Nokia Corporation has released its financial results for the first quarter (Q1) of 2025. The company’s net sales declined by three per cent year-on-year (YoY) in constant currency due to a challenging prior year comparison in Nokia Technologies. Network Infrastructure grew 11 per cent on a constant currency and portfolio basis while Cloud and Network Services grew eight per cent. Further, mobile Networks grew by two per cent in the same period.
Meanwhile, the comparable gross margin declined 820 bps YoY to 42.3 per cent, half of which is related to lower net sales in Nokia Technologies. It was also impacted by a contract settlement charge with net impact of EUR 120 million in Mobile Networks. Further, Q1 comparable operating margin decreased 990bps YoY to 3.6 per cent, mainly due to lower gross margin and increased operating expenses resulting from targeted investments for long-term growth
During the quarter, the comparable diluted earnings per share (EPS) stood at EUR 0.03; while the reported diluted EPS was EUR -0.01. Further, Q1 reported free cash flow of EUR 0.7 billion and net cash balance of EUR 3.0 billion
Nokia expects full-year 2025 comparable operating profit of between EUR 1.9 billion to EUR 2.4 billion and free cash flow conversion from a comparable operating profit of between 50 per cent and 80 per cent.
Commenting on the results, Justin Hotard, president and chief executive officer, Nokia, said, “In the following quote, net sales growth rates are on a constant currency and portfolio basis. Since joining Nokia as President and CEO three weeks ago, I have had great engagements with some of our customers, partners and employees. I see great potential for Nokia, and my early focus is on capital allocation to ensure we both drive efficiency and invest sufficiently in the right growth segments for long-term value creation. I am impressed with our core technology base across our portfolio including in RAN and core as well as in IP, optical and fibre technologies. In speaking with customers, it is clear we play a critical role as a trusted partner operating their mobile and fixed networks and have the potential to expand our presence in hyperscale, enterprise and defense markets. Spending the time with our employees I have been excited by their innovative spirit, energy, and drive to unlock Nokia’s full potential.
Our first quarter financial performance saw a net sales decline of 3 per cent. However, excluding the catch-up element of licensing deals signed in the prior year, sales grew 7 per cent. Our operating margin declined year-on-year due to the challenging prior year comparison in Nokia Technologies and a one-time charge in Mobile Networks, while profitability improved in both network infrastructure and cloud and network services.
Network Infrastructure net sales grew 11 per cent with all units contributing to growth and its backlog increased. The highlight of the first quarter was the completion of the Infinera acquisition. Our expanded optical networks business had a strong first quarter with 15 per cent net sales growth along with several important design wins, particularly with hyperscalers. We have initiated the integration of Infinera and made many important roadmap decisions which we communicated to customers in early April. We are on track to deliver our synergy targets and I believe this acquisition has significant value creation potential for Nokia.
In mobile networks we continue to see positive signs of stabilisation with further wins in addition to those we discussed last quarter. Today we have announced an important contract extension with T-Mobile US. Regarding our financial performance, net sales grew 2 per cent but profitability was impacted by an unexpected one-time contract settlement with a net impact of EUR 120 million. The settlement related to a project for a single customer that started shipping in 2019 and the settlement fully resolves the situation.
Cloud and Network Services delivered net sales growth of 8 per cent and we continue to see strong demand in the market for our 5G Core offers with additional footprint won at AT&T, Boost Mobile, Ooredoo Qatar and Telefónica. Nokia Technologies continued its execution with further deals signed in the quarter that increased the contracted annual net sales run-rate to approximately EUR 1.4 billion.
Looking forward, we are not immune to the rapidly evolving global trade landscape however based on early customer feedback, I believe our markets should prove to be relatively resilient. In 2025, we continue to expect strong net sales growth in Network Infrastructure, growth in Cloud and Network Services and largely stable net sales for Mobile Networks. In Nokia Technologies we expect approximately EUR 1.1 billion of operating profit.
Regarding the tariff situation, there could be some short-term disruption. We will continue to utilise the flexibility of our global manufacturing network to minimise impact of the evolving tariff landscape. Based on what we see today, we currently expect a EUR 20 to 30 million impact to our comparable operating profit in the second quarter from the current tariffs. Given the lack of visibility, we have not taken an assumption related to tariffs in the second half of 2025.
In terms of our outlook for the financial year 2025, we will continue to focus on investing in future growth opportunities and we now have an unexpected charge impacting Mobile Networks. Considering these factors, while achieving the top-end of the range will now be more challenging, our comparable operating profit guidance remains between EUR 1.9 and 2.4 billion. Our free cash flow guidance remains between 50 per cent and 80 per cent of comparable operating profit.
In the coming months I will continue to listen and learn from customers, employees, shareholders, and other stakeholders. I will provide an update with our Q2 results and I look forward to presenting our complete value creation vision for Nokia at our capital markets day which we now expect to hold in November.”
