Earnings call transcript: Nokia Q2 2025 misses forecasts, stock dips

In its Q2 2025 earnings call, Nokia reported earnings per share (EPS) of €0.04, falling short of the forecasted €0.0536, a miss of 25.37%. The company’s revenue also did not meet expectations, coming in at €4.55 billion compared to the anticipated €4.82 billion, resulting in a 5.6% shortfall. Following the announcement, Nokia’s stock price dipped by 0.79% in pre-market trading, reflecting investor concerns over the earnings miss and revenue decline. According to InvestingPro data, Nokia maintains strong fundamentals with an Altman Z-Score of 5.9, indicating robust financial health. Get access to 12 additional exclusive ProTips and comprehensive analysis through InvestingPro’s detailed research reports.

Key Takeaways

• Nokia’s EPS and revenue fell short of market expectations for Q2 2025.
• Stock price decreased by 0.79% in pre-market trading.
• Full-year operating profit guidance revised due to currency and tariff impacts.
• Continued investment in AI and 5G partnerships highlighted.
• Strong position in edge routing and fixed networks maintained.

Company Performance

Nokia’s overall performance in Q2 2025 was marked by a slight decline in net sales, which fell by 1% on a constant currency and portfolio basis. Despite stable gross margins at 44.7%, operating margins decreased to 6.6%, influenced by currency fluctuations and tariffs. The company maintained a robust net cash position of €2.9 billion, supporting its ongoing investments in technological advancements and strategic partnerships. InvestingPro analysis shows Nokia holds more cash than debt on its balance sheet, with a healthy current ratio of 1.36 and a conservative debt-to-equity ratio of 0.24.

Financial Highlights

• Revenue: €4.55 billion, 1% decline year-over-year.
• Earnings per share: €0.04, down from the forecasted €0.0536.
• Gross Margin: 44.7%, stable compared to last year.
• Operating Margin: 6.6%, a decline from previous quarters.
• Free Cash Flow: €88 million.

Earnings vs. Forecast

Nokia’s Q2 2025 EPS of €0.04 was below the forecast of €0.0536, marking a 25.37% miss. Revenue also fell short at €4.55 billion against the expected €4.82 billion, a 5.6% discrepancy. This performance contrasts with previous quarters where Nokia either met or exceeded expectations, raising concerns about its ability to navigate current market challenges.

Market Reaction

Nokia’s stock saw a 0.79% decrease in pre-market trading following the earnings announcement. This movement reflects investor disappointment in the company’s ability to meet financial targets. The stock’s performance sits within its 52-week range, having previously reached a high of €5.02 and a low of €3.39. InvestingPro analysis indicates the stock is currently in oversold territory based on RSI indicators, trading at attractive valuations with a Price-to-Book ratio of 0.99 and an EV/EBITDA multiple of 6.87. For detailed valuation analysis and more insights, explore InvestingPro’s comprehensive research reports covering 1,400+ top stocks.

Outlook & Guidance

Nokia revised its full-year comparable operating profit guidance to €1.6-2.1 billion, considering a currency headwind of €230 million and tariff impacts estimated between €50-80 million. The company anticipates stronger performance in the latter half of the year, driven by continued investments in AI infrastructure and strategic partnerships.

Executive Commentary

CEO Justin Hautard emphasized the critical role of connectivity in the AI super cycle, stating, "Connectivity will be a critical differentiator in the AI super cycle." He reiterated Nokia’s commitment to investing in this opportunity. CFO Marco Varenne highlighted the importance of continuous improvement, stating, "Continuous improvement is something that we have to have in our genes."

Risks and Challenges

• Currency fluctuations pose a significant risk, impacting operating margins.
• Tariff-related costs could further pressure profitability.
• Competitive challenges in the optical and switching markets.
• Potential market saturation in mobile networks.
• Macroeconomic pressures may affect overall demand.

Q&A

During the earnings call, analysts probed Nokia’s strategy for penetrating the hyperscaler market and sought clarity on organizational changes following the Infinera acquisition. Questions also focused on the performance and growth challenges in mobile networks, as well as the impact of currency and tariffs on future guidance.

Full transcript - Nokia Oyj (NOKIA) Q2 2025:

David Mulholland, Head of Investor Relations, Nokia: Good morning, ladies and gentlemen. Welcome to Nokia’s Second Quarter twenty twenty five Results Call. I’m David Mulholland, Head of Investor Relations. And today with me is Justin Hautard, our President and CEO along with Marco Varenne, our CFO. Before we get started, a quick disclaimer.

During this call, we will be making forward looking statements regarding our future business and financial performance, and these statements are predictions that involve risks and uncertainties. Actual results may therefore differ materially from the results we currently expect. Factors that could cause such differences can be both external as well as internal operating factors. We have identified such risks in the Risk Factors section of our annual report on Form 20 F, which is available on our Investor Relations website. Within today’s presentation, references to growth rates will mostly be on a constant currency and portfolio basis, and other financial items will be based on our comparable reporting.

Please note that our Q2 report and a presentation that accompanies this call are published on our website. The report includes both reported and comparable financial results and reconciliation between the two. In terms of the agenda for today, Justin will go through our key messages from the quarter, and then Marco will go through the financial performance, and we’ll then move to Q and A. With that, let me hand over to Justin.

Justin Hautard, President and CEO, Nokia: Thanks, David, and good morning. During my first quarter as President and CEO, I’ve spent significant time engaging with our stakeholders, and it has left me with two conclusions. First, I have increased optimism about our future opportunity. It is clear to me that connectivity will be a critical differentiator in the AI super cycle. That is true not only for the hyperscalers where it’s visible today, but also for communication service providers, and increasingly in areas like defense and national security.

With our portfolio in mobile and fiber access, transport and data center networks, Nokia is uniquely positioned to be a leader in this market transition. We are investing to capitalize on this opportunity, and we are already starting to see success today in areas like optical networking. Second, our customers expect us to engage with them as one integrated company, as the majority of them partner with us across our portfolio. We benefit greatly from the financial accountability our business group structure gives us. However, we also need to evolve how we work so we can 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 and to build a more cohesive culture to help unlock operating leverage. I’m 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, our performance was mixed. Good growth in both network infrastructure and cloud and network services was offset by a decline in mobile networks, primarily related to the accelerated revenue recognition seen in the prior year quarter. Our profitability was impacted by currency fluctuations, particularly the weaker US dollar, which was both an operational headwind and a headwind in our venture fund.

