Nokia's Q1 Earnings Miss Estimates, Revenues Decline Y/Y

Nokia Corporation NOK reported weaker-than-expected first-quarter 2025 results, with both bottom and top lines missing the Zacks Consensus Estimate. The company's top line decreased year over year, primarily owing to declining trends in the Nokia Technologies segment. However, healthy free cash flow and solid traction in the Network Infrastructure, Cloud and Network Services segments are positives.

NOK’s Net Income

Nokia reported a net loss of €60 million ($63 million) or a loss of €0.01 (a penny) per share in the first quarter against an income of €438 million or €0.08 in the year-ago quarter. Lower net sales from Nokia Technologies, one-time contract settlement costs in Mobile Networks and increased investment in long-term growth initiatives impacted profits.

Comparable profit was €153 million ($160.9 million) or €0.03 (3 cents) per share, down from €512 million or €0.09 in the year-earlier quarter. The bottom line missed the Zacks Consensus Estimate of 5 cents. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

NOK’s Revenues

Quarterly net sales were €4.39 billion ($4.61 billion), down 3% from €4.44 billion in the year-ago quarter. Healthy demand in multiple segments was offset by weakness in Nokia Technologies. Revenues missed the Zacks Consensus Estimate by $5 million.

Net sales from Network Infrastructure totaled €1.72 billion ($1.81 billion), up from €1.44 billion in the year-ago quarter. The top line beat our revenue estimate of €1.52 billion. At cc, IP Networks recorded 7% growth year over year, owing to strength in India, Japan and the region of North America, with healthy demand from enterprise and hyperscale customers. Revenues from Optical Networks improved 15% year over year on a cc basis, backed by healthy traction in North America region. Fixed Networks witnessed a 9% rise year over year at cc, driven by growing fixed wireless access deployments in India and increasing investments in North America.

Mobile Networks generated revenues of €1.73 billion ($1.82 billion), up 3% year over year on a reported basis and 2% at cc. Net sales beat our estimate of €1.67 billion. Healthy demand in North America and APAC partially compensated for the declining trends in the Europe, The Middle East and Africa regions.

Net sales from Cloud and Network Services were €567 million ($596 million), up 4% year over year on a reported basis and 8% on a cc basis. Growth in Core Networks primarily supported the top line in this segment. The top line in this segment missed our revenue estimate of €781 million.

Nokia Technologies contributed €369 million ($388 million) compared with €757 million in the year-ago quarter. Net sales declined 52% at cc. A €400 million catch-up payment drove the net sales in the year-ago quarter. The top line benefited from positive trends in the automotive, consumer electronics, multimedia and IoT space.

Region-wise, net sales from the EMEA region decreased to €1.844 billion from €2.293 billion in the year-earlier quarter. Growth in Network Infrastructure and Cloud Network and Services was offset by weakness in the Mobile Networks in this region. Revenues in the APAC region improved to €1.06 billion, up 12% at cc year over year, backed by growth in all three Networks businesses. Sales rose 73% at cc in India.

Americas witnessed 18% growth at cc to €1.48 billion. Strong growth in Optical Networks and IP Networks in the Network Infrastructure segment, along with double-digit growth in the Mobile Networks, led to higher revenues in the region.

NOK’s Other Details

In the March quarter, the comparable gross margin decreased to 42.3% from 50.5% in the year-ago quarter. Declining sales of Nokia Technologies and lower gross margin in the Mobile Networks, owing to one-time contract settlement costs, affected the gross margin. The comparable operating profit decreased 74% year over year to €156 million ($164 million). Comparable operating margin declined to 3.6% from 13.5%.

NOK’s Cash Flow & Liquidity

In the March quarter, Nokia generated €890 million ($936.1 million) net cash from operating activities compared with €1.06 billion in the prior-year quarter.

As of March 31, 2025, the company had €5.54 billion ($5.99 billion) in cash and cash equivalents, with long-term interest-bearing liabilities of €2.28 billion ($2.47 billion).

Outlook of NOK

For 2025, Nokia expects a comparable operating margin in the range of €1.9-€2.4 billion. Free cash flow is estimated within 50-80% of comparable operating profit. Capital expenditure is estimated to be €650 million. Management expects €20-30 million impact on its comparable operating profit in the second quarter owing to the current tariff.

In 2025, the company expects strong momentum in 5G core offerings and major customer wins will drive growth in the Cloud and Network Services segment. Strong sales growth is expected at the Network Infrastructure segment. Nokia expects stable net sales from the Mobile Networks segment.

NOK’s Zacks Rank & Stocks to Consider

Nokia currently carries a Zacks Rank #3 (Hold).

Here are some better-ranked stocks that investors may consider.

InterDigital IDCC sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the trailing four quarters, InterDigital delivered an earnings surprise of 158.41%. It is a pioneer in advanced mobile technologies that enable wireless communications and capabilities. InterDigital boasts a comprehensive portfolio of more than 33,000 granted patents and applications. The company witnessed an exceptional year in innovation in 2024, with more than 5,000 new patent filings worldwide.

CommScope Holding Company, Inc. COMM sports a Zacks Rank #1 at present. Headquartered in Hickory, NC, CommScope is a premier provider of infrastructure solutions, including wireless and fiber optic solutions, for the core, access and edge layers of communication networks. The company currently operates in three segments — Connectivity and Cable Solutions, Networking, Intelligent Cellular and Security Solutions and Access Network Solutions. CommScope has an established global manufacturing and distribution footprint. Its strategically located manufacturing hubs optimize product delivery timelines.

United States Cellular Corporation USM sports a Zacks Rank of 1 at present. In the last reported quarter, it delivered an earnings surprise of 150%.

U.S. Cellular has taken concrete steps to accelerate subscriber additions and improve churn management. The company aims to offer the best wireless experience to customers by providing a superior quality network and national coverage. U.S. Cellular is well-positioned to support the investment required for network enhancements, including the deployment of 5G technology.

 Note: €1 = $1.05182 (period average from Jan. 1, 2025, to March 31, 2025)
         €1 = $1.08204 (as of March 31, 2025)

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