Q2 2025 Nokia Oyj Earnings Call

Good morning ladies and gentlemen, welcome to Nokia's. Second quarter, 2025 results call, I'm Deon head of investor relations and today with me is Justin, hotard, our president and CEO along with Marco van our CFO

Before we get started a quick disclaimer, during this call, we will be making forward-looking statements regarding our future business, and financial performance. On these statements are predictions that involve risks and uncertainties actual results. May therefore, differ materially from the results we currently expect.

Factors that could cause such differences can be both external as well as internal operating factors.

We have identified such risks in the risk, factor section of our annual report on form 20f which is available on our investor relations website.

Within today's presentation, references to growth rates were, mostly be on a constant currency and portfolio basis. And other Financial items will be based on our comparable reporting

Please note that our Q2 report and a presentation that accompanies, this call are published on our website.

The report includes both reported and comparable, Financial results and Reconciliation between the 2.

In terms of the agenda for today, Justin will go through our key messages from the quarter and the market will go through the financial performance and will then move to Q&A with that. Let me hand over to Justin.

Justin Hotard: Thanks, David and good morning.

During my first quarter as president and CEO. I've spent significant time engaging with our stakeholders and it has left me with 2 conclusions.

Justin Hotard: First, I have increased optimism about our future opportunity.

Justin Hotard: It is clear to me that connectivity will be a critical differentiator in the AI super cycle.

Justin Hotard: That is true. Not only for the hyperscalers where it's visible today.

Is like the fence and National Security.

With our portfolio in Mobile and fiber access.

Justin Hotard: Transport and data center Networks.

Justin Hotard: Nokia is uniquely positioned to be a leader in this market transition.

We are investing to capitalize on this opportunity, and we are already starting to see success today in areas like Optical networking.

Justin Hotard: Second. Our customers expect us to engage with them as 1 integrated company as the majority of them partner with us a cross our portfolio.

Justin Hotard: We benefit greatly from the financial accountability, our business group structure gives us. However, we also need to evolve how we work. So we can move faster improve productivity and focus on what brings value to our customers.

Justin Hotard: as a result, we're unifying our corporate functions to simplify how we work and to build a more cohesive culture to help unlock operating Leverage

Justin Hotard: I'm looking forward to discussing our strategy and full value creation. Story at our Capital markets day in New York on November 19th.

Justin Hotard: According to our second quarter results are performance was mixed.

Justin Hotard: Good growth in both Network, infrastructure and cloud and Network Services. We offset by a decline in mobile networks. Primarily related to The Accelerated Revenue recognition seen in the prior year quarter.

Justin Hotard: our profitability was impacted by currency fluctuations, particularly the weaker US dollar, which was both an operational headwind and a headwind in our Venture fund,

Justin Hotard: We had a 50 million non-cash negative impact from our Venture funds in the quarter, which included a 60 million, euro, non negative impact from currency.

Justin Hotard: Excluding currency our profitability in the quarter.

Justin Hotard: Would have been in line with our expectations.

Justin Hotard: And we could continue to make investments in longer term growth opportunities.

Justin Hotard: The second quarter was the first full quarter since we acquired infinera. The combined Optical networks business has been performing well with a book to Bill. Well, above 1 showing continued, strong commercial momentum through our growth.

Justin Hotard: Through our growth was tempered somewhat by Supply constraints.

Justin Hotard: And we're on track to achieve our committed synergies from the acquisition.

Justin Hotard: Looking forward the demand environment remains broadly consistent with what we said last quarter.

Customers are largely continuing with the plans. They laid out at the start of the year and there has not been any Major Impact from geopolitical uncertainty.

Justin Hotard: As a result for the full year, we continue to expect strong growth in network infrastructure growth in cloud and Network Services and largely stable, net sales and mobile networks in Nokia Technologies. We still expect 1.1 billion euros of operating profit.

Let me share a few highlights from the quarter across our business groups.

In network infrastructure, we continue to see a strong demand environment in Optical networks and a positive reception to the infinera acquisition from customers.

Justin Hotard: 2 deals. I'd like to highlight an optical, our first award from a hyperscaler for 800 gig ZR. ZR plus pluggables and a deal with a large US Communication service provider.

Overall, hyperscalers are 1 of the biggest drivers of our order intake in the quarter and remain a significant growth opportunity for our Network infrastructure business.

Justin Hotard: Across the whole of Nokia, hyperscalers, accounted for 5% of net sales in the second quarter.

Justin Hotard: in it networks, we continued our leading position in the market remaining number 1 in Ed trouting and number 2, in total routing,

Justin Hotard: We continue to see a long-term opportunity in AI infrastructure and our investing to accelerate growth.

Recently, we've been an active participant in consortiums that are bidding to benefit from the eu's 20 billion Euro program to build AI gigafactories in Europe.

