Nokia Q2 2025 Earnings Release and H1 2025 Interim Report

Financial Highlights

Nokia's financial performance for Q2 2025 and H1 2025 showed resilience despite currency headwinds. The company reported a slight decrease in comparable net sales of 1% in Q2 2025, excluding currency impacts and adjusted for the current company structure. This was primarily due to a 13% decline in Mobile Networks, influenced by a prior-year accelerated revenue recognition. However, Network Infrastructure saw an 8% increase in net sales, and Cloud and Network Services grew by 14%. The Technologies segment also grew by 3%.

Comparable gross margin remained stable at 44.7% in Q2 2025. Comparable operating profit margin decreased by 2.9 percentage points year-on-year to 6.6%, impacted by a negative €50 million effect from venture fund investments, including a €60 million negative change in valuation due to currency fluctuations. Tariffs also influenced operating profit.

Comparable diluted earnings per share were €0.04 in Q2 2025. Free cash flow for the quarter was €0.1 billion, with net cash totaling €2.9 billion.

Nokia revised its full-year 2025 comparable operating profit outlook to €1.6–€2.1 billion (previously €1.9–€2.4 billion), citing currency fluctuations and tariffs. The outlook for free cash flow remains unchanged, expected to be 50–80% of comparable operating profit.

CEO's Review

Nokia's CEO, Justin Hotard, highlighted the critical role of network connectivity in the AI era, emphasizing Nokia's unique position to lead market transitions across mobile, fixed, and data center networks. He noted the importance of a unified approach for customers and continuous improvement in operational efficiency.

The Q2 results were significantly impacted by currency movements, particularly the weakening of the US dollar. Despite a 1% decline in comparable net sales excluding currency impacts, net sales would have grown by 3% without a prior-year one-off contract settlement. Network Infrastructure sales grew by 8%, driven by strong demand in North America and Europe. Mobile Networks sales decreased by 13%, mainly due to the prior-year one-off item and project phasing in India. Cloud and Network Services showed strong growth of 14%, particularly in 5G core networks. Technologies segment sales increased by 3%.

Comparable gross margin remained stable at 44.7%. Venture fund investments had a negative impact of €50 million on operating profit, with no cash impact. Tariffs also affected profitability. Comparable operating profit margin declined to 6.6%.

The first half of the year saw strong free cash flow exceeding €800 million. Optical Networks orders remained robust, driven by hyperscale customers. Nokia secured significant contracts, including one with a major US service provider and its first contract with a US hyperscale customer for 800G modules. Hyperscale customers represented 5% of net sales in the quarter.

The company anticipates a stronger second half of the year, with typical seasonality expected. Full-year expectations remain for strong growth in Network Infrastructure, growth in Cloud and Network Services, and largely stable net sales in Mobile Networks (excluding currency impacts and adjusted for current structure). Technologies segment is expected to deliver around €1.1 billion in operating profit.

Uncertainties related to currency fluctuations and tariffs are expected to impact full-year operating profit. Currency movements are estimated to have a negative impact of approximately €230 million, including €90 million from venture fund investment revaluations. Tariffs are expected to negatively impact operating profit by €50–€80 million. These factors led to the revision of the comparable operating profit outlook.

Segment Information

Network Infrastructure

Net sales in the Network Infrastructure segment increased by 25% year-on-year, or 8% excluding currency impacts and adjusted for the current company structure. Growth was observed across all business lines. Fixed Networks saw strong growth of 17% (excluding currency impacts), driven by the adoption of fixed wireless access in APAC. Optical Networks sales grew by 6% (excluding currency impacts and adjusted for the current company structure), with slight supply constraints expected to ease in Q3. IP Networks sales grew by 3% (excluding currency impacts), supported by demand from communication service providers, hyperscalers, and enterprise customers.

Gross margin improved year-on-year, primarily due to increased net sales and the inclusion of Infinera. The gross margin percentage remained largely stable. Operating profit increased year-on-year, reflecting the gross margin improvement, partially offset by higher operating costs related to Infinera integration and R&D investments. The operating profit margin slightly decreased year-on-year. Infinera's consolidation had a negative impact of €20 million on the segment's operating profit.

