Nokia sees Q4 growth and profit improvement, forecasts stable 2025 outlook

Investing.com -- Nokia (HE:NOKIA) Corporation reported strong fourth-quarter growth and profitability, signaling a recovery in market trends after a challenging year. 

The telecom company’s net sales increased by 9% year-over-year in constant currency terms, with reported growth at 10%. 

This growth was driven by gains across its Network Infrastructure, Nokia Technologies, and Cloud and Network Services segments.

The company’s profitability improved substantially in the quarter. The comparable gross margin rose by 250 basis points to 47.2%, supported by strong contributions from Nokia Technologies. 

Meanwhile, the comparable operating margin saw a notable increase of 380 basis points, reaching 19.1%, as cost control measures and a higher contribution from Nokia Technologies helped boost overall performance. 

Nokia’s diluted earnings per share for the quarter stood at EUR 0.18 on a comparable basis, with a reported EPS of EUR 0.15. Free cash flow for the quarter was EUR 0.05 billion, while the company’s net cash balance at year-end was EUR 4.9 billion.

For the full year, Nokia’s net sales declined by 9%, with a significant portion of the decline—7 percentage points—attributable to reduced sales in India. 

The company recorded a full-year comparable operating profit of EUR 2.6 billion, aligning with the mid-point of its previous guidance range. 

Comparable diluted EPS for the year stood at EUR 0.39, while reported EPS was EUR 0.23. In response to its financial position, Nokia’s board has proposed a dividend authorization of EUR 0.14 per share.

Nokia also provided an outlook for 2025, projecting a comparable operating profit in the range of EUR 1.9 billion to 2.4 billion. The company expects free cash flow conversion from comparable operating profit to be between 50% and 80%.

“I am optimistic that the improving market trends we are now seeing will persist into 2025,” said Nokia’s chief executive, Pekka Lundmark in a statement.

Among the company’s business segments, Network Infrastructure showed strong momentum, with net sales growing 17%. 

This growth was supported by a 24% increase in IP Networks, a 16% rise in Fixed Networks, and a 7% gain in Optical Networks. Nokia attributed these gains to a recovery in demand from communication service providers, particularly in North America. 

Mobile Networks stabilized, with gross margins holding firm despite competitive pressures. The company secured 18,000 additional base station sites over the year while maintaining pricing discipline to protect profitability.

Cloud and Network Services returned to growth, posting a 7% increase in net sales for the quarter.

This was despite a 4-percentage-point headwind from the disposal of a prior business unit. Nokia reported strong performance in Core Networks and Enterprise Campus Edge, two key areas of its cloud and services strategy.

The company also completed the acquisition of Rapid’s technology assets, aimed at enhancing its research and development efforts in Network as Code and automation tools for telecom operators.

Nokia Technologies had a particularly active quarter, securing licensing agreements with mobile device maker Transsion, as well as multimedia deals with HP (NYSE:HPQ) and Samsung (KS:005930). 

The segment’s annual net sales run rate increased to between EUR 1.3 billion and 1.4 billion in the quarter, bringing it closer to its mid-term target of EUR 1.4 billion to 1.5 billion.

The company’s financial strength remained evident through its cash performance. Full-year free cash flow reached EUR 2.0 billion, helping Nokia maintain a net cash balance of EUR 4.9 billion by year-end, even after distributing EUR 1.4 billion to shareholders through dividends and share buybacks. 

The company reaffirmed its commitment to a stable net cash position, targeting a range of 10-15% of annual net sales.

In the data center market, Nokia continued its expansion efforts with key deals signed with Microsoft (NASDAQ:MSFT) and Nscale for data center switching products. 

The company also announced partnerships with Kyndryl and Lenovo. Looking to capture more opportunities in this space, Nokia plans to invest an additional EUR 100 million annually in operating expenses, with the goal of driving EUR 1 billion in incremental net sales by 2028. 

“In the short-term this will moderate the pace of operating margin expansion in Network Infrastructure, but we anticipate a strong return on investment considering the momentum we already have today in the market,” the company said.

For 2025, Nokia expects continued Network Infrastructure growth due to sustained demand. Cloud and Network Services growth is anticipated, driven by 5G Core and Enterprise Campus Edge adoption. 

Mobile Networks sales are projected as largely stable, and Nokia Technologies targets approximately EUR 1.1 billion in operating profit.