Justin Hotard: In fixed networks, we still expect strong growth this year and the appetite for fiber among Tier 1 csps remain strong.

Justin Hotard: Past 12 months have seen us, strengthen our Market leadership position in the operator premise equipment.

Justin Hotard: Ouellette, and we are continuing to invest in Innovation and passive Optical Networks.

Turning to mobile networks. At the start of the quarter. We signed an extension to our ran agreement with T-Mobile us, which we announced in our q1 earnings.

Justin Hotard: We also announced 5G deals with Alyssa and Finland and Optus in Australia.

Justin Hotard: We continue to see good overall commercial momentum. And the competitiveness of our products is resonating with customers.

We are optimistic about the potential 3gpp, technology can bring into the defense sector.

Justin Hotard: In Q2, we announced a partnership with blackned in which Ryan Mattel. Owns the minority a majority stake. And we now have delivered Banshee radio unions to the US Marine Corps through Nokia Federal Solutions.

Justin Hotard: Says, had a strong quarter with new 5G core wins, and deployments including across India, Europe, and the Middle East.

Justin Hotard: We're continuing to progress on our open API Journey with 57. Partners announced for our Network as code platform, including Telstra, and the bridge Alliance in Asia.

Justin Hotard: We also announced a partnership with Verizon in the UK to provide private 5G networks across multiple teams reports sites.

Finally, let me turn to our outlook for the full year 2025

as we announced on Tuesday, we decided to take the prudent approach of lowering, our full year, outlook from 1.9 to 2.4 billion euros to a new range of 1.6 to 2.1 billion euros,

Justin Hotard: The change has been driven by 2 factors that are largely outside of our control. The first impact is currency.

Justin Hotard: when we issued, our first issued, our guidance for 2025, the euro dollar rate was 1.04 and it has now moved significantly to 1.17

Justin Hotard: altogether. This currency movement is posing a 230 million euro headwind to our operating profit outlook for 2025.

Of which 90 million euros is related to the non-cash currency impact in our Venture fund portfolio.

Marco will provide you additional detail on this in his comments.

The second is the Tariff situation for the full year 2025. We now expect to see an impact in between 50 and 80 million euros tied to fulfillment of pre-existing customer orders.

Justin Hotard: The underlying performance across the business is in line with our expectations at the start of the Year. Therefore it is these 2 factors that lead us to change comparable operating profit Outlook. Our guidance for free cash flow conversion remains unchanged at 50% to 80% of comparable operating profit.

Justin Hotard: With that, let me hand over to Marco.

Marco Van: Thank you, Justin and hello from my side as well.

Marco Van: I'll just talk by discussing our overall group performance.

Marco Van: Go to 2. Net sales where 4.655 billion euros.

And that's a 1% decline on constant currency and portfolio basis.

Marco Van: Across margin was stable versus a year ago, a quarter at 44.7%.

Marco Van: More on networks and network infrastructure across margins by Pro to stable. While cloud and Network Services delivered on Improvement of 520 basis points, 3 of them by Topline growth,

Speaker Change: Operator margin declined to 6.6% as a result of the negative currency impact to our Venture funds, as well as the impact of terrorists which were within the 20 to 30 million range. We had expected

Speaker Change: assuming existing tariff rates. We now expect an impact to our full year, operating profit of around 50 to 80 million

Speaker Change: and we generated 88 million euros of recast flow in the quarter and ended the quarter with 2.9 billion of net cash.

now, turning to our business group performance,

Speaker Change: Network infrastructure delivered 8% growth.

Speaker Change: and each business unit crew with fixed networks, having a particular strong quarter growing 17%

Speaker Change: Optical networks, grow 6% and IP networks through 3%.

Speaker Change: Opticon networks growth was hampered by some modest supply chain constraints and could have grown over 10%.

Speaker Change: And we expect this issues to improve in the second half.

Speaker Change: Personal margin was rather stable. Despite the 110 basis points impact from tariffs in line with what we have expected,

Speaker Change: Operating margin declined slightly by 70 basis points. Euro Euro to 5.7%,

Speaker Change: And this was mainly the result of higher operating expenses associated with the infinera acquisition, as well as increased investments into growth opportunities.

Speaker Change: It is worth noting that the X inferior business was dilutive to avoid margin in the quarter. Although the integration process continues and we are moving quickly to deliver on our committed synergies.

Speaker Change: Net sales in mobile networks declined by 13% in the quarter.

Speaker Change: As mentioned much of this decline because of the 150 million euro in accelerated, Revenue recognition from a contract settlement that benefited the Euro quarter.

Speaker Change: Supporting rollouts impacted India. However, we did see some growth in Europe.