We had a $50,000,000 non cash negative impact from our venture funds in the quarter, which included a €60,000,000 negative impact from currency. Excluding currency, our profitability in the quarter would have been in line with our expectations, and we continued to make investments in longer term growth opportunities. The second quarter was the first full quarter since we acquired Infinera. The combined optical networks business has been performing well, with a book to bill well above one showing continued strong commercial momentum to our growth, though our growth was tempered somewhat by supply constraints, and we’re on track to achieve our committed synergies from the acquisition. Looking forward, the demand environment remains broadly consistent with what we said last quarter.

Customers are largely continuing with the plans they laid out at the start of the year, and there has not been any major impact from geopolitical uncertainty. As a result, for the full year, we continue to expect strong growth in network infrastructure, growth in cloud and network services, and largely stable net sales in mobile networks. In Nokia Technologies, we still expect €1,100,000,000 of operating profit. Let me share a few highlights from the quarter across our business groups. In network infrastructure, we continue to see a strong demand environment in optical networks and a positive reception to the Infinera acquisition from customers.

Two deals I’d like to highlight in optical, our first award from a hyperscaler for 800 gig ZRZR plus pluggables, and a deal with a large US communication service provider. Overall, hyperscalers are one of the biggest drivers of our order intake in the quarter and remain a significant growth opportunity for our network infrastructure business. Across the whole of Nokia, hyperscalers accounted for 5% of net sales in the second quarter. In IP networks, we continued our leading position in the market, remaining number one in edge routing and number two in total routing. We continue to see a long term opportunity in AI infrastructure and are investing to accelerate growth.

Recently, we’ve been an active participant in consortiums that are bidding to benefit from the EU’s €20,000,000,000 program to build AI gigafactories in Europe. In fixed networks, we still expect strong growth this year, and the appetite for fiber among Tier one CSPs remains strong. The past twelve months have seen us strengthen our market leadership position in the operator premise equipment, OLT, and we are continuing to invest in innovation in passive optical networks. Turning to mobile networks. At the start of the quarter, we signed an extension to our RAN agreement with T Mobile US, which we announced in our Q1 earnings.

We also announced five gs deals with Elisa in Finland and Optus in Australia. We continue to see good overall commercial momentum, and the competitiveness of our products is resonating with customers. We are optimistic about the potential 3GPP technology can bring into the defense sector. In Q2, we announced a partnership with BlackNet, in which Rheinmetall owns a majority stake, and we now have delivered Banshee radio units to the US Marine Corps through Nokia Federal Solutions. Finally, cloud and network services had a strong quarter with new five gs core wins and deployments including across India, Europe, and The Middle East.

We’re continuing to progress on our open API journey with 57 partners announced for our Network as Code platform, including Telstra and the Bridge Alliance in Asia. We also announced a partnership with Verizon in The UK to provide private five gs networks across multiple TEMS report sites. Finally, let me turn to our outlook for the full year 2025. As we announced on Tuesday, we decided to take the prudent approach of lowering our full year outlook from 1,900,000,000.0 to €2,400,000,000 to a new range of 1,600,000,000.0 to €2,100,000,000 The change has been driven by two factors that are largely outside of our control. The first impact is currency.

When we first issued our guidance for 2025, the eurodollar rate was 1.04, and it has now moved significantly to 1.17. Altogether, this currency movement is posing a €230,000,000 headwind to our operating profit outlook for 2025, of which €90,000,000 is related to the noncash currency impact in our venture fund portfolio. Marco will provide you additional detail on this in his comments. The second is the tariff situation. For the full year 2025, we now expect to see an impact of between 50,000,000 and €80,000,000 tied to fulfillment of pre existing customer orders.

The underlying performance across the business is in line with our expectations at the start of the year. Therefore, it is these two factors that lead us to change comparable operating profit outlook. Our guidance for free cash flow conversion remains unchanged at 50% to 80% of comparable operating profit. With that, let me hand over to Marco.

Marco Varenne, CFO, Nokia: Thank you, Justin, and hello from my side as well. I will start by discussing our overall group performance. Quarter two net sales were €4,550,000,000 that’s a 1% decline on constant currency and portfolio basis. Our gross margin was stable versus the year ago quarter at 44.7%. Mobile networks and network infrastructure gross margins were broadly stable, while cloud and network services delivered an improvement of five twenty basis points, driven by top line growth.

Operating margin declined to 6.6%, as a result of the negative currency impact to our venture funds, as well as the impact of tariffs, which were within the 20,000,000 to 30,000,000 range we had expected. Assuming existing tariff rates, we now expect an impact to our full year operating profit of around 50,000,000 to 80,000,000. And we generated €88,000,000 of free cash flow in the quarter and ended the quarter with 2,900,000,000.0 of net cash. Now turning to our business growth performance. Network infrastructure delivered 8% growth and each business unit grew with fixed networks having a particularly strong quarter growing 17%, optical networks grew 6% and IP networks grew 3%.

Optical networks growth was hampered by some modest supply chain constraints and could have grown over 10%, and we expect these issues to improve in the second half. Gross margin was relatively stable, despite the 110 basis points impact from tariffs, in line with what we have expected. Operating margin declined slightly by 70 basis points year on year to 5.7%. And this was mainly the result of higher operating expenses associated with the Infinera acquisition, as well as increased investments into growth opportunities. It is worth noting that the ex Infinera business was dilutive to operating margin in the quarter, although the integration process continues, and we are moving quickly to deliver on our committed synergies.

Net sales in mobile networks declined by 13% in the quarter, as mentioned, much of this decline was because of the 150,000,000 Euro in accelerated revenue recognition from a contract settlement that benefited the year ago quarter. Regionally, we saw mix trends in mobile networks, the pause in rollouts impacted India. However, we did see some growth in Europe. Mobile networks gross margin was 41.1 in the quarter, a 70 basis points decline year over year as favorable product and regional mix helped offset a difficult comparison related to the settlement that benefited the prior year. These factors led to operating profit and margin declining, despite lower operating expenses.

