Release Date: October 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Nokia Oyj (NOK, Financial) reported strong growth in fixed networks (9%) and IP networks (6%) in Q3 2024, particularly in North America.
- The company achieved significant improvements in gross margin, expanding by 490 basis points year on year.
- Nokia Oyj (NOK) generated over EUR600 million in free cash flow in Q3, contributing to a net cash balance of EUR5.5 billion.
- The company is making progress in expanding to non-CSP customers, with increased investments in data centers, defense, and private wireless.
- Nokia Oyj (NOK) has made good progress on the Infinera acquisition, receiving necessary approvals and targeting closure in H1 2025.
Negative Points
- Net sales declined by 7% in Q3 2024, primarily driven by a 17% decrease in mobile networks.
- Optical networks saw a significant decline of 15%, with recovery expected to be slow.
- The overall market dynamic has been weaker than expected, impacting net sales assumptions.
- The company has lowered net sales assumptions for network infrastructure due to slower market recovery.
- Nokia Oyj (NOK) faces challenges in the Indian market, with sales expected to be at the lower end of the EUR1.5 billion to EUR2 billion range.
Q & A Highlights
Q: Can you explain the factors behind the considerable gross margin improvement and whether the one-off AR benefits impacted the gross margin?
A: The reversal of the allowance of trade receivables did not impact the gross margin as it was booked in other operating income and expenses. The gross margin improvement was equally driven by product mix, regional mix, and product cost reductions. - Marco Wiren, CFO
Q: Could you elaborate on the CoreWeave win and how it relates to Nokia's strategy of expanding into enterprise markets?
A: The CoreWeave win is significant as it positions us in the AI-driven data center market, which is a key growth area. We are targeting data centers as our number one growth opportunity, with existing references like Apple and Microsoft. The Infinera acquisition will further enhance our capabilities in this space. - Pekka Lundmark, CEO
Q: What is the outlook for the Indian market, especially considering the recent Vodafone Idea award?
A: We expect meaningful growth in India next year. While this year's investments by leading operators have been lower, we anticipate a recovery. Our revenue from India is tracking towards the lower end of the EUR1.5 billion to EUR2 billion range, but it will be above 2022 levels. - Pekka Lundmark, CEO
Q: How is Nokia progressing with its cost savings program, and why hasn't the target been increased despite slower market recovery?
A: We are pleased with the rapid progress, having achieved EUR500 million in run rate cost savings. The target range remains EUR800 million to EUR1.2 billion, allowing flexibility to adjust based on market conditions. We continue to execute the program swiftly. - Marco Wiren, CFO
Q: Can you discuss the dynamics within the Cloud and Network Services (CNS) division, given the traction in 5G core?
A: While 5G core and other strategic segments are growing, legacy segments like 3G core are declining, impacting overall CNS performance. We plan to provide more transparency on growth areas in the future. - Pekka Lundmark, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