Speaker Change: Mobile networks cross margin was 41.1% in the quarter.

Speaker Change: The 70 basis points decline year-over-year as favorable product and Regional. Mix helped offset a difficult comparison related to the settlement that benefited the prior year.

These factors led to operating profit and margin declining this despite lower operating expenses.

Speaker Change: As we look to quarter 3, we expect cross margin to be.

Speaker Change: Below the normal run rate level as we expect an unfavorable product, mix shift in the quarter.

Speaker Change: For the full year. Mobile networks, first margin should remain in the normalized 37 to 38% range. When excluding the 1 time impact, we saw in quarter 1.

Speaker Change: Cloud and Network Services. Net sales through by 14% in the quarter reflecting continued momentum in core Networks.

Speaker Change: From Regional perspective CNS. So growth 3 in by North America and Asia Pacific and Japan.

Speaker Change: The higher level of net sales from strong expansion in both cross and operating margin, which improved, 520 and 850 basis points respectively.

Speaker Change: Nokia Technologies, net sales increased by 3% on a constant currency basis.

Speaker Change: We signed several new agreements as we continue to make progress in our cross. Uh, in our growth areas of Automotive consumer electronics iot and multimedia.

Speaker Change: Our net sales run rate remains approximately at 1.4 billion euros.

Speaker Change: now, let's look at the net sales by region, we saw a decline in North America, although this reflects mixed Trends mobile networks declined, because of the settlement in the year ago quarter, while we saw double digit growth in both Network infrastructure and cloud and Network Services

Speaker Change: within APAC. India sales were flat reflecting a pause in investment in mobile networks, which was offset by growth in pics networks within Network infrastructure as well as cloud and Network Services.

Speaker Change: And credit China continued to decline as expected based on the current market trends.

Speaker Change: We saw strength in Europe with growth across all businesses.

Speaker Change: Now, turning to our cache performance, we ended the quarter with a net cash position of 2.9 billion euros.

Speaker Change: You can see on the slide that working capital as well managed in the quarter.

Speaker Change: As the expected payment of 2024 related. Incentives, was largely offset by a strong collection in receivables.

Speaker Change: Free cash. Flow was positive, 88 million euros, leading to over 800 million. Euro free cash flow in the first half.

Speaker Change: As Justin noted, we continue to Target 50 to 80% free cash flow conversion from comparable operating profit for the full year.

Speaker Change: The last topic I want to cover is our currency exposure. As I know, there have been some questions following our announcement on Tuesday.

Speaker Change: First of all, we typically generate about 55% of our net sales and have 50% of our total costs in the US dollars.

Speaker Change: But we report in euros.

Speaker Change: we have said in the past that we have a high degree of natural hatching with our, with our, our operating uh business protecting our operating margin

Speaker Change: But we still have an impact.

Speaker Change: On an absolute basis when you convert USD profit back to euros for reporting purposes.

Then, on top of that, we have a hatching program which helps to Shield us on a short term basis.

Speaker Change: So what happens this year?

Speaker Change: when we first provide in our guidance in January,

The Euro USD rate was at 1.04.

Speaker Change: Now, the currency rate is around 1.7.

And our guidance is assuming it remains there for the rest of the year.

Speaker Change: That is a significant 13 us Cent movement movement.

Including the Indian rupee.

Speaker Change: Assuming currency rates, remain at the current level.

Speaker Change: We for the rest of the year, the currency movement compared to January is a 67% impact to our net sales outlook for the full year.

We do have a modest imbalance between net sales and total cost in our operating uh operations. Meaning a strengthening Euro has a slight negative impact on our operating margin which is then largely offset.

Speaker Change: Short-term by hatching.

Speaker Change: when you combine all of these together,

Speaker Change: We see 140 million euro, operating headwind.

Speaker Change: Compared to our expectations at the start of the year.

Speaker Change: And we hatch on a rolling 4, quarter basis.

Speaker Change: Such that the first 2 quarters, net us. Operational. Exposure is quite well, hatched. And then the decree of hatching drops, the third and fourth quarter.

Speaker Change: And this means that at the start of the year, we still had exposure to the currency fluctuations for the second half.

Speaker Change: but that at this point of the year we are now, largely operationally hatched

Speaker Change: Finally, we have currency exposure from our Venture fund Investments.

Speaker Change: A lot of these assets are valued in US dollars.

Speaker Change: These are illiquid investments that are only revalued when there is a capital event event.

Speaker Change: However, under IFRS, we need to Mark the market for currency each quarter.

And this is creating a 90 million impact currently for the full year.

Speaker Change: Considering this is both non-cash and non-operational to our core businesses.

Speaker Change: We don't hatch this.

Speaker Change: Through the rest of the year.

