Nokia Oyj (NYSE: NOK) plummets over 7.14% in early session on Thursday as in the first quarter, the Finnish telecoms operator missed earnings projections and warned consumers were beginning to cut down on spending. However, the business maintained its full-year projection and stated that it expected profitability to improve in the second half of the year.
President and CEO of Nokia, Pekka Lundmark stated that they had a strong start to 2023, with Q1 net sales increasing by 9% in constant currency. Their comparable operating margin was 8.2%, down 270 basis points year on year, owing principally to increased seasonality in Mobile Networks profitability, a smaller contribution from Nokia Technologies in the quarter, and a negative impact from venture fund investments.
Network Infrastructure had another solid quarter, with net sales growing by 13% in constant currency and operating margins increasing even further. It has seen unprecedented growth in optical networks, as well as major increase in IP networks and submarine networks. Mobile Networks net sales grew 13% as 5G deployments surged in India, more than offsetting a drop in North American spending. In terms of Mobile Networks profitability, the first and second halves of the year are seeing increased seasonality, as projected.
Cloud and Network Services had a 3% increase in net revenues in constant currency, although profitability was hampered by product mix. Nokia Technologies’ net sales fell 22% in the third quarter, owing mostly to a long-term license that no longer contributes after an option was exercised in Q4 2022. He said, they remain convinced that Nokia Technologies will recover to an annual net sales run rate of EUR 1.4-1.5 billion.
With 62% net sales increase in constant currency, they maintained their strong momentum in Enterprise. They are making significant success in both webscale and private wireless, and they anticipate strong double-digit growth for the whole year.
Looking ahead, they are beginning to notice symptoms of the economic situation influencing client spending. Given the continuous need to invest in 5G and fiber, they view this as largely a time issue; but, they will maintain their cost discipline to guarantee they can effectively traverse this uncertainty. They are still on course to achieve another year of growth in 2023, so their projection remains intact, with the assumption that profitability will be greater in the second half of the year than in the first.