As we look to quarter three, we expect gross margin to be below the normal run rate level, as we expect an unfavorable product mix shift in the quarter. For the full year mobile networks gross margin should remain in the normalized 37% to 38% range, when excluding the one time impact we saw in quarter one. Cloud and network services net sales grew by 14% in the quarter, reflecting continued momentum in core networks. From regional perspective, CNS saw growth driven by North America and Asia Pacific and Japan. A high level of net sales drove strong expansion in both cross and operating margin, which improved five twenty and eight fifty basis points respectively.

Nokia Technologies net sales increased by 3% on a constant currency basis, we signed several new agreements as we continue to make progress in our growth areas of automotive, consumer electronics, IoT and multimedia. Our net sales run rate remains approximately at €1,400,000,000. Now, let’s look at the net sales by region, we saw a decline in North America, although this reflects mixed trends, mobile networks declined because of the settlement in the year ago quarter, while we saw double digit growth in both network infrastructure and cloud and network services. Within APAC, India sales were flat, reflecting a pause in investment in mobile networks, which was offset by growth in fixed networks within network infrastructure, as well as cloud and network services. And credit China continued to decline as expected based on the current market trends.

We saw strength in Europe with growth across all businesses. Now turning to our cash performance, we ended the quarter with a net cash position of €2,900,000,000 You can see on the slide that working capital was well managed in the quarter, as the expected payment of twenty twenty four related incentives was largely offset by strong collection in receivables. Free cash flow was positive EUR88 million, leading to over €800,000,000 of free cash flow in the first half. As Justin noted, we continue to target 50% to 80% free cash flow conversion from comparable operating profit for the full year. The last topic I want to cover is our currency exposure, as I know there have been some questions following our announcement on Tuesday.

First of all, we typically generate about 55% of our net sales and have 50% of our total costs in US dollars, but we report in euros. We have said in the past that we have a high degree of natural hedging without our operating business protecting our operating margin, but we still have an impact on an absolute basis, when you convert USD profit back to euros for reporting purposes. Then on top of that, we have a hedging programme, which helps to shield us on a short term basis. So what happens this year? When we first provide our guidance in January, the Euro USD rate was at 1.04.

Now the currency rate is around 1.17, and our guidance is assuming it remains there for the rest of the year. That is a significant 13 US cent movement. There has also been significant strengthening in the Euro against other currencies, including the Indian rupee. Assuming currency rates remain at the current level, for the rest of the year, the currency movement compared to January is a six to 7% impact to our net sales outlook for the full year. We do have a modest imbalance between net sales and total cost in our operations, meaning a strengthening euro has a slight negative impact on our operating margin, which is then largely offset short term by hedging.

When you combine all of these together, we see 140,000,000 Euro operating headwind, compared to our expectations at the start of the year. And we hedge on a rolling four quarter basis, such that the first two quarters net US operational exposure is quite well hedged, and then the degree of hedging drops the third and fourth quarter. And this means that at the start of the year, we still had exposure to currency fluctuations for the second half, but that at this point of the year, we are now largely operationally hedged. Finally, we have currency exposure from our venture fund investments. A lot of these assets are valued in US dollars.

These are illiquid investments that are only revalued when there is a capital event. However, under IFRS, we need to mark the market for currency each quarter. And this is creating a 90,000,000 impact currently for the full year. Considering this is both non cash and non operational to our core businesses, we don’t hedge this. Through the rest of the year and including the Friendship Fund impact for modeling purposes, we estimate that every 1 US cent movement in the Euro USD rate could have about 10,000,000 to 15,000,000 Euro impact on our operating profit in 2025.

David Mulholland, Head of Investor Relations, Nokia: Thank you, Justin and Marco. Before we turn to the Q and A session, one date for your diary. We recently sent out a save the date confirming that Nokia will hold its Capital Markets Day this year in New York on November 19. We will be sending out a formal registration shortly, and we hope as many of you as possible will be able to join us. As usual, for the q and a session, as a courtesy to others in the queue, could you please limit yourself to one question and a brief follow-up?

Dorvin, could you please give the instructions?

Operator: Certainly. We will now begin the question and answer session. If you are also viewing the webcast, please remember to mute the audio on your computer before asking your question as there is a thirty second delay. To ask a question, you may press star and then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.

To withdraw your question, please press star then 2. I will now hand the call back to Mr. David Mulholland. Thanks,

David Mulholland, Head of Investor Relations, Nokia: Donald. We’ll take our first question today from Richard Kramer from Arete. Richard, please go ahead.

Richard Kramer, Analyst, Arete: Oh, thank you very much. Justin, I asked last call about what you thought was required to win large hyperscaler deals. And in your prepared remarks, you mentioned potential integration of business operations, even though a lot of those hyperscaler deals are for products that mostly sit in NI. Given the big increases we’ve seen from hyperscaler CapEx, I mean, what is the unlock or what do you see as the key issues for Nokia increasing materially that percentage of sales to hyperscalers that you’ve got now and moving towards double digits and beyond?

Justin Hautard, President and CEO, Nokia: Yeah, Richard, thank you for that. Think a couple of things. First of all, the functional changes that we’re making are really around functional support organizations. I think there’s plenty of companies that have their operating models aligned functionally like we’re doing, and again, just to reiterate, if you look at our organizations, our legal team, legal compliance and sustainability was actually operating this way already, and the other functions were operating in a slightly different manner, so we’re just driving consistency within the company. Separating that, let’s talk about two things that are important for hyperscalers.

One is the customer relationship and customer intimacy. This is where the BG structure, and specifically the sales team we have in NI, including the team that we’ve integrated from Infinera, is very important, and it’s understanding those customers, understanding they’re predicting able to work with them around product design, forecasting, planning, and obviously supply chain execution and delivery, as well as negotiating terms and all the things you would expect. As I think about this, for me, the biggest opportunities for us right now, one is continuing the focus and building the intimacy with those hyperscale customers through that team, and two is really the portfolio. I think if you look at just the progress that we’re now disclosing in the second quarter, with a book to bill that’s above that, and an award that’s not in the second quarter, I think we’re making good progress. We need to continue to gear our products and portfolios to exactly what those hyperscalers are looking for, and then continue to work with them on a very close and intimate basis.