Speaker Change: And including the French and fund impact for modeling purposes. We estimate that every 1 US Cent movement in the Euro USD rate could have about 10 to 15 million euro impact on our operating profit in 2025.

Speaker Change: Thank you, Justin and Marco.

Speaker Change: Before we turn to the Q&A session, 1 date for your diary, we recently sent out a save, the date confirming. That Nokia will hold. Its capital Market Day this year in New York on November 19th.

Speaker Change: We will be sending a formal registration shortly and we hope as many of you as possible will be able to join us.

As usual for the Q&A session as a courtesy, to others in the queue. Could you please limit yourself to 1 question and a brief follow-up?

Dorvin: Dorvin could you please give the instructions?

Speaker Change: Certainly.

Speaker Change: We will now begin the question and answer session.

Speaker Change: if you are also viewing the webcast,

Speaker Change: Please remember to mute the audio on your computer before asking your question, as there is a 30 second delay.

Speaker Change: to ask a question, you may press star and then 1 on your telephone keypad,

Speaker Change: If you are using a speaker-phone, please pick up your handset before pressing the keys.

Speaker Change: To withdraw your question. Please. Press star. Then 2

Speaker Change: I will now hand the call back to Mr. David mull. Holland.

Speaker Change: Thanks Tom. We'll take our first question today from Richard. Kramer from Arete, Richard, please go ahead.

Richard Kramer: Oh, thank you very much. Uh, Justin. I asked last call about what you thought was required to win, large hyperscaler, deals, and, uh, in your prepared remarks, you were mentioned potential integration of business operations, even though a lot of those hyperscaler deals are for products. That mostly sit in knee given the big increase as we've seen from hyperscaler capex. I mean, what is the unlock or what do do you see as the key issues for Nokia?

Richard Kramer: Increasing materially that percentage of sales to hyperscalers that you've got now, and, and moving towards double digits and Beyond.

Justin Hotard: Yeah, Richard, thank you for that. I I I think a couple of things. First of all, the the functional changes are that we're making are really around functional, support organization. I think there's plenty of companies that, um, you know, that have their operating models aligned, you know, functionally like we're doing and again just to reiterate. If you look at our organizations um, our legal, our legal team, uh, legal compliance, and sustainability was actually operating this way already and the other functions were operating in a slightly different manner. So we're just driving consistency within the company.

Justin Hotard: Their, you know, predict being able to work with them around product design. Uh, you know, forecasting planning and obviously supply chain execution and delivery uh, as well as, you know, as well as negotiating terms. And, you know, all the things you would expect is I think about this, you know, for me the biggest opportunities for us right now 1 is continuing the focus and building the intimacy with those hyperscale customers uh through that team and 2 is really the portfolio. And I think if you look at just the progress that we're now disclosing in the second quarter,

Justin Hotard: With a book to build that's above that. And an award that's not in the second quarter. I think we're making good progress, we need to continue to gear our products and portfolios to exactly what those hyperscalers are looking for, uh, and then continue to work with them, uh, on a, you know, on a very close and intimate basis. And I think we've made progress, there's still work to do. Um, and, uh, and obviously we're coming from a position of not having as much exposure there as you rightfully noted. Um, so we're in a bit of a Challenger mode and that that also requires just investment in time, as I think I commented on last week.

Speaker Change: Okay. Thanks and just a quick follow-up. I mean, the the area that we're hearing a lot about expansions from Big us. Telos is in their fiber build programs. Is that something you see accelerating into 2026 where these large announcements that have been made by the 2? Largest US carriers. To increase fiber bills is something Nokia can directly address,

Yes. So this is a place where we have a very healthy portfolio as you as you rightfully pointed out that Richard. And and I think the other comment I would make is, uh, really encouraged by the announcements. I think it's, uh, you know, very positive, sign around the, you know, the the big beautiful bill in the US that was enacted into law earlier this month. Uh, that there's going to be continued investment. And I'm also cautiously optimistic that there's, uh, there's going to be investment in Europe as well. Um, I think for this, this for us, this is 2, things. 1 is obviously opportunity for accelerating growth with our core um oolt portfolio, the operator line terminals. Um, but also opportunity for us to really think about Innovation. How can we continue to help these customers and back to my, my macro comments? I think it's, you know, I'm, I'm also hearing from customers that, uh, you know, we have opportunity to partner with them, uh, in a, in a more complete solution area in this space. And that's part of why I commented that we're investing in innovation in this area.

Speaker Change: Thanks Richard, we'll take our next question. From Frederick Leal from handles banking Frederick. Please go ahead.

Frederick Leal: Thank you and good morning to all of you. Thanks for taking my question. I have 1. Uh, we saw yesterday AT&T came with their report and they uh uh

Frederick Leal: Talked about their topics for the coming years. And we also know Trump's big beautiful, bill act, uh, it seems like operators in the US are getting some

Frederick Leal: Uh, tax advantages here. Can you talk a little bit about what you see there on the CSP place? If if that will be a driver for you, thank you.

