LAGOS – Nokia Corporation has shown a robust growth in its network infrastructure business in the first quarter (Q1) of 2025, despite facing challenges in other segments.
Nokia made this known in its interim 2025 Q1 report on Thursday.
The report stated that in spite of Nokia Corporation’s strong growth in its network infrastructure business in Q1 2025, the company’s overall profitability faced significant pressure due to a decline in Nokia Technologies and a one-time charge in mobile networks.
“In spite of an 11 per cent year-on-year increase in network infrastructure net sales, Nokia’s comparable gross margin and operating margin both experienced substantial decreases during the period.
“The comparable Q1 gross margin fell by 8.20 percentage points to 42.3 per cent, with half of this decline directly linked to lower net sales in Nokia Technologies, which faced a challenging prior-year comparison due to significant licensing deals,” the company said.
It stated further that the gross margin was negatively impacted by a notable contract settlement charge within mobile networks, amounting to a net impact of €120 million (N220.30 bn).
The report noted that this charge significantly contributed to the decrease in the company’s profitability for the quarter.
It said the comparable operating margin saw an even more pronounced decrease, falling by 9.90 percentage points year-on-year to 3.6 per cent.
“The decline was primarily driven by the lower gross margin and increased operating expenses, which the company attributes to targeted investments aimed at long-term growth.
“The one-time contract settlement in mobile networks played a significant role in this reduced operating profitability.
“As a result of these pressures on profitability, Nokia’s comparable diluted earnings per share (EPS) for Q1 stood at 0.03 euro, while the reported diluted EPS was -0.01 euro.
“These highlight the impact of the exceptional items on the company’s bottom line,” the report noted.
Despite these challenges, Nokia’s network infrastructure segment demonstrated robust growth, with net sales increasing by 11 per cent and its backlog also expanding.
It noted that the recent acquisition of Infinera was a key highlight, bolstering Nokia’s presence in optical networks and hyperscalers, adding that the integrated optical networks business reported a strong 15 per cent net sales growth.
It, however, stressed that the strong performance in network infrastructure was offset by the headwinds faced by Nokia Technologies and the unexpected charge in mobile networks.
Commenting, Mr Justin Hotard, President and Chief Executive Officer of Nokia, confirmed that the decline in the company’s operating margin was due to a challenging prior-year comparison in Nokia Technologies and a one-time charge in Mobile Networks.
He noted that while profitability improved in both network infrastructure, cloud and network services, the overall impact on the company’s financials was significant.
Hotard explained that the one-time contract settlement in mobile networks was related to a 2019 project for a single customer, and the settlement brought the issue to a close, as it was a one-off event.
“Looking ahead, Nokia maintained its full-year 2025 outlook for comparable operating profit, expecting it to be between €1.9 billion and €2.4 billion,” he said.
The Nokia boss explained that, however, achieving the top end of this range would now be more challenging, considering the unexpected charge impacting mobile networks.
The company also highlighted the potential impact of the evolving global trade landscape, currently expecting a €20 million to €30 million impact on its comparable operating profit in the second quarter from existing tariffs.
The report revealed that while Nokia’s network infrastructure business was demonstrating strong growth and the Infinera acquisition held promise, the company’s Q1 results underscored the challenges it faced in other segments.
It revealed that investors would be closely watching to see how Nokia navigated these headwinds and executed its strategy for long-term value creation in the coming quarters. (NAN)
