Finnish telecoms giant Nokia posted a surprising 32% increase in net profit for the third quarter, despite an 8% decline in sales.
The company’s net profit rose to €175 million, driven by improved product mix, regional mix, and cost-cutting measures.
Nokia’s CEO, Pekka Lundmark, attributed the profit growth to the company’s strategic efforts to adapt to shifting market dynamics. “We’re now turning the corner in many parts of our business, even if some continue to experience market weakness,” Lundmark said.
However, the company’s sales fell short of analyst forecasts due to India’s market slowdown and a divestment in cloud and network services.
According to Atte Riikola, analyst with Inderes, Nokia’s earnings development was largely in line with expectations. However, Riikola noted that Nokia’s net sales have been declining for over a year, with a minor recovery expected. Unfortunately, market recovery has been slower than anticipated.
Riikola forecasted a challenging 2025 for Nokia, citing difficulties in the network business. “Earnings are unlikely to grow next year,” he warned. The telecoms equipment sector faces significant headwinds, with major players like Nokia, Ericsson, and Huawei experiencing slowed investment from telecom operators and slackening growth in India.
To mitigate these challenges, Nokia and Ericsson are implementing cost-cutting measures. Nokia announced plans to cut up to 14,000 jobs (16% of its workforce) in October 2023, primarily due to weakening US demand. Ericsson also posted a 4% drop in Q3 sales, mirroring Nokia’s challenges.
Despite these challenges, Nokia maintained its operating profit outlook at €2.3-2.9 billion. The company’s focus on 5G and network infrastructure remains crucial for future growth. However, Riikola cautioned that the market will be tough to navigate for years to come.
Nokia’s Q3 results reflect the company’s efforts to adapt to a rapidly changing market landscape. While profit growth is a positive sign, the sales decline and industry challenges underscore the need for continued innovation and cost efficiency.