Frederick Leal: Yeah. And I think Frederick, I just answered this but uh, but absolutely, we're optimistic about this, uh, I think anything that's invested. You know, that's enabling investment in infrastructure as a positive. Uh, you know for us and really encouraged by the comments out of some of our major customers in the US including specifically AT&T where we, you know, we're a key supplier today. But having said that, I I think that doesn't, you know, does doesn't mean we can sit on our hands. We have to invest in Innovation, which is why I made the comments I did.

Speaker Change: Did you have a follow-up Frederick?

Frederick Leal: Yeah, maybe a follow-up. If, if you could sort of expand a little bit on Europe, it it looked quite healthy in the quarter. Uh, if, if it really broad based or could you sort of Pick 3, 5 is behind the the good momentum. You saw in Europe

Yeah, hi. This is Marco and and uh,

Marco Van: We we actually saw a quite broad-based, um, development in Europe, in, in all businesses. And, uh, it was quite quite healthy, um, and, and, uh, welcomed as well. Uh, considering that Europe has been a little bit muted in the past. Um, and, um, of course, we hope that that we can see some, some more development in Europe, going forward just like, uh, just in mentioned that hopefully, the fiber Investments also in Europe will will, um, uh, take off more, uh, but also um, the whole macroeconomic environment, what gives some some, um, Improvement here.

Thanks Frederick, we'll take our next question from Oreck. Roth from Bernstein Oreck, please go ahead.

Speaker Change: Uncertainties have increased quite materially doubled essentially, or is there any other reason to keep the range? And then in this context, also

Um, why did you not just indicate the lower end of the prior range? But but actually lower the midpoint of the range because the the range was pretty wide. The downside sort of fits in that and you could have just said uh oh it's it's now at the low end of the original range um bit more explanation every player. So thank you.

Marco Van: Yeah. Uh, so, all right. Thank you for that, uh, couple of comments. So first of all, I need to go back to q1. Um, Marco and I both highlighted that we, you know, given the 1 time charges, we had in MN and then the Tariff and Q2, which largely played out as expected, uh, the 20 to 30 million that we called out.

Marco Van: We thought we'd be at the, uh, we thought that the top end of the range would be challenging. And then, obviously, now we've, we've Incorporated a full full year look on tariffs. And, uh, and then a, and then, obviously this currency shift significant 90 million of it being non-operational, uh, with, you know, with the impact of venture funds. So, with all of that in Play, We felt, you know, we, we felt it was prudent to lower the range. As we said, you know, what I would highlight is, uh, you

Speaker Change: Would I highlight an addition to that? Is that underlying it, I think we feel pretty good about operations because what you probably noted is we did not, um, we did not actually call down an impact from the 1-time charge of mobile. Um, and I think that's actually, you know, that that actually probably underscores a little bit of optimism outside of currency and tariffs, which, uh, we just felt it was, it was not prudent to assume we could absorb and still meet the guidance range.

Speaker Change: Did you have a follow-up?

Speaker Change: No, just to come back to part of the question. Thank you for that answer. Um but what why why is the range still 500 million when when you have, you know, 6 months now. I'll report it, you know? Yeah. May maybe just the, the other point I'll make and I'll let Marco comment is, uh, in the second. You know, obviously, if you look at our first half versus the second half, and particularly in Q4,

Marco Van: You know, other than 23 and probably 20, which disruption from Co in 23. We had a significant shift in capex from the uh, on the mobile network side. If, you know, if you look at the business where historically very back-end loaded and uh, you know, as we talked about, we had, uh, you know, expectation, this quarter, uh, that we'd see more more demand from India and mobile networks, that did not happen. Um, so we feel very back and loaded and, and we want to be balanced and disciplined in our forecast, because so much is in the second half, Marco anything? You want to add there? Yeah, just that as well. That that we are still a little bit on the Fly and what comes to tariffs. So now we are assuming the situation is today. But as we all know that, um, you know,

We don't exactly know how these terrorists will land in the end and um, uh, that's why we want to keep the the range a little bit wider. So we have flexibility there.

Oreck: Thanks Oreck. We'll take our next question from Sami saris from danske Bank Sami. Please go ahead.

Sami saris: Uh hi. Uh, could you provide a bit of color on network infrastructure performance in Q2 and uh, how do you expect things to develop during a third and fourth quarter for knee? When we look at Q2, we see a bit weak growth IP and Optical combined with gross margin weakness.

