REG-Nokia Corporation Interim Report for Q1 2025

Nokia OyjAnnouncement

24/04/2025 06:00

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Nokia Corporation

Interim report
24 April 2025 at 08:00 EEST

Nokia Corporation Interim Report for Q1 2025

Network Infrastructure delivers strong net sales growth to start 2025
* Infinera acquisition completed during Q1, increasing Nokia's scale in
Optical Networks and with hyperscalers. Integration underway with many
portfolio decisions already taken. Positive momentum with customers, with Q1
seeing strong order intake for Infinera driven by growth in hyperscalers.
* Q1 net sales declined 3% y-o-y on a constant currency and portfolio basis
(-1% reported) due to a challenging prior year comparison in Nokia
Technologies. Network Infrastructure grew 11% on a constant currency and
portfolio basis while Cloud and Network Services grew 8%. Mobile Networks grew
2%.
* Comparable gross margin in Q1 decreased 820bps y-o-y to 42.3% (reported
decreased 820bps to 41.5%), half of which is related to lower net sales in
Nokia Technologies. It was also impacted by a contract settlement charge with
net impact of EUR 120 million in Mobile Networks.
* Q1 comparable operating margin decreased 990bps y-o-y to 3.6% (reported up
1 020bps to -1.1%), mainly due to lower gross margin and increased operating
expenses resulting from targeted investments for long-term growth.
* Q1 comparable diluted EPS for the period of EUR 0.03; reported diluted EPS
for the period of EUR -0.01.
* Q1 free cash flow of EUR 0.7 billion, net cash balance of EUR 3.0 billion.
* Full year 2025 outlook unchanged with comparable operating profit of between
EUR 1.9 billion and 2.4 billion and free cash flow conversion from comparable
operating profit of between 50% and 80%.
This is a summary of the Nokia Corporation Interim Report for Q1 2025
published today. Nokia only publishes a summary of its financial reports in
stock exchange releases. The summary focuses on Nokia Group's financial
information as well as on Nokia's outlook. The detailed, segment-level
discussion will be available in the complete financial report hosted at
www.nokia.com/financials. A video interview summarizing the key points of our
Q1 results will also be published on the website. Investors should not solely
rely on summaries of Nokia's financial reports and should also review the
complete reports with tables.

JUSTIN HOTARD, PRESIDENT AND CEO, ON Q1 2025 RESULTS

In the following quote, net sales growth rates are on a constant currency and
portfolio basis. 
Since joining Nokia as President and CEO three weeks ago, I’ve had great
engagements with some of our customers, partners and employees. I see great
potential for Nokia, and my early focus is on capital allocation to ensure we
both drive efficiency and invest sufficiently in the right growth segments for
long-term value creation. I am impressed with our core technology base across
our portfolio including in RAN and core as well as in IP, Optical and Fiber
technologies. In speaking with customers, it is clear we play a critical role
as a trusted partner operating their mobile and fixed networks and have the
potential to expand our presence in hyperscale, enterprise and defense
markets. Spending the time with our employees I've been excited by their
innovative spirit, energy and drive to unlock Nokia's full potential.

Our first quarter financial performance saw a net sales decline of 3%.
However, excluding the catch-up element of licensing deals signed in the prior
year, sales grew 7%. Our operating margin declined year-on-year due to the
challenging prior year comparison in Nokia Technologies and a one-time charge
in Mobile Networks, while profitability improved in both Network
Infrastructure and Cloud and Network Services.

Network Infrastructure net sales grew 11% with all units contributing to
growth and its backlog increased. The highlight of the first quarter was the
completion of the Infinera acquisition. Our expanded Optical Networks business
had a strong first quarter with 15% net sales growth along with several
important design wins, particularly with hyperscalers. We have initiated the
integration of Infinera and made many important roadmap decisions which we
communicated to customers in early April. We are on track to deliver our
synergy targets and I believe this acquisition has significant value creation
potential for Nokia.

In Mobile Networks we continue to see positive signs of stabilization with
further wins in addition to those we discussed last quarter. Today we have
announced an important contract extension with T-Mobile US. Regarding our
financial performance, net sales grew 2% but profitability was impacted by an
unexpected one-time contract settlement with a net impact of EUR 120 million.
The settlement related to a project for a single customer that started
shipping in 2019 and the settlement fully resolves the situation.

Cloud and Network Services delivered net sales growth of 8% and we continue to
see strong demand in the market for our 5G Core offers with additional
footprint won at AT&T, Boost Mobile, Ooredoo Qatar and Telefónica. Nokia
Technologies continued its execution with further deals signed in the quarter
that increased the contracted annual net sales run-rate to approximately EUR
1.4 billion.

