negative impact from venture funds. A weaker U.S. dollar contributed to a EUR 60 million impact, affecting overall profitability.
Revised Full Year Outlook
Nokia revised its full-year operating profit outlook, adjusting it from EUR 1.9 billion to EUR 2.4 billion to a new range of EUR 1.6 billion to EUR 2.1 billion. This revision was driven by currency movements and tariff impacts. Despite these challenges, Nokia remains optimistic about strong growth in Network Infrastructure and Cloud and Network Services, while maintaining stable net sales in Mobile Networks.
In conclusion, Nokia’s earnings call reflected a balanced view of the company’s current position. While there are notable challenges, particularly in Mobile Networks and due to currency fluctuations, the company is optimistic about its growth prospects in Network Infrastructure and Cloud and Network Services. The revised outlook indicates a cautious approach, but with strategic initiatives in place, Nokia is poised to navigate these challenges effectively.