Speaker Change: I mean, thanks. Uh yeah, a couple of comments from my end. I think, first of all, if you, if you look at us against our, our us peers. Obviously, we're showing constant currency. There's a benefit that you have to also consider for currency Tailwind that they're reporting. So that's that's 1 balance that we, you know, we didn't enjoy. Um, the other thing I would just highlight and we talked about this was, we had a bit of a, um, you know, a bit of a shortfall due to supply chain constraints and an increasing demand environment. I'll make 2 comments on that, and we would have expected double, you know, just on that alone. On a constant currency basis, we would have expected double digit growth and we fulfilled about demand to a more consistent historical level. Um, second comment I would make is even with that, we have a strong book to Bill and then again, that's without the award that I, that I touched on in my comments. Uh, so we feel

Speaker Change: feel feel quite good about the opportunity, uh, in terms of, uh,

Speaker Change: In terms of the second half. But again uh you know again uh this is largely driven off of an. You know what we see as an is, an increasing mix in hyperscale uh and and AI data center customers.

Do you have a follow-up Sammy?

Speaker Change: Uh, maybe a quick 1, uh, you talked about the need to have a more integrated fast moving and later Nokia, uh, can you elaborate on this a bit further? And will you be communicating related changes in the near term.

I didn't touch on as explicitly, but we shared a few weeks back with the team, is in response to customer feedback. We also, uh, we also announced the a reinforced, the position of the executive account manager. Um, So within each of the businesses today, we have a specialist sales forces, but we had, we made the change a couple of years ago. We did not have, uh, we did not, we did not have a, a top accounts function. So we've built a little bit of that capability. I think this is really important because our, our customers are not, you know, are not organized by unified by by product line. And while there are differences in each of our product groups and they're important. Um, and they're important, not only because they touch, you know, areas of Technology. We invest in uh the business model and how we monetize the technology think of core versus mobile network with radio and Rand versus uh versus Optical and IP let alone, you know, broadband and fiber, fiber access Networks.

Well, that's important. Um, it's also important to understand that our customers are thinking about things on a more integrated basis, uh, because they're also considering their customers who are, you know, they're, they're incredibly many of our customers are increasingly addressing them in a more integrated Manner. And then strategically from a technology road map perspective, we need to be thinking about it, end to end. Uh, and if you think about things like security, uh, obviously platforms and services, uh, Ai and automation, there's there's clear opportunities and, and I've heard that from many of our customers, uh, both strategically and tactically. And, uh, that's all very important. So, better service for customers number 1 and then underneath that, I think.

Speaker Change: you know, I I think if you look at um,

Speaker Change: you know, some of the industry players, certainly, some of our partners, I, you know, I spent time studying our partners as well. And if you look at some of our partners that have announced, um, you know, continued operating uh, operating leverage opportunities both using AI further, op, uh, operations. Many of them, uh, you know, focused on productivity and Agility as the key North, North Stars. And and so, for us I I feel like it's similar that we need to have. We need to have that kind of mindset of functional excellence. And so, uh, you know, we talked about this quite a bit as a leadership team and made the decision that this was the right step for the company. A consistent operating model across the functions and our mindset around Excellence, so that we can improve agility on on rock, on Rock operating level with Justin said, we, we believe that it's important that all the businesses will have the pnl responsibility. And our ambition is not to increase the headquarters. If we want to do something, it's actually decreased the number of the cost of level of of headquarters.

Speaker Change: Just to be clear here as well.

Speaker Change: Thanks, honey. We'll take our next question, from Simon Leupold. From Raymond James, Simon. Please go ahead.

Simon Leupold: Great. Thank you very much for for taking the question. Um, so Justin, you you've been at the firm now for, you know, roughly 100 days. Uh, and you've talked a little bit about sort of priorities, but I guess, what, what I'd like to get a sort of understanding of here is, um, having had sort of this period to to learn and adjust and you've

Simon Leupold: Talked about some organizational shifts. How do you characterize your priorities going forward versus what you thought when you first took the job and started

Simon Leupold: Yeah. Thank thanks. Simon. I I think a few probably a few key learnings and maybe I'll talk about them across customers technology. And then, um, you know, operational and financial execution, I think. First of all, uh, from a customer perspective, uh, I think there's

Simon Leupold: A real opportunity to partner, uh, and uh, and to co-innovate with our customers and certainly. And obviously, every customer has a slightly different strategy and, and, and value, you know, value position and how they, how they compete. But there are, I think there's been a number of conversations where I've been really encouraged about the opportunity, to be, um, you know, to be innovating with our customers. Uh, in a way that perhaps we haven't on the technology side. Uh, look, I think what's important here is, we have a lot of great technology and great people in the organization particularly at, you know, within, uh, within our engineering, uh, engineering and R&D teams. I think what we have opportunity to do is continue to be uh, better members in the in the tech ecosystem. And what I mean by that is partner externally think outside in and collaborate, more uh, with what's happening and uh, in in Tech and across the industries that we play in. Um, and then I'll make the other comment of just focusing. And not only the comments I made at the top around mobile and fixed access networks, transport and data center.

