Nokia (NOK, Financial), the Finnish telecom equipment supplier, reported a 9% year-over-year increase in operating profit for the third quarter, thanks to cost-cutting measures. Despite a revenue drop of about 8% to €4.33 billion due to diminished sales in India, the company's earnings, particularly comparable EBIT, exceeded analyst expectations by reaching €454 million.
Nokia maintained its profit outlook for 2024 within the range of €2.3 billion to €2.9 billion but expects results to trend toward the lower end of this spectrum. Meanwhile, rival Ericsson (ERIC) showcased a more optimistic financial report, significantly surpassing profit forecasts due to its collaboration with AT&T, reflecting stronger North American market growth.
Both Nokia and Ericsson observe signs of recovery in the North American telecom market, albeit Nokia has lost market share over the years due to contract losses with Verizon (VZ) and AT&T (T). CEO Pekka Lundmark acknowledged a difficult cycle but now sees signs of market recovery, emphasizing substantial growth in network infrastructure.
Nokia's market scope in telecommunications is around $84 billion, and it is targeting data centers to fuel future growth. In June, it acquired Infinera, a U.S. optical networking equipment manufacturer, to enhance its capabilities in providing core network equipment critical for AI applications like ChatGPT. This strategic move aims to improve data processing efficiency in data centers.
The acquisition of Infinera allows Nokia to offer enhanced network hardware suitable for data centers, utilizing optical network solutions that provide higher bandwidth, lower latency, and greater energy efficiency. These advancements are essential for AI applications that demand large-scale data handling and real-time processing capabilities.
Nokia's recent contract acquisition from Vodafone Idea in India might revive sales in the region, with expectations of an additional contract from Bharti Airtel. Lundmark anticipates the Indian market will return to growth next year.
