Nokia reported Q1 2024 sales of EUR 4.667 billion, a drop of 19% yoy in constant currency (-20% reported). Q1 comparable diluted EPS amounted to EUR 0.09; reported diluted EPS of EUR 0.08.
Highlights
Mobile Networks Division
The Mobile Networks division faced significant challenges in the first quarter, with net sales falling by 37% in constant currency, primarily due to reduced spending in North America and India. The slowdown in India was anticipated following the rapid deployment of 5G in the first half of 2023, and the outlook for the region remains unchanged for the full year. However, the division experienced a robust gross margin of 42%, a notable improvement from 34% in the previous year. This improvement was partly due to a favorable shift in regional and product mix and partly due to exceptionally low indirect costs of sales. The division expects the first quarter to be the lowest point in demand, with activities expected to pick up progressively through the rest of 2024.
Network Infrastructure Division
The Network Infrastructure division of Nokia has shown promising signs of recovery, continuing the momentum of improved order intake from the end of the previous year into the first quarter. This uptick in orders contributed to year-on-year growth and an increased backlog. Specifically, the Fixed Networks segment has a positive outlook for 2024, often being an early indicator of market recovery. Conversely, the Optical Networks segment may experience a slower recovery. Despite broader economic challenges, the division is optimistic about returning to net sales growth in 2024, particularly with a stronger performance expected in the second half of the year.
Nokia Technologies Division
Nokia Technologies had an exceptionally strong start to the year, underscored by several significant patent licensing agreements. These deals boosted the division's annual licensing net sales run-rate from between EUR 0.9 to 1.0 billion in the fourth quarter of the previous year to approximately EUR 1.3 billion in the first quarter. The division also recorded over EUR 400 million in catch-up net sales during this period. With the smartphone licensing renewal cycle now complete and no major renewals on the horizon for several years, Nokia Technologies is poised for a period of stability. Looking forward, the division plans to focus its efforts on expanding into new growth areas, aiming to elevate its annual licensing net sales run-rate to between EUR 1.4 to 1.5 billion in the mid-term.
Cloud and Network Services Division
The Cloud and Network Services division began the year slowly, impacted by the challenging spending environment. Nevertheless, the division is witnessing improving order intake and momentum in its pipeline. A significant development has been progress with the Network as Code platform, which enables operators to monetize their 5G investments by offering developers advanced API access to the network. This platform has already attracted 11 operators, with many more in active discussions, promising new revenue streams and strategic growth in the future.
"We have been executing quickly on the operating model changes we announced back in October along with our cost savings roadmap. These actions, combined with our expectation for improved net sales growth in the second half of the year, supported by our order backlog, mean we are solidly on track to achieve our full year comparable operating profit outlook of EUR 2.3 to 2.9 billion and free cash flow conversion of 30% to 60%," stated Nokia CEO Pekka Lundmark.