Simon Leupold: But also, as you think about in the stack, where does it make sense to partner versus where? Does it make sense to invest in, uh, in in core, uh, in core technology? Last comment. I'll make is just, you know, around financials and operations. And I think this is maybe the thing I haven't emphasized in the comments, I just made on function on the functions.

Simon Leupold: Is not only to drive growth but to drive a level of predictability. And I think growth because obviously, when you look back historically, as you as you all, well know, um, we haven't been as predictable as certain we would uh, we would expect ourselves to be

As a followup. Yes, please. Um, it it at the end of June there. There were some press reports suggesting uh, that Nokia might be taking some actions to reduce headcount and to do some cross cutting. Uh, I, I know it sounds like a little bit of reorganization efforts on your part, uh, but it doesn't sound like there were any major initiatives. Could you update us on, uh, really what you're thinking about in terms of any initiatives around Staffing cost structure, uh, that might be related to those press reports. Thank you.

Speaker Change: Yeah, thanks Simon. I, I just make a couple of comments there. I think. First of all, we had a, a major restructuring program that in 23, that we announced that we're still executing. Um, so I think that's important to understand, and we set some targets around that and obviously a range around the restructuring charges at that time. We're still within that, you know, that point of execution uh, of of that program. So we're still within the window there.

Marco Van: Second comment I would make is, um, is that I'm not a, you know, having been in this situation before. Um, I don't think going forward, our, our objective should be to announce a big program, but also, you know, but but much more building the, the muscle and the capability around driving productivity and operating leverage as a discipline. Um, so there's nothing. Nothing new to update today on a on our restructuring program, but in addition, I think, you know, if you look at, you know, best practice, it will be around making announcements around continuing a productivity and I think you'll see that in our results over time versus me telling you it's going to happen Marco. You want to

Marco Van: no, I think it just

Marco Van: What what what you just said, several times is continuous Improvement. Is something that we have to have in our genes. And this is something that every part of the company has to, you know, Brooke on on that species as well. And and um, uh, and this is something that we will focus on very much and and uh, hopefully see improvements in our efficiency and and um, productivity in the company.

Simon Leupold: Thanks Simon. We'll take our next question from Rob Sanders at Deutsche Bank robbed. Please go ahead.

Rob Sanders: Yeah. Hi um Justin can you discuss your view of the mobile networks business? I mean, is this a business where you're okay being relatively sub-scale and treading water or do you have strong Ambitions to build back scale and and recover? Share in 6G I I guess another way of asking this question is relative to your 5% of sales. It's high.

Rob Sanders: Scale of lead, how much of your R&D budget is going to go towards hyperscalers because I'm just trying to see trying to understand how you're going to orient the business uh going forward. Thanks.

Rob Sanders: Thank you. So

first of all, it's sort of 2 questions there. So let me let me ask, you're sort of asking, I think an implicit Capital allocation question as well. So let me let me answer the mobile networks business. I think, first of all, I I believe this is a unique and highly strategic assets. There's 4 scale players in the world. Uh, 2 are in the west, uh, you know, us and and Eric. And um, what I think is important, and I've said this, you know, consistently is, I don't think it's just about mobile networks, I understand how we report. But I think you have to look at Mobility Co every 1 of the scale players, including the 2 and the 2 competitors, we have out of China, have the core networks business, mobile network, the mobile networks assets radios, and and ran, and a robust IP portfolio. And I think you have to look at the business in totality even as you report, the segments. Uh, and so, I think, first of all, that's, that's really critical second, I would say, when you look at our customer base, it's very clear to me, and I hear from my customers that we have opportunity to do more with them. And, uh, and and then I would just say third, I, as I've said before.

Rob Sanders: For, I believe, the AI super cycle is going to drive a refreshed wave of investment in the space. It's not there today, but I think we have to be, you know, we have to have a view of, you know, over the longer term and whether it's smart glasses, drones autonomous vehicles. Um, you know, obviously innovations that, I think we'll see even in the, in the traditional mobile, handset business. Uh, there's going to be a set of innovations that drive opportunity for us and opportunity for our customers. Uh, and this is where also being a, you know, an a thoughtful partner to our customers. As I touched on earlier, is going to be important, uh, in terms of capital allocation, you know, I think, what's what's happened in knee? And I, I would, I would just I, you know, emphasize this is 1 of the reasons I think in funaro is a very, very good acquisition for us is the market has shifted.

