In the second quarter, Nokia, the Finnish telecom equipment company, experienced a significant decline in its net profit. The comparable net profit decreased by 29% to 415 million euros ($464.9 million), compared to 582 million euros in the previous year. Analysts had predicted a comparable net profit of 408 million euros according to FactSet. When considering reported figures, net profit amounted to 290 million euros, down from the expected 368 million euros. Nokia recently revised its full-year guidance and mentioned that second-quarter operating profit was boosted by approximately 80 million euros from catch-up sales in its technologies business.
In Q2, Nokia achieved net sales of 5.7 billion euros.
Nokia’s 2Q Performance
Nokia recently reported its 2Q performance, revealing a comparable operating margin of 11.0%, slightly lower than 12.2% last year, but in line with the company’s expectations. The mobile networks gross margin for the quarter fell to 33.4% from 40.2%, while the operating margin dropped to 7.9% from 11.2%. This decline can be attributed to the regional mix and the slower recovery observed in North America.
Despite these challenges, Nokia’s mobile network growth in 2Q was primarily driven by the ongoing 5G deployments in India and its continued market share expansion in the region. Additionally, the company saw growth in Europe, where it continued to gain market share. However, this growth was partially offset by declines in other regions, particularly North America.
On the bright side, the mobile infrastructure gross margin for the quarter rose to 37.1% from 35.4%, and the operating margin increased to 13.1% from 11.5%. This improvement can be attributed to a positive product mix and lower indirect costs of sales, including logistics costs, compared to the previous year.
Nokia expects its gross margin to improve further towards the end of the year, as the recovery in North America gains momentum. Despite the challenges faced, Nokia remains confident in its business strategy and is well-positioned to capitalize on the growing market opportunities in the telecommunications industry.
Nokia Lowers Sales and Margin Guidance for 2023
Nokia, the global technology company, has recently revised its guidance for 2023 net sales and operating margin. The new forecast predicts net sales between EUR23.2 billion and EUR24.6 billion, compared to the earlier estimate of EUR24.6 billion to EUR26.2 billion. Similarly, the projected comparable operating margin has been adjusted to 11.5% to 13%, down from the previous range of 11.5% to 14%.
Nokia attributes the downward revision to a combination of factors, including a weaker demand outlook in the second half of the year. This decline in demand can be attributed to both the macroeconomic environment and customers’ inventory digestion. Customer spending plans have been adversely impacted by high inflation, rising interest rates, and project delays, particularly in North America with some projects now being pushed to 2024.
Moreover, Nokia’s supply chain has faced challenges over the past two years, leading to inventory normalization. In light of these circumstances, Nokia has revised its growth outlook for the mobile networks sector in 2023 to -2%, compared to the previous estimation of +4%. Furthermore, the network infrastructure market outlook for 2023 has also been adjusted to +1% from +4%.
These adjustments reflect Nokia’s proactive response to market dynamics and serve as a strategic measure to align its operations with prevailing conditions.