Release Date: January 30, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Nokia Oyj (NOK, Financial) reported a strong fourth quarter with a 9% growth in net sales.
- Network Infrastructure grew by 17% in Q4, with IP Networks being a standout performer with 24% growth.
- The company achieved a comparable gross margin of 47.2% and an operating margin of 19.1%, the highest since 2015.
- Nokia Technologies saw an impressive 85% growth in net sales in Q4 due to new deals and catch-up payments.
- The company generated a strong free cash flow of EUR 2 billion, ending the year with a net cash balance of EUR 4.9 billion.
Negative Points
- Mobile Networks experienced a 2% decline in net sales during the quarter.
- Gross margin for Mobile Networks declined slightly by 20 basis points to 38.1%.
- The company faces a 4 percentage point headwind in Mobile Networks from a customer decision made in 2023.
- Enterprise sales declined by 4% in constant currency, partly due to lumpiness in Webscale deals.
- The competitive environment remains challenging in Latin America, impacting market stability.
Q & A Highlights
Q: Can you comment on the visibility for 2025 and the expectations for Mobile Networks' gross margin?
A: Pekka Lundmark, CEO, stated that visibility for 2025 is better than a year ago, with a growing order backlog and robust customer CapEx commentary. While explicit net sales assumptions aren't provided, strong growth is expected in Network Infrastructure (NI) and Cloud and Network Services (CNS), with stable sales in Mobile Networks (MN) despite a 4% headwind from AT&T. The underlying Mobile Networks gross margin in 2024 was 38% to 39%, excluding one-offs like the AT&T settlement.
Q: What are the short-term trends with hyperscalers, and how does AI impact telco customers?
A: Lundmark highlighted hyperscalers and data centers as significant growth opportunities, with good deal traction, including with Microsoft and Nscale. The Infinera acquisition will enhance capabilities in optical networking. AI is impacting telcos in customer service, network management, and security. The edge compute market is a strategic focus, with telcos considering offering workload processing capabilities at the network edge.
Q: Can you elaborate on the growth trajectory for the Network Infrastructure segment?
A: Lundmark noted strong growth across all NI subsegments, including IP, optical, and fixed networks. While not specifying a figure, he indicated that the trends seen in Q4 2024 are expected to continue into 2025, with optical expected to pick up further, especially post-Infinera acquisition.
Q: What are the expectations for data center growth and the split between R&D and go-to-market investments?
A: Lundmark explained that the EUR100 million investment will ramp up during 2025, targeting an additional EUR1 billion in sales by 2028. The investment will be split between R&D and go-to-market efforts, with a focus on leveraging the significant market opportunity in data centers.
Q: How do you view the competitive landscape with Chinese suppliers, given potential changes in US policy?
A: Lundmark stated that while the US market share of Chinese suppliers is small, their presence is significant in Europe and other regions. The impact of US policy changes on Chinese suppliers' access to advanced silicon and their competitiveness remains uncertain, and Nokia is observing these developments closely.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
