Nokia ((NOK)) has held its Q3 earnings call. Read on for the main highlights of the call.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
Nokia’s recent earnings call presented a balanced mix of optimism and caution. The company showcased robust sales growth across its various business segments, particularly highlighting advancements in the AI and cloud customer segment and the successful integration of Infinera. However, the call also underscored challenges, such as declining margins and the necessity for ongoing cost control measures.
Net Sales Growth
Nokia reported a commendable 9% increase in net sales, with all business groups contributing to this growth. The company noted a strong order intake in optical networks and IP networks, primarily driven by demand from AI and cloud customers.
AI and Cloud Customer Segment Growth
The AI and cloud customer segment emerged as a significant contributor, accounting for 6% of Nokia’s group net sales. This growth was bolstered by strategic partnerships and new product launches, with 29% of optical networks’ sales stemming from this segment.
Infinera Acquisition Progress
Nokia is ahead of schedule in integrating Infinera, which has positively impacted both net sales and order intake growth in the third quarter. This integration is a key factor in Nokia’s recent performance improvements.
Cloud and Network Services Performance
Cloud and Network Services experienced a 13% sales growth, with a notable increase in gross margin by 380 basis points. This improvement was attributed to better delivery costs and enhanced operating leverage.
Nokia Technologies Sales Growth
Nokia Technologies reported a 14% increase in net sales during the third quarter, supported by the signing of several new deals, indicating a strong market presence and demand for its offerings.
Decline in Gross and Operating Margins
Despite the sales growth, Nokia faced a decline in group gross margin by 150 basis points year-on-year, primarily due to product mix issues in network infrastructure and mobile networks. The operating margin also decreased by 220 basis points, impacted by a one-time loss allowance reversal from the previous year.
Mobile Networks Gross Margin Decline
In the Mobile Networks segment, the gross margin fell by 370 basis points, attributed to a reduced contribution from software revenue, highlighting an area needing attention.
Cost Savings Program
Nokia aims to achieve EUR 450 million in savings by 2025. However, the company continues to encounter challenges in enhancing operational leverage and efficiency, emphasizing the need for continuous productivity improvements.
Forward-Looking Guidance
Looking ahead, Nokia anticipates sequential net sales growth in the fourth quarter, exceeding the historical seasonality of 22%. The company is on track to reach the midpoint of its operating profit outlook range of EUR 1.7 billion to EUR 2.2 billion. Nokia remains focused on operational leverage through productivity improvements, rather than large restructuring programs, as it progresses towards its cost-saving goals.
In conclusion, Nokia’s earnings call highlighted a blend of strong sales growth and strategic advancements, tempered by challenges in margin management and cost efficiency. The company’s forward-looking guidance suggests optimism for continued growth, driven by its strategic focus on AI, cloud, and network services.