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    NOKIA (NOK)

    NOK Q2 2024: Cost Cuts Yield €400M Savings, Guides Margins Above 11%

    Reported on Jun 16, 2025 (Before Market Open)
    Pre-Earnings Price$3.90Last close (Jul 17, 2024)
    Post-Earnings Price$3.73Open (Jul 18, 2024)
    Price Change
    $-0.17(-4.36%)

    What went well

    • Strong Order Backlog & Continued Order Intake: Executives highlighted that robust order intake over three consecutive quarters has built a strong order backlog—especially in Network Infrastructure and Mobile Networks—which supports the potential for accelerated revenue growth in future quarters.
    • Effective Cost Savings & Margin Improvement Initiatives: The company is executing its cost-cutting program aggressively with significant run rate savings (e.g., EUR 400 million already implemented) and improved operational efficiency, including the positive impact from the AT&T contract resolution, which should bolster both operating margins and cash flow.
    • Strategic Transactions & Diversification into High-Margin Areas: The strategic moves, such as the planned acquisition of Infinera and the divestment of ASN, are set to enhance network infrastructure capabilities and diversify revenue streams into less cyclic, higher-margin sectors like enterprise, defense, and data center switching, laying a strong foundation for long-term growth.

    What went wrong

    • Margin Pressure: Executives highlighted ongoing challenges in shifting cost structure to higher-margin software and service-based models, with large-scale systems projects continuing to drag margins down.
    • Reliance on India's Market Recovery: A significant portion of the revenue decline was attributed to India’s 5G deployment normalization, and future growth remains highly dependent on this market recovering as expected.
    • Delayed Revenue Recognition from Order Backlog: Despite strong order intake momentum, much of the revenue from these deals is deferred to future periods, posing near-term revenue uncertainty.

    Q&A Summary

    1. Margin Outlook
      Q: How will margins improve this year?
      A: Management noted that despite 6% NI EBIT in H1, they expect a boost to over 11% full‐year margins driven by strong Q4 volumes and cost action improvements, even though Q3 remains softer.

    2. AT&T Revenue Impact
      Q: How does AT&T affect revenue recognition?
      A: The EUR 150 million was accelerated due to contract amendments, with future revenue recognized on a normal run rate—about half of this level is expected in 2025.

    3. Cost Savings
      Q: How effective is the cost cutting program?
      A: The company has delivered EUR 400 million in savings, split between cost of sales and OpEx, rapidly reducing expenses to support improved profitability despite challenging market conditions.

    4. Order Intake Dynamics
      Q: What is the current order backlog trend?
      A: Strong order intake over the past three quarters has built a healthy backlog, although many Q2 orders will be recognized in 2025, implying near‐term softness but a robust outlook later.

    5. Buyback & Acquisition Strategy
      Q: Why accelerate buybacks now?
      A: The board is fast-tracking the EUR 600 million buyback program to counteract dilution from the Infinera acquisition, leveraging the solid cash position and strategic momentum.

    6. Cloud & Network Services Guidance
      Q: How will CNS perform this year?
      A: Guidance for Cloud and Network Services has been adjusted to –5% to 0% growth, impacted by a 3 pp headwind from a divestiture, but with expectations of renewed momentum through core network wins in Q4.

    7. Revenue Decline Attribution
      Q: What drove the revenue decline?
      A: Nearly the entire decline is attributed to a slowdown in India’s 5G deployment, with other regions remaining stable and operational changes not to blame.

    8. CapEx & Working Capital
      Q: What are the CapEx and cash flow impacts?
      A: CapEx was reduced from EUR 600 million to 550 million and, along with improved working capital management, supports robust cash flow despite timing effects from accelerated revenue recognition.

    9. Regulatory & RAN Outlook
      Q: What is the impact of German regulatory actions?
      A: Management explained that while German measures affect the mobile core by limiting Chinese vendor access, uncertainties remain around RAN implications, so clarity is still awaited.

    10. IPR Revenue Growth
      Q: Can IPR revenue accelerate soon?
      A: Initial high-margin tech deals like the video streaming agreement signal potential, though current IPR income remains modest with further growth expected over time.

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