I think we’ve made progress, there’s still work to do. Obviously, we’re coming from a position of not having as much exposure there, as you rightfully noted. We’re in a bit of a challenger mode, and that also requires just investment in time, as I think I commented on last quarter.

Richard Kramer, Analyst, Arete: Okay, thanks. And just a quick follow-up, I mean, the area that we’re hearing a lot about expansions from big U. S. Telcos is in their fiber build programs. Is that something you see accelerating into 2026, where these large announcements that have been made by the two largest U.

S. Carriers to increase fiber builds is something Nokia can directly address?

Justin Hautard, President and CEO, Nokia: This is a place where we have a very healthy portfolio, as you rightfully pointed out, Richard. Think the other comment I would make is really encouraged by the announcements. I think it’s very positive sign around the big beautiful bill in The US that was enacted into law earlier this month, that there’s going to be continued investment. I’m also cautiously optimistic that there’s going to be investment in Europe as well. I think for us, this is two things.

One is obviously opportunity for accelerating growth with our core OLT portfolio, the operator line terminals, but also opportunity for us to really think about innovation, how can we continue to help these customers and back to my macro comments, I think it’s, I’m also hearing from customers that we have opportunity to partner with them in a more complete solution area in this space. And that’s part of why I commented that we’re investing in innovation in this area.

David Mulholland, Head of Investor Relations, Nokia: Thanks, Richard. We’ll take our next question from Fredrik Lethel from Handelsbanken. Fredrik, please go ahead.

Fredrik Lethel, Analyst, Handelsbanken: Thank you, and good morning to all. Thanks for taking my question. I have one. We saw yesterday AT and T came with their report and they talked about their CapEx for the coming years. And we also know Trump’s big beautiful bill act.

And it seems like operators in The U. S. Are getting some tax advantages here. Can you talk a little bit about what you see there on the CSP place if that will be a driver for you? Thank you.

Justin Hautard, President and CEO, Nokia: Yeah, and I think, Frederic, I just answered this, but absolutely, we’re optimistic about this. I think anything that’s enabling investment in infrastructure is a positive for us and really encouraged by the comments out of some of our major customers in The US, including specifically AT and T, we’re a key supplier today. But having said that, I think that doesn’t mean we can sit on our hands, we have to invest in innovation, which is why I made the comments.

David Mulholland, Head of Investor Relations, Nokia: Did you have a follow-up, Frederic?

Fredrik Lethel, Analyst, Handelsbanken: Yeah, maybe a follow-up, if you could sort of expand a little bit on Europe, it looked quite healthy in the quarter. Is it really broad based or could you sort of pick three drivers behind the good momentum you saw in Europe?

Marco Varenne, CFO, Nokia: Yeah, hi, this is Marco. And actually saw a quite broad based development in Europe in all businesses, and it was quite healthy and welcomed as well, considering that Europe has been a little bit muted in the past. And of course, we hope that we can see some more development in Europe going forward, just Justin mentioned that hopefully the fibre investments also in Europe will take off more, but also the whole macroeconomic environment would give some improvement here.

David Mulholland, Head of Investor Relations, Nokia: Thanks, Frederic. We’ll take our next question from Ulrik Rath from Bernstein. Ulrik, please go ahead.

Ulrik Rath, Analyst, Bernstein: Yes, thanks very much. I wanted to ask about the guidance revision two days ago. Just to clarify, so you are halfway through the year, but I know that the range was still €500,000,000 as it was at the beginning of the year. So does this mean uncertainties have increased quite materially, doubled essentially? Or is there any other reason to keep the range?

And then in this context also, why did you not just indicate the lower end of the prior range, but actually lower at the midpoint of the range? Because the range was pretty wide, the downside sort of fits in that, and you could have just said, oh, it’s now at the low end of the original range. A bit more explanation, that would be helpful. Thank you.

Justin Hautard, President and CEO, Nokia: So Ulrik, thank you for that couple of comments. So first of all, if you go back to Q1, Marco and I both highlighted that we, given the one time charges we had in MN and then the tariff in Q2, which largely played out as expected, the 20 to 30,000,000 that we called out, we thought that the top end of the range would be challenging. And then obviously, now we’ve incorporated a full year look on tariffs. And obviously, this currency shift significant 90,000,000 of it being non operational, with, you know, with the impact of venture funds. So with all of that in play, we felt, you know, we felt it was prudent to lower the range, as we said, you know, what I would highlight is, what I’d highlight in addition to that is that underlying it, think we feel pretty good about operations, because what you probably noted is we did not actually call down an impact from the one time charge in mobile.

And I think that’s actually, you know, that actually probably underscores a little bit of optimism outside of currency and tariffs, which, we just felt it was it was not prudent to assume we could absorb and still meet the guidance range.

David Mulholland, Head of Investor Relations, Nokia: Did you have a follow-up, Ulrik?

Ulrik Rath, Analyst, Bernstein: No. Just to come back to part of the question. Thank you for that answer. But why is the range still 500,000,000 when you have, you know, six months now reported?

Justin Hautard, President and CEO, Nokia: Yeah, maybe just the other point I’ll make, and I’ll let Marco comment is in the second, know, obviously, if you look at our first half versus second half, and particularly in q4, you know, other than ’23, and probably ’20, which disruption from COVID in ’23, we had a significant shift in CapEx from the on the mobile network side. If you know, if you look at the business, we’re historically very back end loaded. And as we talked about, we had expectation this quarter that we’d see more demand from India and mobile networks that did not happen. So we feel very back end loaded, and we want to be balanced and disciplined in our forecast, because so much is in the second half. Marco, anything you want to add there?

Marco Varenne, CFO, Nokia: Yeah, just to add as well that we are still a little bit on the fly in what comes to tariffs, so now we have assumed the situation as today, but as we all know that we don’t exactly know how these tariffs will land in the end, and that’s why we want to keep the range a little bit wider, so we have flexibility there.

David Mulholland, Head of Investor Relations, Nokia: Thanks, Ulrik. We’ll take our next question from Sami Sarkamidis from Danske Bank. Sami, please go ahead.