Looking forward, we are not immune to the rapidly evolving global trade
landscape however based on early customer feedback, I believe our markets
should prove to be relatively resilient. In 2025, we continue to expect strong
net sales growth in Network Infrastructure, growth in Cloud and Network
Services and largely stable net sales for Mobile Networks. In Nokia
Technologies we expect approximately EUR 1.1 billion of operating profit.

Regarding the tariff situation, there could be some short-term disruption. We
will continue to utilize the flexibility of our global manufacturing network
to minimize impact of the evolving tariff landscape. Based on what we see
today, we currently expect a EUR 20 to 30 million impact to our comparable
operating profit in the second quarter from the current tariffs. Given the
lack of visibility, we have not taken an assumption related to tariffs in the
second half of 2025.

In terms of our outlook for the financial year 2025, we will continue to focus
on investing in future growth opportunities and we now have an unexpected
charge impacting Mobile Networks. Considering these factors, while achieving
the top-end of the range will now be more challenging, our comparable
operating profit guidance remains between EUR 1.9 and 2.4 billion. Our free
cash flow guidance remains between 50% and 80% of comparable operating profit.

In the coming months I will continue to listen and learn from customers,
employees, shareholders and other stakeholders. I will provide an update with
our Q2 results and I look forward to presenting our complete value creation
vision for Nokia at our capital markets day which we now expect to hold in
November.

Justin Hotard
President and CEO

FINANCIAL RESULTS

 EUR million (except for EPS in EUR)                  Q1'25    Q1'24    YoY change  
 Reported results                                                                   
 Net sales                                            4 390    4 444    (1)%        
 Gross margin %                                       41.5%    49.7%    (820)bps    
 Research and development expenses                    (1 145)  (1 125)  2%          
 Selling, general and administrative expenses         (728)    (693)    5%          
 Operating (loss)/profit                              (48)     405      (112)%      
 Operating margin %                                   (1.1)%   9.1%     (1 020)bps  
 (Loss)/profit from continuing operations             (60)     451                  
 Profit/(loss) from discontinued operations           —        (13)                 
 (Loss)/profit for the period                         (60)     438                  
 EPS for the period, diluted                          (0.01)   0.08                 
 Net cash and interest-bearing financial investments  2 988    5 137    (42)%       
 Comparable results                                                                 
 Net sales                                            4 390    4 444    (1)%        
 Constant currency and portfolio YoY change ((1))                       (3%)        
 Gross margin %                                       42.3%    50.5%    (820)bps    
 Research and development expenses                    (1 115)  (1 076)  4%          
 Selling, general and administrative expenses         (587)    (584)    1%          
 Operating profit                                     156      600      (74)%       
 Operating margin %                                   3.6%     13.5%    (990)bps    
 Profit for the period                                153      512      (70)%       
 EPS for the period, diluted                          0.03     0.09     (67)%       



 Business group results                            Network Infrastructure      Mobile Networks     Cloud and Network Services      Nokia Technologies      Group Common and Other      
 EUR million                                       Q1'25         Q1'24         Q1'25     Q1'24     Q1'25           Q1'24           Q1'25       Q1'24       Q1'25         Q1'24         
 Net sales                                         1 722         1 439         1 729     1 682     567             546             369         757         4             23            
 YoY change                                        20%                         3%                  4%                              (51)%                   (83)%                       
 Constant currency and portfolio YoY change ((1))  11%                         2%                  8%                              (52)%                   (83)%                       
 Gross margin %                                    40.6%         40.8%         30.9%     40.9%     45.9%           39.4%           100.0%      100.0%                                  
 Operating profit/(loss)                           135           85            (152)     (32)      14              (37)            259         658         (99)          (75)          
 Operating margin %                                7.8%          5.9%          (8.8)%    (1.9)%    2.5%            (6.8)%          70.2%       86.9%                                   

(1) This metric provides additional information on the growth of the business
and adjusts for both currency impacts and portfolio changes. The full
definition is provided in the Alternative performance measures section in
Nokia Corporation Interim Report for Q1 2025.

SHAREHOLDER DISTRIBUTION

Dividend

The Board of Directors proposes that the Annual General Meeting 2025 to be
held on 29 April 2025 authorizes the Board to resolve on the distribution of
an aggregate maximum of EUR 0.14 per share to be paid in respect of the
financial year 2024. The authorization would be used to distribute dividend
and/or assets from the reserve for invested unrestricted equity in four
installments during the authorization period unless the Board decides
otherwise for a justified reason. Subject to approval by the Annual General
Meeting, the Board is expected to resolve on the amount and timing of each
distribution so that the preliminary record and payment dates will be as set
out in the Board’s proposal to the Annual General Meeting. Accordingly, the
first expected record date would be 5 May 2025 and the expected payment date
would be 12 May 2025. The actual dividend payment date outside Finland will be
determined by the practices of the intermediary banks transferring the
dividend payments.

