Nokia reports smaller-than-expected quarterly profit

Nokia quarterly results: Finnish telecommunications equipment manufacturer Nokia disclosed a smaller-than-expected increase in quarterly profit on Thursday, attributing it to sluggish demand for 5G equipment in crucial markets like North America and India, which continued to impact sales.

CEO Pekka Lundmark addressed reporters, acknowledging the challenging landscape: "This will still be a weak year for the mobile RAN (radio access network) market, and we expect it to gradually pick up during the year."

Both Nokia and its Swedish counterpart, Ericsson, experienced a decline in demand for 5G equipment in North America, their largest market, along with market share setbacks in China. Consequently, both companies have adjusted their expectations and implemented cost-cutting measures, resulting in thousands of job layoffs.

In the first quarter, Nokia's operating profit, excluding certain items, stood at 597 million euros, up from 479 million euros a year earlier, despite a 19 per cent decline in sales when measured in constant currency. This figure fell short of the 663 million-euro profit forecasted by four analysts polled by LSEG.

Nokia's shares initially dropped by 3 per cent but later rebounded by 1.5 per cent as of 0801 GMT.

JPMorgan analysts observed that Nokia's underperformance in sales impacted the earnings but expressed confidence in the company's ability to rebound.

CEO Lundmark noted a positive trend in orders since late last year, despite ongoing market challenges. The Mobile Networks segment, responsible for 5G equipment orders, saw a 37 per cent decline in local-currency sales during the quarter, which Nokia anticipates will mark the low point for the year, with expectations for a recovery in the latter part of 2024.

Nokia reiterated its outlook from January, projecting a comparable operating profit of 2.3-2.9 billion euros for 2024. The company's comparable gross margin also improved, widening to 48.6% from 37.7 per cent.

While the long-term confidence of Nokia and Ericsson in the market is encouraging, analysts cautioned about macroeconomic uncertainties, elections, and geopolitical tensions affecting future prospects.

(With Reuters inputs)