Marco Varenne, CFO, Nokia: Hi. Could you provide a bit of color on network infrastructure performance in Q2? And how do you expect things to develop during third and fourth quarter for NI? When we look at Q2, we see a bit weak growth at IP and Optical combined with gross margin weakness.

Justin Hautard, President and CEO, Nokia: Thanks. Yes, a couple of comments from my end. I think, first of all, if you look at us against our U. S. Peers, obviously, we’re showing constant currency.

There’s a benefit that you have to also consider for currency tailwind that they’re reporting, so that’s one balance that we didn’t enjoy. The other thing I would just highlight, and we talked about this, was we had a of a shortfall due to supply chain constraints and an increasing demand environment. I’ll make two comments on that. Just on that alone on a constant currency basis, we would have expected double digit growth had we fulfilled that demand to a more consistent historical level. Second comment I would make is even with that, we’d have a strong book to bill.

Then again, that’s without the award that I touched on in my comments. So we feel quite good about the opportunity in terms of the second half. But again, this is largely driven off of an, we see as an increasing mix in hyperscale and AI data center customers.

David Mulholland, Head of Investor Relations, Nokia: Do you have a follow-up, Sami?

Marco Varenne, CFO, Nokia: Maybe a quick one. You talked about the need to have a more integrated, fast moving and leader Nokia. Can you elaborate on this a bit further? And will you be communicating related changes in the near term?

Justin Hautard, President and CEO, Nokia: Yeah, so we announced changes today around a single functional organization, maybe the one I didn’t touch on as explicitly, but we shared a few weeks back when the team is, in response to customer feedback, also announced or reinforced the position of the executive account manager. So within each of the businesses today, we have specialist sales forces, but when we made the change a couple of years ago, we did not have a top accounts function. So we’ve built a little bit of that capability. I think this is really important because our customers are not organized by product line. While there are differences in each of our product groups, they’re important, and they’re important not only because they touch areas of technology we invest in, the business model and how we monetize the technology, think of core versus mobile network with radio and RAN versus optical and IP, let alone broadband and fiber access networks.

While that’s important, it’s also important to understand that our customers are thinking about things on a more integrated basis, because they’re also considering their customers who are, many of our customers are increasingly addressing them in a more integrated manner. And then strategically, from a technology roadmap perspective, we need to be thinking about it end to end. And if you think about things like security, obviously, platforms and services, AI and automation, there’s clear opportunities. And I’ve heard that from many of our customers, both strategically and tactically, and that’s all very important. So better service for customers, number one.

And then underneath that, think if you look at some of the industry players, certainly some of our partners, I spent time studying our partners as well. And if you look at some of our partners that have announced, continued operating leverage opportunities, both using AI for their operations, many of them are focused on productivity and agility as the key stars. So for us, I feel like it’s similar that we need to have that kind of mindset of functional excellence. And so, we talked about this quite a bit as a leadership team and made the decision that this was the right step for the company, a consistent operating model across the functions, and a mindset around excellence so that we can improve agility and unlock operating leverage. And just

Marco Varenne, CFO, Nokia: what Justin said, we believe that it’s important that all the businesses will have the P and L responsibility. And our ambition is not to increase the headquarters. If we want to do something, it’s actually decreased the number of the cost of level of headquarters, just to be clear here as well.

David Mulholland, Head of Investor Relations, Nokia: Thanks, Sami. We’ll take our next question from Simon Leopold from Raymond James. Simon, please go ahead.

Simon Leopold, Analyst, Raymond James: Thank thank you very much for for taking the question. So Justin, you’ve been at the firm now for roughly one hundred days and you’ve talked a little bit about sort of priorities. But I guess what I’d like to get a sort of understanding of here is having had sort of this period to learn and adjust and you’ve talked about some organizational shifts. How do you characterize your priorities going forward versus what you thought when you first took the job and started?

Justin Hautard, President and CEO, Nokia: Yeah, thanks, Simon. I think a few probably a few key learnings and maybe I’ll talk about them across customers, technology and then, operational and financial execution. I think first of all, from a customer perspective, I think there’s a real opportunity to partner and to co innovate with our customers. Obviously every customer has a slightly different strategy and value position and how they compete. But I think there’s been a number of conversations where I’ve been really encouraged about the opportunity to be innovating with our customers in a way that perhaps we haven’t.

On the technology side, look, I think what’s important here is we have a lot of great technology and great people in the organization, particularly within our engineering and R and D teams. I think what we have opportunity to do is continue to be better members in the tech ecosystem. And what I mean by that is partner externally think outside in and collaborate more with what’s happening tech and across the industries that we play in. And then I’ll make the other comment of just focusing and not only the comments I made at the top around mobile and fixed access networks, transport and data center, but also as you think about in the stack, where does it make sense to partner versus where does it make sense to invest in core technology? Last comment I’ll make is just around financials and operations.

I think this is maybe the thing I haven’t emphasized in the comments I just made on the functions that Marco and I touched on, is that specifically, I think we have an opportunity also to be more predictable and more productive. And I think that’s one of the objectives I have is that, is not only to drive growth, but to drive a level of predictability and growth. Because obviously, when you look back historically, as you all well know, we haven’t been as predictable as certainly we would expect ourselves to be.

Rob Sanders, Analyst, Deutsche Bank: As a follow-up, yes, please.

Simon Leopold, Analyst, Raymond James: At the June, were some press reports suggesting that Nokia might be taking some actions to reduce headcount and to do some cost cutting. I know it sounds like a little bit of reorganizational efforts on your part, but it doesn’t sound like there were any major initiatives. Could you update us on really what you’re thinking about in terms of any initiatives around staffing, cost structure that might be related to those press reports? Thank you.

Justin Hautard, President and CEO, Nokia: Yeah, thanks, Simon. I just make a couple of comments there. I think first of all, we had a major restructuring program in ’23 that we announced that we’re still executing. So I think that’s important to understand, and we set some targets around that, and obviously a range around the restructuring charges at that time. We’re still within that point of execution of that program, so we’re still within the window there.

