In Q2 2024, Nokia recorded an 18% decrease in net sales and an 8% decline in operating profit compared to the previous year. Despite these challenges, this quarter showed robust cash generation, yielding a free cash flow of EUR 394 million, supported by Nokia's ongoing normalization of its working capital position.
With the challenges of 2023 conquered and more normalized customer inventory levels, Nokia is looking forward to “a stronger second half and a return to growth,” as it ventures towards 2025.
In Q2, Nokia announced two major transactions in the network infrastructure segment to support its strategic goal of active portfolio management: the divestment of Alcatel Submarine Networks to the French State and the acquisition of Infinera to increase the scale and profitability of its Optical Networks business in North America.
“These transactions will focus and strengthen our network infrastructure business with its future built on three market-leading units in fixed networks, IP networks and optical networks. We are investing in network infrastructure as we see a compelling opportunity in this business to drive mid-single digit net sales growth and improve our profitability to a mid-to-high teens operating margin over time,” explained President and CEO, Pekka Lundmark.
In June 2024, Nokia officially launched its Open Innovation Lab in Dubai, significantly enhancing the technological landscape of the Middle East and Africa (MEA) region. This initiative aims to drive regional innovation and accelerate the adoption of cutting-edge technologies like cloud, AI, and network automation.
WATCH: Nokia MEA Open Innovation Lab Inauguration
Segment Breakdown
In the network infrastructure segment, Nokia secured several significant fiber deals, including in the U.S., and received orders from a U.S. distributor for both fixed and IP products. These preparatory efforts were made to adequately supply operators under the BEAD program.
Lundmark noted that Nokia has once again begun to exhibit growth in North America, “which was one of the first markets where we [Nokia] saw the 2023 market slowdown.”
During Q2, InfraX and Nokia reached a significant milestone in the network infrastructure segment, revolutionizing connectivity solutions for businesses across the UAE. By combining their expertise and resources, they aim to deliver state-of-the-art network infrastructure solutions tailored to meet the unique needs of InfraX's clients in the UAE.
In the mobile networks segment, the market dynamic remains challenging as operators continue to be cautious, but there has been significant customer tendering activity. Notably, Nokia onboarded new customers, such as MEO in Portugal, and expanded its footprint with existing customers, demonstrating the strength of its product offering.
Nokia also concluded negotiations with AT&T regarding existing RAN contracts, giving them “clarity on the path forward” and ensuring that Nokia maintains “the value agreed in the contracts.”
In a groundbreaking achievement during Q2, Nokia successfully demonstrated its IVAS technology in a real-time call, despite the technology not yet being implemented in mobile networks. Showcasing the experience over a public 5G network, this inaugural live call utilized Nokia’s proprietary Immersive Voice technology.
In the cloud and network services segment, Nokia has demonstrated good progress. The entity has concluded deals and outlined organic efforts set to bring about new API capabilities and orchestration automation to customers. Notably, in Q2, Nokia signed several new Network-as-Code collaboration agreements with operators such as Orange, Telefónica, and Turkcell, along with ecosystem players, Google and Infobip, bringing its ecosystem total to 16.
Atul Purohit, Head of Technology, Cloud & Network Services, EMEA, shared that, from an API perspective, 2024 is going to be a year of scale. According to Purohit, Nokia is “looking at contributing to the forum and promoting world-wide API adoption, particularly in standardizing third-party ecosystem and developer exposure.”
Furthermore, Nokia supports e& UAE’s journey to become a cloud-native operator. With Nokia’s FP5-based technology, e& UAE can now provide significantly enhanced connectivity to hyperscalers, delivering superior performance, scalability, and security. This advancement supports mission-critical applications across evolved business-class services.
In the realm of cybersecurity, Nokia is partnering with Microsoft to deliver a specialized, state-of-the-art security solution. By leveraging their combined telco security expertise and AI platform, they aim to create a robust product for owners of both public and private networks.
“Looking forward, we believe the industry is stabilizing, and given the order intake seen in recent quarters, we expect a significant acceleration in net sales growth in the second half,” continued Lundmark.
While the dynamic is improving, net sales recovery is not progressing as Nokia expected. This has impacted its business group net sales assumptions for 2024. However, Lundmark affirmed that Nokia remains “solidly on track” to achieve its full-year outlook, which is supported by its “quick action on cost.”
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