Nokia's Q2 Earnings: Record-Low Revenue As 5G Investment Slows, Annual Outlook Cut, Stock Slides

Nokia Corp NOK reported a fiscal second-quarter 2024 net sales decline of 18% year-on-year (18% in constant currency) to 4.47 billion euros ($4.81 billion), missing the analyst consensus estimate of $5.24 billion.

The quarterly sales mark a record low since 2015 as weak investment in mobile network upgrades weighs on the 5G equipment market, Bloomberg reports. The stock price declined after the print.

The weak telecom equipment market has prompted Nokia to overhaul its network infrastructure division.

In June, Nokia invested $2.3 billion in AI-driven demand for data center services by acquiring Infinera. Additionally, Nokia plans to sell its undersea cable business, Alcatel Submarine Networks, to the French government.

Both net sales and operating profit got a boost of 150 million euros from Nokia’s resolution of an outstanding contract with AT&T Inc T.

Comparable EPS was $0.065 (0.06 euros) versus the analyst consensus estimate of $0.05. 

The reported net loss is (142) million euros, down from 289 million euros a year ago. Comparable net profit was 328 million euros, down from 409 million euros a year earlier.

Network Infrastructure sales declined by 11% year over year in CC due to the weak demand environment.

Cloud and Network Services sales decreased by 16% year over year in CC, reflecting lower net sales in each business.

Nokia Tech sales climbed by 5% year over year, driven mainly by signing patent license agreements with Oppo and Vivo.

Mobile Network sales declined by 24% year over year in CC, driven by a decrease in India.

Margins: Gross margin climbed by 380 bps to 43.3%, and comparable gross margin improved by 450 bps to 44.7%. The margins mainly reflected an improvement in Mobile Networks.

The operating margin increased by 110 bps to 9.7%, and the comparable operating margin declined by 190 bps to 9.5%, driven by lower net sales.

In the second quarter, Nokia held 6.85 billion euros in cash and equivalents and generated 0.4 billion euros in free cash flow.

Dividend: The Board resolved to distribute a dividend of 0.03 euros per share.

FY24 Outlook: Nokia expects (2)% – 3% (prior 2% – 8%) growth for Network Infrastructure sales, (19)% – (14)% (prior (15)% – (10)%) change in Mobile Networks sales, and (5)% – 0% (prior (2)% – 3%) change in Cloud and Network Services sales.

Nokia reiterated a comparable operating profit of between 2.3 billion euros – 2.9 billion euros and free cash flow conversion from a comparable operating profit of 30% – 60%.

The fiscal 2024 revenue and adjusted EPS consensus are $23.6 billion and $0.37.

Price Action: NOK shares traded lower by 5.13% at $3.70 premarket at the last check on Thursday.

Image: Nokia