Second comment I would make is that having been in this situation before, I don’t think going forward, our objective should be to announce a big program, but much more building the muscle and the capability around driving productivity and operating leverage as a discipline. So there’s nothing new to update today on our restructuring program. But in addition, I think if you look at your best practice, it will be around making announcements around continuing productivity. I think you’ll see that in our results over time versus me telling you it’s going to happen. Marco, you want to?

Marco Varenne, CFO, Nokia: No, I think what you’ve just said several times is continuous improvement is something that we have to have in our genes. And this is something that every part of the company has to work on that thesis as well. And this is something that we will focus on very much and hopefully see improvements in our efficiency and productivity in the company.

David Mulholland, Head of Investor Relations, Nokia: Thanks, Simon. We’ll take our next question from Rob Sanders at Deutsche Bank. Rob, please go ahead.

Rob Sanders, Analyst, Deutsche Bank: Yes. Hi. Justin, can you discuss your view of the mobile networks business? I mean, is this a business where you’re okay being relatively subscale and treading water? Or do you have strong ambitions to build back scale and recover share in six gs?

I guess another way of asking this question is relative to your 5% of sales as hyperscaler led, how much of your R and D budget is going to go towards hyperscalers? Because I’m just trying to see trying to understand how you’re going to orient the business going forward. Thanks.

Justin Hautard, President and CEO, Nokia: Thank you. So first of all, it’s sort of two questions there. Let me ask you’re sort of asking, I think an implicit capital allocation question as well. So let me answer the mobile networks business. Think first of all, I believe this is a unique and highly strategic asset.

There’s four scale players in the world, two are in the West, Us and Ericsson. What I think is important, and I’ve said this consistently is, I don’t think it’s just about mobile networks. I understand how we report, but I think you have to look at MobilityCo. Every one of the scaled players, including the two competitors we have out of China, have the core networks business, the mobile networks assets, radios and RAN, and a robust IP portfolio. And I think you have to look at the business in totality, even as you report the segments.

And so I think first of all, that’s really critical. Second, I would say, when you look at our customer base, it’s very clear to me and I hear from my customers that we have opportunity to do more with them. Then I would just say third, as I’ve said before, I believe the AI super cycle is gonna drive a refreshed wave of investment in this space. It’s not there today, but I think we to be, we have to have a view of over the longer term of whether it’s smart glasses, drones, autonomous vehicles, obviously innovations that I think we’ll see even in the traditional mobile handset business, there’s going to be a set of innovations that drive opportunity for us and opportunity for our customers. And this is where also being a thoughtful partner to our customers, as I touched on earlier, is going be important.

In terms of capital allocation, I think what’s happened in NI and I would just emphasize this as one of the reasons I think Infinera was a very, very good acquisition for us is the market has shifted to cloud and AI driving the investment, the investment and the innovation curve on fixed networks. It used to be a lot of this innovation was out of transport networks. That’s now more and more transport networks and data center driving the left edge, whether you think about Ethernet switching speeds or obviously optical technology, what’s happening with pluggables inside the data center, which we just talked about, the innovation curve has shifted. So by default, our R and D has to be invested in that areas. But it’s not just in that, I think if you look at the hyperscalers and public cloud, they set an expectation for security, they set an expectation for ease of use and deployment of technology and performance.

And so there’s a number of areas where I think we, as targeting those customers in NI, we have opportunity to enable advantages for us across our customer base in that portfolio. And that’s been reconfirmed with some of my customer conversations. And then back to core and mobile, if you look at the portfolio of the mobile side, many of those cloud players and those hyperscalers are partners for us on mobile. We’ve talked about announcements in our core business as we’ve moved much more to a cloud first strategy for core in terms of the tech stack, but also in terms of where we run those platforms. And I think over time, we’re going to see some of those things move even into RAN.

And I think we need to be a partner there. So as I I look at capital allocation, that’s one element. As I think about these partners as being broad partners across our business, I think there’s significant opportunity.

David Mulholland, Head of Investor Relations, Nokia: Did you have a quick follow-up, Rob?

Rob Sanders, Analyst, Deutsche Bank: Just quickly on the fixed wireless access rollout in India. How long can this last in terms of being a tailwind for your business? Thanks.

Justin Hautard, President and CEO, Nokia: Yes, you want to talk about this, Marco?

Marco Varenne, CFO, Nokia: Yes, I guess thank you. I would say that many operators globally are looking into opportunities to utilise fixed wireless access, especially areas where they see that the mobile networks is not utilised fully, which is usually outside of the city centres, and there’s one way for them to capture more opportunities and customer base, and if and when there would be any fibre connection later, then they have already that customer connection, and they can just swap over that customer from fixed wireless access into fibre customer. And different operators see these opportunities coming different timelines as well. But right now we’ve seen that Indian operators have been quite active and seeing this opportunity to capture the customer base. And that’s why we’ve seen the tailwind there.

Justin Hautard, President and CEO, Nokia: I would just add on that front. I think when we look at this, there’s a couple of opportunities here. I think first of all, broadband access, wireless or fiber are opportunities for growth for us. Second, there’s opportunities on the operator side, and you think about that as OLT, as I touched on in my comments, but also, it’s actually innovation and services and technology we can deliver at the radio layer. We see that not only in India, but in North America as well, but there’s probably more we can do there.

Then I would just say third, obviously, it’s hard to predict exactly where the demand will go, and Marco rightfully pointed out that there’s usually a balance between how much wireless access you want to provide before you want to lay fiber, but I think the good thing, the unique thing for us is we can potentially benefit on both sides.

David Mulholland, Head of Investor Relations, Nokia: Thanks, Rob. We’ll take our next question from Sandeep Deshpande from JPMorgan. Sandeep, please go ahead. Sandeep, we can’t hear you.

Sandeep Deshpande, Analyst, JPMorgan: Hello. Sorry. Can you hear me?

David Mulholland, Head of Investor Relations, Nokia: Yes. Go ahead.

Sandeep Deshpande, Analyst, JPMorgan: Yeah. Yeah. Hi. My question is on network infrastructure. In the network infrastructure business, you are seeing this very strong growth in the fixed fixed network business.