Share buyback program

On 27 June 2024, Nokia announced its intention to acquire Infinera in a
transaction that valued Infinera at US$1.7 billion equity value with up to 30%
of the consideration to be paid in Nokia American depositary shares, depending
on the elections of Infinera shareholders. To offset the dilution from the
transaction to Nokia shareholders, on 22 November 2024 Nokia announced a share
buyback program targeting to repurchase 150 million shares. This share buyback
program was completed on 2 April 2025. Under this program, Nokia repurchased
150 million of its own shares at an average price per share of approximately
EUR 4.69. The repurchases reduced the company’s unrestricted equity by
approximately EUR 703 million and the repurchased shares were cancelled on 23
April 2025.

OUTLOOK

The outlook provided below reflects the acquisition of Infinera.

                                    Full Year 2025                                          
 Comparable operating profit ((1))  EUR 1.9 billion to EUR 2.4 billion                      
 Free cash flow ((1))               50% to 80% conversion from comparable operating profit  

(1)Please refer to Alternative performance measures section in Nokia
Corporation Interim Report for Q1 2025 for a full explanation of how these
terms are defined.

The outlook and all of the underlying outlook assumptions described below are
forward-looking statements subject to a number of risks and uncertainties as
described or referred to in the Risk Factors section later in this report.

Along with Nokia's official outlook targets provided above, Nokia provides the
below additional assumptions that support the group level financial outlook.

                                                                        Full year 2025                  Comment                                                                               
 Group Common and Other operating expenses                              approximately EUR 400 million                                                                                         
 Comparable financial income and expenses                               Positive EUR 50 to 150 million                                                                                        
 Comparable income tax rate                                             ~25%                                                                                                                  
 Cash outflows related to income taxes                                  EUR 500 million (update)        Mainly reflecting evolving regional mix and the inclusion of Infinera                 
 Capital Expenditures                                                   EUR 650 million (update)        Reflecting the inclusion of Infinera                                                  
 Recurring gross cost savings                                           EUR 400 million                 Related to ongoing cost savings program and not including Infinera-related synergies  
 Restructuring and associated charges related to cost savings programs  EUR 250 million                 Related to ongoing cost savings program and not including Infinera-related synergies  
 Restructuring and associated cash outflows                             EUR 400 million                 Related to ongoing cost savings program and not including Infinera-related synergies  

ADDITIONAL TOPICS

Completion of Infinera acquisition

On 28 February 2025, Nokia announced the completion of the acquisition of
Infinera Corporation, pursuant to the definitive agreement announced on 27
June 2024. Infinera, the San Jose based global supplier of innovative open
optical networking solutions and advanced optical semiconductors, has become
part of the Nokia group effective as of the closing with Nokia holding 100% of
its equity and voting rights. The total purchase consideration was EUR 2.5
billion, consisting of cash proceeds, Nokia shares in the form of American
Depositary Shares, the fair value of the portion of Infinera’s performance
and restricted shares attributable to pre-combination services that were
replaced with Nokia’s share-based payment awards and the fair value of
Infinera’s convertible senior notes in line with relevant bond indentures.
For more information regarding the acquisition, refer to Note 3. Acquisitions
in Nokia Corporation Interim Report for Q1 2025.

"Constant currency and portfolio net sales growth" alternative performance
metric

In Q1 2025, Nokia has introduced a new alternative performance metric (APM),
"constant currency and portfolio net sales growth”. Constant currency and
portfolio net sales growth is presented on a constant currency basis and also
assumes certain specific acquisitions had already been owned during both
periods and as if disposals had already occurred in both comparison periods.
This has been added to mainly consider the acquisition of Infinera and is an
evolution of the constant currency APM that had been previously used.