Mobile Networks

Reported net sales in the Mobile Networks segment decreased by 17%, or 13% excluding currency impacts. The decline was mainly in the Americas and APAC regions, while EMEA saw slight growth. The decrease in the Americas was primarily due to an accelerated revenue recognition from a contract settlement in Q2 2024. Project phasing in India affected APAC net sales. EMEA experienced a decline in the Middle East and Africa, offset by growth in Europe.

Both gross margin and gross margin percentage decreased compared to Q2 2024, which benefited from the prior-year contract settlement. Product and regional mix were favorable during the quarter.

Operating profit and operating profit margin declined compared to the previous year, mainly due to the impact of prior-year revenue recognition on gross profit. Operating expenses decreased, while other operating income declined slightly due to unfavorable currency movements.

Cloud and Network Services

Reported net sales for the Cloud and Network Services segment grew by 10%, or 14% excluding currency impacts. Growth was driven by the strength in Core Networks. Net sales increased across several regions, with strong growth in EMEA and the Americas. APAC saw growth in India and other parts of the region, partially offset by a decline in China. Gross margin percentage increased by 520 basis points year-on-year, driven by growth in net sales and profitability in both Enterprise Campus Edge and Core Networks.

Both operating profit and operating profit margin improved year-on-year, reflecting the increase in gross margin. Adjusted free cash flow was negative €5 million, mainly due to outflows related to net working capital, driven by a decrease in receivables offset by a decrease in payables related to incentive payments and an increase in inventories.

Technologies

Reported net sales for the Technologies segment remained flat, with a 3% increase excluding currency impacts. Growth was driven by new contracts signed over the past 12 months and some benefit from prior-period revenue recognition. The segment continued to perform well in expanding into growth areas such as automotive, consumer electronics, IoT, and multimedia.

The annual recurring revenue from the segment's order book remained approximately €1.4 billion, despite unfavorable currency movements. A slight decrease in operating profit was mainly due to increased operating expenses from ongoing R&D investments, partially offset by lower legal expenses. Adjusted free cash flow was €291 million, reflecting operating profit and a decrease in receivables. Adjusted free cash flow is expected to be closer to operating profit for the full year and beyond.

Group Common and Other

Reported net sales for Group Common and Other decreased by 25%. The increase in operating loss was primarily due to a positive revaluation of Nokia's venture fund investments, more than offset by unfavorable currency movements of €60 million, resulting in a negative impact of approximately €50 million in Q2 2025, compared to a profit of €10 million in Q2 2024.

Adjusted free cash flow was negative €228 million, reflecting operating loss and outflows related to a decrease in payables.

Financial Statements

Consolidated Income Statement (Condensed)

The tables present a condensed view of Nokia's consolidated income statement for Q2 2025 and H1 2025, comparing them with the corresponding periods in 2024. Key figures include net sales, cost of sales, gross profit, R&D expenses, SG&A expenses, operating profit, and profit for the period.

Consolidated Balance Sheet (Condensed)

The condensed consolidated balance sheet provides a snapshot of Nokia's assets, liabilities, and equity as of June 30, 2025, compared to previous periods. Key items include goodwill, intangible assets, property, plant and equipment, inventories, trade receivables, cash and cash equivalents, trade payables, and various debt instruments.

Consolidated Cash Flow Statement (Condensed)

The condensed consolidated cash flow statement details Nokia's cash flows from operating, investing, and financing activities for Q2 2025 and H1 2025. It shows the movement in cash and cash equivalents and provides insights into the company's cash generation and usage.

Other Information

Shareholder Information

Nokia's total number of shares outstanding as of June 30, 2025, was 5,455,850,345. The company held 76,755,096 Nokia shares in treasury.

Risk Factors

The report outlines various risk factors that could affect Nokia's business, including intense competition, changes in customer network investments, ability to maintain product development plans and cost competitiveness, supply chain disruptions, inflation, macroeconomic uncertainty, currency fluctuations, tariffs, interest rates, geopolitical conflicts, and potential impacts of pandemics.

Forward-Looking Statements

Certain statements in the report are forward-looking and subject to risks and uncertainties. These statements are based on management's current expectations and beliefs and may differ materially from actual results.

Contact Information

For media and investor inquiries, please contact:

• Communications: +358 10 448 4900, press.services@nokia.com
• Investor Relations: +358 931 580 507, investor.relations@nokia.com

Nokia plans to publish its Q3 2025 and January-September 2025 interim financial results on October 23, 2025.