I mean and you’ve talked you’ve talked about that in earlier questions. I wanna go back to the optical business where you highlighted the 6% organic growth. I mean, given the strength in the hyperscalers, why is that business not growing stronger at this point? Or is it that you need to expand your footprint at the customer base more? And following up on that, where are you in terms of the router biz the routing and switching in the hyperscalers and can where in terms of expanding your footprint with the hyperscalers?

Justin Hautard, President and CEO, Nokia: Yeah. Thanks thanks, Sandeep. I think a couple things. So on optical, again, I think if you if you look at that, largely pre acquisition, Nokia was not penetrated heavily in optical within the AI and cloud space. Within Finera, we’ve gained footprint there, but we’re behind our competition in terms of market share penetration.

I believe we have opportunity. That’s why things like what we announced with the 800 gig pluggable platform are important, because that gets us back to being competitive, and you’ll note that we were behind in that space. So I think the work that David and the team have done to start to catch up there is very important, and we need to continue to do work to make sure we hit future product intercepts. Second thing I would comment on there is, it’s your question IP and switching and routing is, we’ve had some traction in routing, I think more work to do in that space, switching less traction. But obviously, this is a place of focus for us.

But traditionally we haven’t made this a priority. It’s one of the things I think David and the team are looking at to see how much potential is there and we’ll give you more of a fulsome view on what we believe we can do there as we come to Capital Markets Day.

David Mulholland, Head of Investor Relations, Nokia: Thanks, Sandeep. Did you have a quick follow-up?

Sandeep Deshpande, Analyst, JPMorgan: No, that’s it. Thanks. Thanks,

David Mulholland, Head of Investor Relations, Nokia: Sandeep. We’ll take our next question from Felix Henriksen from Nordea. Felix, please go ahead.

Justin Hautard, President and CEO, Nokia0: Hi, thanks for taking my question. It’s on the Q3 outlook where you flagged somewhat stable operating margin sequentially, partly reflecting a bit weaker business mix. Is this reflective of just MN, which you highlighted, or do you also see weaker mix in the other segments? And also, do you have any visibility on mix improvement for the fourth quarter of the year?

Marco Varenne, CFO, Nokia: Yeah, thank you, Felix. I would say that if you look at normal seasonality that we’ve seen in the past years as well, we have had quite strong quarter four, and seasonally we believe that we see this year as well, getting back more than normal seasonality. And when it comes to second half, believe that we have a stronger performance in the second half compared to first half. And also if you look in the past, I think eight to ten years, seasonally between quarter two to quarter three, the sales has been flat. And this is something that is also quite typical seasonality in the company.

But also, we want to highlight when it comes to quarter three specifically is that in mobile networks, we see less software compared to quarter two, And that will have, of course, impact on the margins as well in quarter three.

David Mulholland, Head of Investor Relations, Nokia: Thanks, Felix. Did you have a follow-up?

Justin Hautard, President and CEO, Nokia0: Yeah, just a quick one on the cost base in Technologies, because I guess if we play around with the numbers, it seems like your $1,100,000,000 EBIT guidance for Technologies of the year assumes a step down in OpEx for the back half of the year, assuming that your sort of sales run rate keeps at the current level. So could you just discuss that a little bit? Why should we expect lower OpEx for technologies in the second half of the year?

Justin Hautard, President and CEO, Nokia: Yes. Thanks, Felix. I think the key thing here is OpEx is expected to be flat. We have some optimism on what we’ll do in the second half in terms of revenue.

David Mulholland, Head of Investor Relations, Nokia: Thanks, Alex. We’ll take our next question from Sebastian Stabowitz from Kepler Cheuvreux. Sebastian, please go ahead.

Justin Hautard, President and CEO, Nokia1: Yes. Hello, everyone, and thanks for taking my question. Have you seen any kind of put in orders affecting any of your businesses over the past few months? Or you think the order intake has been tracking fairly a normal evolution? That would be the first question.

The second one is linked to competition because your Nordic competitor was blaming stronger price competition in the RAN market over the past few months. Have you seen any kind of change in pricing dynamic or competitive landscapes over the past few months in mobile networks? Thank you.

Justin Hautard, President and CEO, Nokia: Yeah, so I think on your first question, adjusting for if you look at it on a constant currency basis, I think we feel pretty good about the forecast. I think it’s pretty consistent. Nothing in terms of pull ins. I think probably more what Marco and I are looking at is just given some of the news, particularly, which is a question earlier about The US, is there more opportunity? Though that feels like it’s more ’26 and beyond thing based on some of the announcements that have been made.

And then in terms of your second question around pricing, I wouldn’t say there’s anything that we see that’s abnormal at this point. As you know, the market regionally has very different dynamics. So in terms of pricing dynamics or specific competitive situations, it very much depends on the individual opportunity. I think we feel pretty good about what we see in terms of the market.

David Mulholland, Head of Investor Relations, Nokia: Thanks, Sebastian. We’ll take our next question from Jacob Bluestone from BNP Paribas. Jacob, please go ahead.

Justin Hautard, President and CEO, Nokia2: Thanks, David. Just to come back to the sort of phasing. You’ve mentioned a few times, it’s a very Q4 loaded year. And I

Justin Hautard, President and CEO, Nokia: guess if you can, first

Justin Hautard, President and CEO, Nokia2: of all, just explain a little bit more why is it quite so heavily skewed into Q4? And if you can maybe also help us understand just around your confidence, is the midpoint of that guide covered out of your existing order book? Or how far away are you from sort of in terms of your orders?

Marco Varenne, CFO, Nokia: Yeah, thank you. I can start and then Justin can build on. What comes to the seasonality in this industry is pretty much driven actually how customer behaviour is and how they see what needs they do have when they are investing in their networks, and usually towards the latter part of the year in quarter four as well, if they see that there’s some opportunities for them to do any upgrades or additional investments in the CapEx frame that they have, that’s when they usually come and ask us to do. And this has been the pattern in the market quite a long time. And then what comes to in general, I would say that different sectors behave a little bit differently, so there’s more the CSP side.

Then when it comes to hyperscalers side, they are perhaps more focusing on gradual investments, and not always thinking like CSPs that quarter four would be very heavy. But as we said, only 5% of the sales is in hyperscalers today. That’s why we are quite dependent on the cycles that CSPs have. I can mention what comes to order coverage. It depends also between different businesses.

