Despite macroeconomic uncertainties, Nokia Corporation delivered a resilient performance during Q2. Net sales remained flat year-on-year in constant currency, with a slight decline of 3% on a reported basis. Notably, Enterprise net sales saw substantial growth, rising 27% year-on-year in constant currency (25% reported).
However, the comparable gross margin experienced a 180 bps decline year-on-year, reaching 38.8% (the reported margin declined 200 bps to 38.2%). This drop is primarily attributable to the regional mix in Mobile Networks. Nevertheless, the strong margin in Network Infrastructure and catch-up net sales in Nokia Technologies partially offset this decline.
Furthermore, the comparable operating margin also faced a decrease of 120 bps year-on-year, settling at 11.0% (the reported margin declined 130 bps to 8.3%). This decline was driven by the aforementioned gross margin factors, but it was partly mitigated by reduced operating expenses and higher operating income.
The comparable diluted EPS (Earnings Per Share) stood at EUR 0.07, while the reported diluted EPS was EUR 0.05. Nokia reported a negative free cash flow of EUR 0.4 billion, resulting in a net cash balance of EUR 3.7 billion.
In light of these results, Nokia adjusted its full-year 2023 outlook. The company now expects net sales for the year to fall in the range of EUR 23.2 billion to EUR 24.6 billion, with a comparable operating margin anticipated to be in the range of 11.5% to 13.0%, as announced on July 14, 2023.
Regarding this news, Pekka Lundmark, president and CEO of Nokia, stated: "In Q2, we delivered stable net sales in constant currency compared to the prior year. As a result of prudent management of our costs, we were able to deliver a solid comparable operating margin of 11.0%, despite the regional mix headwinds faced in our Mobile Networks business. Considering the significant decline in major North American operators' investments, our operating margin has proved resilient, even adjusting for the EUR 80 million of catch-up net sales in Nokia Technologies." Lundmark credited 5G deployments in India for offsetting weakness in North America.
Also read: Nokia's SaaS Service, ‘AVA Charging,’ Fosters 5G and IoT Monetization