RISK FACTORS

Nokia and its businesses are exposed to a number of risks and uncertainties
which include but are not limited to:
* Competitive intensity, which is expected to continue at a high level as some
competitors seek to take share;
* Changes in customer network investments related to their ability to monetize
the network;
* Our ability to ensure competitiveness of our product roadmaps and costs
through additional R&D investments;
* Our ability to procure certain standard components and the costs thereof,
such as semiconductors;
* Disturbance in the global supply chain;
* Impact of inflation, increased global macro-uncertainty, major currency
fluctuations, changes in tariffs and higher interest rates;
* Potential economic impact and disruption of global pandemics;
* War or other geopolitical conflicts, disruptions and potential costs
thereof;
* Other macroeconomic, industry and competitive developments;
* Timing and value of new, renewed and existing patent licensing agreements
with licensees;
* Results in brand and technology licensing; costs to protect and enforce our
intellectual property rights; on-going litigation with respect to licensing
and regulatory landscape for patent licensing;
* The outcomes of on-going and potential disputes and litigation;
* Our ability to execute, complete, successfully integrate and realize the
expected benefits from transactions;
* Timing of completions and acceptances of certain projects;
* Our product and regional mix;
* Uncertainty in forecasting income tax expenses and cash outflows, over the
long-term, as they are also subject to possible changes due to business mix,
the timing of patent licensing cash flow and changes in tax legislation,
including potential tax reforms in various countries and OECD initiatives;
* Our ability to utilize our Finnish deferred tax assets and their recognition
on our balance sheet;
* Our ability to meet our sustainability and other ESG targets, including our
targets relating to greenhouse gas emissions;
as well the risk factors specified under Forward-looking statements of this
release, and our 2024 annual report on Form 20-F published on 13 March 2025
under Operating and financial review and prospects-Risk factors.

FORWARD-LOOKING STATEMENTS

Certain statements herein that are not historical facts are forward-looking
statements. These forward-looking statements reflect Nokia's current
expectations and views of future developments and include statements
regarding: A) expectations, plans, benefits or outlook related to our
strategies, projects, programs, product launches, growth management, licenses,
sustainability and other ESG targets, operational key performance indicators
and decisions on market exits; B) expectations, plans or benefits related to
future performance of our businesses (including the expected impact, timing
and duration of potential global pandemics, geopolitical conflicts and the
general or regional macroeconomic conditions on our businesses, our supply
chain, the timing of market changes or turning points in demand and our
customers’ businesses) and any future dividends and other distributions of
profit; C) expectations and targets regarding financial performance and
results of operations, including market share, prices, net sales, income,
margins, cash flows, cost savings, the timing of receivables, operating
expenses, provisions, impairments, tariffs, taxes, currency exchange rates,
hedging, investment funds, inflation, product cost reductions,
competitiveness, value creation, revenue generation in any specific region,
and licensing income and payments; D) ability to execute, expectations, plans
or benefits related to transactions, investments and changes in organizational
structure and operating model; E) impact on revenue with respect to
litigation/renewal discussions; and F) any statements preceded by or including
"anticipate", “continue”, “believe”, “envisage”, “expect”,
“aim”, “will”, “target”, “may”, “would”, “could“,
"see", “plan”, “ensure” or similar expressions. These forward-looking
statements are subject to a number of risks and uncertainties, many of which
are beyond our control, which could cause our actual results to differ
materially from such statements. These statements are based on management’s
best assumptions and beliefs in light of the information currently available
to them. These forward-looking statements are only predictions based upon our
current expectations and views of future events and developments and are
subject to risks and uncertainties that are difficult to predict because they
relate to events and depend on circumstances that will occur in the future.
Factors, including risks and uncertainties that could cause these differences,
include those risks and uncertainties identified in the Risk Factors above.

ANALYST WEBCAST
* Nokia's webcast will begin on 24 April 2025 at 11.30 a.m. Finnish time
(EEST). The webcast will last approximately 60 minutes.
* The webcast will be a presentation followed by a Q&A session. Presentation
slides will be available for download at www.nokia.com/financials.
* A link to the webcast will be available at www.nokia.com/financials.
* Media representatives can listen in via the link, or alternatively call
+1-412-317-5619.
FINANCIAL CALENDAR
* Nokia's Annual General Meeting 2025 is planned to be held on 29 April 2025.
* Nokia plans to publish its second quarter and half year 2025 results on 24
July 2025.
* Nokia plans to publish its third quarter and January-September 2025 results
on 23 October 2025.
About Nokia

At Nokia, we create technology that helps the world act together.

As a B2B technology innovation leader, we are pioneering networks that sense,
think and act by leveraging our work across mobile, fixed and cloud networks.
In addition, we create value with intellectual property and long-term
research, led by the award-winning Nokia Bell Labs, which is celebrating 100
years of innovation.

With truly open architectures that seamlessly integrate into any ecosystem,
our high-performance networks create new opportunities for monetization and
scale. Service providers, enterprises and partners worldwide trust Nokia to
deliver secure, reliable and sustainable networks today – and work with us
to create the digital services and applications of the future.

Inquiries:

Nokia
Communications
Phone: +358 10 448 4900
Email: press.services@nokia.com
Maria Vaismaa, Global Head of External Communications

Nokia

Investor Relations
Phone: +358 931 580 507
Email: investor.relations@nokia.com

Attachment
*     2025 Q1 Nokia_ Earnings_release_English
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