When you go to a project business like mobile network proxies, usually your order book is longer, and you have a more coverage a couple quarters ahead, while when you are in more shorter term business like in network infrastructure, then your coverage is lower. But I would say that we don’t see any deviations from the normal pattern that we normally have in this year.

David Mulholland, Head of Investor Relations, Nokia: Thanks, Jacob. We’ll take our next question from Emil Imenen from Carnegie. Emil, please go ahead.

Justin Hautard, President and CEO, Nokia3: Hi. Thanks for taking my questions. Just a couple more, maybe on the order book. Could you go into a little bit of detail on what the order book looks like as a whole in network infrastructure and how it has developed year on year and Q o Q?

Justin Hautard, President and CEO, Nokia: Yeah, I think just a couple of comments on this. We obviously don’t break this down in detail, but overall group book to bill was well above one. Optical was well above one, and as I touched on, even would have remained well above one had we fulfilled all of the orders we would historically have fulfilled on traditional conversion rates. Then as I touched on the eight gig award that we disclosed, that order has not been booked. So I think, again, as you look at the overall funnel, we’re, I think we believe it’s quite healthy.

But having said that, as I touched on earlier, we have a lot of work to do to continue to grow and scale and in hyperscale, because as Marco highlighted, we’re at 5% of overall revenue mix, so there’s much more opportunity for us.

David Mulholland, Head of Investor Relations, Nokia: Did you have a quick follow-up, Anil?

Justin Hautard, President and CEO, Nokia3: Yeah, thanks for that. Then on mobile networks, I just wanted to know, how do you think about the segment in terms of what is needed for that to return to revenue growth?

Justin Hautard, President and CEO, Nokia: Yeah, I think first of all, obviously, this has been a challenging business for us over the last few years. Second of all, the market is flat. If you look at the market that’s addressable to us, and I’m really focused on geos where we can actually sell, we get to participate, the market’s largely flat. That’s largely because data consumption is somewhat flat, subscriber growth is flattened out. I mean, end customer metrics are there.

I think what we shared at MWC, or the team shared at MWC was that were starting to see recovered share from what we had lost in terms of cell sites. From my perspective, what I’m focused on is, to your point, overall revenue growth. I think right now though, it’s about making sure we preserve market share in a flat market, and then looking at where the opportunities are for us to gain share.

David Mulholland, Head of Investor Relations, Nokia: Thanks, Demo. We’ll take our next question from Francois Bouvignet from UBS. Francois, please go ahead.

Justin Hautard, President and CEO, Nokia4: Thank you very much. I have a quick question on the strategy, Justin, this more integrated end to end maybe. Nokia did that in the past, you know, at, you know, Rajiv at at the time when, you know, he acquired Alcatel. The idea was to do an end to end. And then Pekka came and then, you know, realized that maybe it was not the good solution, so we went back to best of breed.

And now you seem to go to go back again to the to the integrated part end to end. So how different is it from, you

Justin Hautard, President and CEO, Nokia3: know, the

Justin Hautard, President and CEO, Nokia4: previous work of Nokia? And because, you know, what make would make it work this time? Is there anything you can see in the past, you know, about what has been done and how you can be differently? Just trying to understand, you know, this strategy given it didn’t work in the past.

Justin Hautard, President and CEO, Nokia: Yeah. Thank you, Francois. So first of all, I’d I’d say a few things. One is, in my career, I’ve worked in many different models. And and I I I’m spent a lot of time understanding this and probably studied it pretty deeply in terms of my own companies and others.

There is no perfect model. It’s really about being customer in, marketing oriented, and then being focused on core innovation. For me, there’s a couple of things that are really important. I think it’s also important not to say we’re going back to something that was there before. That’s not the case.

What’s important here, and I think what we’re building on is BG accountability is very important. The businesses have different cycles, they have different investment areas. CNS is very focused on cloud native software, building a fabric and platform, we talk about APIs, that’s very different than a fixed broadband business, where we’re focused on OLT customers and in places where it makes sense, obviously selling consumer premise equipment. Very, very different businesses. What’s important is that we have the accountability around that.

The other thing is our customers are one customer set. I think sometimes from a model perspective, can get caught up in having too many, being so focused on the portfolio, you miss that the customer wants to engage with you in one way, because there’s one procurement organization, there’s one group CTO, there’s one customer portfolio that they’re engaging with, then I think we need to orient to our customers, and that’s why we’re making a bit of the balance on customer facing side. On the functional excellence piece, I think I covered this in my comments, The steps that we took in the past were the right steps at the time, and they’ve delivered value for the company. The reality is, as we look ahead, we felt like there were a different set of steps we needed to take, and in spending time with the team, I made the decision that we needed to really drive a consistency across the functions. Because again, as I’ll point out, when I came in, we had different operating models depending on the function.

So the reintegration of MBS, the alignment of the functions to a consistent model, I think is gonna be valuable. I think it’s better for our people, and I think it’ll ultimately unlock operating leverage. Those were really my two key decisions in this. So would spend, obviously I study history, I’m a student of history of what’s happened, studied other models, but I wouldn’t say that we’re dropping the prior model for the model that was two generations ago. I don’t think that’s the case at all.

I think we’re taking a step in evolution that’s setting us up to be better positioned, Early feedback from customers, and candidly from our people has been very positive around this more integrated approach, particularly on the go to market side.

Justin Hautard, President and CEO, Nokia4: Thank you.

David Mulholland, Head of Investor Relations, Nokia: Thanks Francois. Did you have a quick follow-up?

Justin Hautard, President and CEO, Nokia4: No, that’s fine. I’m conscious of time. Thank you.

David Mulholland, Head of Investor Relations, Nokia: Thank you all. That is our last question for today. Ladies and gentlemen, this concludes today’s call. I would like to remind you that during the call today, we have made a number of forward looking statements that involve risks and uncertainties. Actual results may therefore differ materially from the results we currently expect.

Factors that could cause such differences can be both external as well as internal operating factors. We have identified such risks in the Risk Factors section of our annual report on Form 20 F, which is available on our Investor Relations website. Thank you all for joining us.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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