Nokia’s Second-Quarter Profit Falls 37% Due to Reduced US Phone Operator Investment

Finnish telecommunications equipment maker Nokia reported a significant drop in second-quarter profits, largely influenced by reduced investments from North American mobile phone operators. While Nokia continues to compete with Ericsson and Huawei in the global 5G equipment rollout, the company witnessed growth in its mobile network business, driven by deployment in India.

However, net sales in North America declined as clients continued to review spending and reduce inventory levels. Nokia’s net profit fell by 37 percent to EUR 289 million in Q2, well below the Bloomberg survey’s analyst forecast of two billion euros.

Although net sales reached EUR 5.7 billion, down three percent overall, they remained flat on a constant currency basis. In North America, net sales dropped by a significant 42 percent, while in India, they soared by 333 percent. The company attributed the sales decline in North America to macroeconomic uncertainty affecting network infrastructure spending.

Nokia’s operating margin remained resilient at 11 percent despite the challenging market conditions, largely due to prudent cost management. However, Nokia issued a warning last week, lowering its yearly outlook, citing the impact of high inflation and rising interest rates on customer spending plans, particularly in North America.

As Nokia’s rival, Ericsson, also reported a rare net quarterly loss due to scaled-back investments in 5G networks by mobile phone operators, Nokia’s Chief Executive, Pekka Lundmark, acknowledged the intensifying macroeconomic challenges and inventory digestion impacting customer spending during the second quarter.