Nokia reported a 32% decline in second-quarter operating profit due to weak demand for 5G telecom equipment. However, the Finnish telecoms group anticipates a sales recovery towards the end of 2024, driven by orders from North America.
The adjusted profit, which excludes certain charges and asset revaluations for comparability with last year’s results, dropped to 423 million euros ($462.38 million) from 619 million euros in the same quarter the previous year.
Nokia and its competitor Ericsson have faced reduced telecom equipment purchases from customers, prompting both companies to announce significant layoffs.
Net sales decreased by 18% year-on-year as the rapid pace of 5G technology investment in India, a key market, slowed down after substantial growth the year before.
Jefferies analysts noted that both sales and earnings fell short of forecasts when excluding one-offs. As a result, Nokia’s shares dropped by 8% by 0718 GMT.
CEO Pekka Lundmark acknowledged that sales recovery was taking longer than initially expected but predicted a significant acceleration in net sales in the second half of the year. This forecast aligns with similar predictions made by Ericsson last week.
Lundmark highlighted an improving fiber market in the U.S. and a $42 billion U.S. government initiative aimed at expanding citizens’ access to high-speed broadband. “This is creating some interesting additional dynamics for us because we are clearly the first mover with a product portfolio that meets the ‘Buy America’ requirements,” Lundmark told Reuters, adding that the real impact would be felt next year.
In Europe, Nokia and Ericsson might benefit from Chinese vendors losing market share following Germany’s decision to exclude Chinese companies like Huawei.
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