Nokia Corporation Q2 2025 Financial Summary
Business Context and Reporting Period
This Form 6-K summarizes Nokia Corporation's financial results for the second quarter and first half of 2025, reported on July 24, 2025. The period marks the first full quarter under new CEO Justin Hotard and includes the consolidation of the Infinera acquisition completed in February 2025. The company operates four primary segments: Network Infrastructure, Mobile Networks, Cloud and Network Services, and Nokia Technologies.
Key Financial Metrics
| Metric | Q2 2025 (Reported) | Q2 2025 (Comparable) | Q2 2024 (Comparable) |
|---|---|---|---|
| Net Sales (EUR million) | 4,546 | 4,551 | 4,466 |
| Gross Margin (%) | 43.4% | 44.7% | 44.7% |
| Operating Profit (EUR million) | 81 | 301 | 423 |
| Operating Margin (%) | 1.8% | 6.6% | 9.5% |
| Diluted EPS (EUR) | 0.02 | 0.04 | 0.06 |
| Free Cash Flow (EUR million) | 88 | N/A | N/A |
| Net Cash Balance (EUR million) | 2,879 | N/A | N/A |
Segment Performance (Constant Currency & Portfolio Basis):
- Network Infrastructure: Sales grew 8% (driven by Optical and Fixed Networks).
- Mobile Networks: Sales declined 13% (impacted by prior-year settlement benefits and project timing in India).
- Cloud and Network Services: Sales grew 14% (strong momentum in 5G Core).
- Nokia Technologies: Sales grew 3%.
Material Changes vs. Prior Period
Reported operating profit decreased 81% year-over-year to EUR 81 million, while comparable operating profit declined 29% to EUR 301 million. The decline in comparable operating margin (down 290 basis points to 6.6%) was primarily driven by:
- Venture Fund Impact: A negative EUR 50 million impact, including a EUR 60 million negative currency revaluation.
- Tariffs: Adverse effects on operating profit.
- Mobile Networks: A 13% sales decline due to the absence of a EUR 150 million accelerated revenue recognition benefit present in Q2 2024.
Despite the profit decline, gross margins remained stable at 44.7% on a comparable basis. Free cash flow for the first half of 2025 was strong at over EUR 800 million.
Guidance, Outlook, and Risks
Full Year 2025 Outlook Revision:
- Comparable Operating Profit: Revised down to EUR 1.6 billion – EUR 2.1 billion (previously EUR 1.9 billion – EUR 2.4 billion).
- Free Cash Flow Conversion: Unchanged at 50% to 80% of comparable operating profit.
Headwinds: Management cited two primary external headwinds impacting the outlook:
- Currency: A weaker US Dollar is expected to have a negative impact of approximately EUR 230 million relative to year-start expectations.
- Tariffs: Forecasted to impact operating profit by EUR 50 million to EUR 80 million.
Management Commentary: CEO Justin Hotard highlighted strong order momentum in Optical Networks (book-to-bill > 1) and successful integration of Infinera. The company expects stronger performance in the second half, particularly in Q4, consistent with seasonality.
Risks: Key risks include competitive intensity, supply chain disruptions, semiconductor procurement costs, geopolitical conflicts, and uncertainty regarding income tax expenses and patent licensing litigation.
Investor Verification Checklist
- Mobile Networks Recovery: Verify the timeline for project timing normalization in India and the sustainability of Mobile Networks sales without prior-year settlement benefits.
- Currency Sensitivity: Assess the impact of the EUR/USD exchange rate (outlook assumes 1.17) on future revenue and profit margins.
- Infinera Integration: Monitor the realization of synergies and the contribution of Optical Networks to the Network Infrastructure segment's growth.
- Tariff Exposure: Evaluate the specific product lines and regions most affected by the forecasted EUR 50-80 million tariff impact.
- Venture Fund Volatility: Review the composition of the venture fund portfolio and the likelihood of further currency revaluation impacts.