Nokia reported Q2 net sales of EUR 5.710 billion, flat yoy in constant currency, as gross margin declined to 38.8% due to regional mix in Mobile Networks, partly offset by a strong Network Infrastructure margin and catch-up net sales in Nokia Technologies.
Some highlights:
- Network Infrastructure business saw a 6% decline in net sales in constant currency as macro uncertainty impacted the business, particularly in IP Networks which declined 11%.
- Fixed Networks also declined, driven by Fixed Wireless Access and some modest inventory management, nonetheless fiber demand remains robust.
- Optical Networks saw continued strength with 16% growth.
- Mobile Networks business continued to benefit from 5G deployments in India offsetting on-going weakness in North America, delivering 5% net sales growth in constant currency.
- Cloud and Network Services achieved net sales growth of 2% in constant currency and delivered a 2.2% operating margin in the quarter.
- Nokia Technologies signed a new long-term patent license agreement with Apple.
Pekka Lundmark, Nokia CEO, writes: “Earlier in the year I highlighted that we were starting to see signs of macroeconomic challenges along with inventory digestion impacting customer spending and this has intensified through the second quarter. In the second half we expect these trends to continue to impact our business, meaning we now see second half net sales broadly similar to the first half in both Network Infrastructure and Mobile Networks with some sequential improvement visible into Q4.
“We have therefore reduced our net sales outlook for 2023 to EUR 23.2 billion to EUR 24.6 billion from the prior EUR 24.6 billion to EUR 26.2 billion. Proactive action by our business groups to manage cost is largely mitigating the impact to our operating margin and hence we only narrow the range to 11.5% to 13.0% from the prior 11.5% to 14.0%.
Looking beyond 2023, in Network Infrastructure we believe these impacts are mostly short-term in nature and that moving forward we see growth opportunities supported by the work we have been doing to diversify our customer base by growing in enterprise and webscale. In Mobile Networks there is still substantial need for operators to invest in 5G globally with only approximately 25% of the potential mid-band 5G base stations so far deployed outside China. We also remain focused on taking the necessary actions to improve our operating margin to double-digit. For the Group we remain committed to achieving at least 14% comparable operating margin longer-term.
Finally, given the strength of our balance sheet and EUR 3.7 billion net cash position I’m confident we have a firm foundation from which to navigate this period of uncertainty. I would like to thank all the Nokia employees for their hard work, cost focus and continued commitment.”