Rob Sanders: The optical technology what's happening with pluggables inside the data center, which we just talked about, you know, the Innovation curve is shifted. So,

by default R&D has to be invested in that areas, but it's not just in that. I think if you look at the hyperscalers and public Cloud, they set an expectation for security, they set an expectation for um, you know, for ease of use and and uh,

Uh, and deployment of technology and performance. And so there's a number of areas where I think we, you know, as we're as we're targeting those customers in. In knee, we have opportunity to, uh, to enable them, you know, to enable advantageous for us across our, you know, across our customer base in that portfolio. Uh, and that's been reconfirmed, with some of my customer conversations and then back to, you know, to core and, uh, and, uh, and mobile. If you look at the, you know, the the portfolio or the mobile side, uh, many of those Cloud players and those hyperscalers are partners for us on mobile. We've been out. We've talked about announcements and, you know, in our Core Business. As as we've moved much more to a a cloud first strategy for core in terms of the tech stack. But also in terms of where we run those platforms and I think over time we're going to see some of those things, move even into, uh, into ran. And I think we need to be, you know, we need to be a, a partner there. So, as I look at the, uh, if I look at Capital allocation, that's 1 element, as I think about, uh, these Partners as being, you know, broad Partners across our business. I think there's significant opportunities

Rob Sanders: Did you have a quick follow-up? Rob?

Rob Sanders: Uh, just quickly on the the fixed wireless access roll out in India. Um, how long can this last, uh, in terms of being a Tailwind for your business? Thanks.

Rob Sanders: Yeah, you want to talk about this Mark? Yeah, I get. Um, thank you. Um,

Mark: I would say that many, many operators globally. Uh, are are looking into opportunities to utilize fixed wireless access whenever they especially areas where they see that? The, the, uh, more than networks is not utilized fully, which is usually outside of the city centres. And there's 1 way for them to capture more opportunities and customer base. And if, and when there would be any fiber, uh, connection later, then the have already Data customer connection, and they can just swap over that customer from fixed price access into Fiber customer. Um, and different operators, see these opportunities, uh, coming, um, you know, different time time, uh, lines as well. But right now, we've seen that that Indian operators have been, uh, you know, quite active and seeing these opportunity to capture the customer base. Uh, and that's why we've seen the Tailwind there.

Rob Sanders: I, I would just add

Speaker Change: Uh, just add on that front. Uh, I, I think, when we look at this, there's a couple of opportunities here, I think. First of all Broadband Access Wireless, uh, you know, Wireless or fiber are opportunities for growth for us second. Um, there's opportunities on the operator side, you know, and you think about that as Ouellette as I touched on, on my comments but also, um, it's actually Innovation and services and, and Technology we can deliver at the radio layer and we see that not only in India but in North America as well. But there's probably more we can do there. Uh, and then I would just say third, um, you know, obviously, uh, you know, it's, it's hard to predict exactly where you know where the demand will go and Marco rightfully pointed out, that there'll be a, you know, there's there's a, there's usually a balance between how much wireless access you want to provide before you want to, you want to lay fiber. Um, but I think the good thing the unique thing for us is we can potentially benefit on both sides.

Speaker Change: Thanks Rob. We'll take our next question from Sandeep. Desb from JP Morgan Sunday. Please go ahead.

Cindy, we can hear you.

Sandeep Desb: Hello, sorry. Uh, can you hear me?

Yes go ahead. Yeah yeah. Hi uh my question is on network infrastructure. Uh uh in the network infrastructure business, you're seeing this very strong uh growth in uh the fixed uh, fixed Network business. I mean, uh and we've talked you've talked about that in the earlier questions. I want to go back to the optical business where you highlighted the 6% organic growth. I mean, given

Sandeep Desb: The strength in the hyperscalers. Why is that business not growing stronger at this point? Or is it that you need to expand your footprint at the customer base more and following up on that? Uh, where are you in terms of the router with the routing and switching in the hyperscalers and can uh, in terms of expanding your footprint, with the hyperscalers,

Speaker Change: Opportunity. That's why things like what we announced with uh, you know, with the 800 gig pluggable, uh, platform is are important because that gets us back to being competitive and you'll note that we were behind in that space. So I think the work that David and the team have done to start to catch up, there is very important and we need to continue to do work to make sure we hit the if you hit future product intercepts.

Speaker Change: Second thing I would comment on there is uh answer your question on uh uh on on on IP and switching. And routing is you know, we've had some tracks and and uh in routing I think more work to do in that space switching less traction. Uh but obviously this is a, this is a place to focus for us. Um, but we're uh, you know, traditionally we haven't we haven't made this a priority, it's 1 of the things, I think, David and the team are looking at to see how much potential that is there. And we we'll give you more of a full view on what we, you know, what we believe we can do there. As we as we come to Capital markets today.

Speaker Change: Thanks. Did you have a quick followup?

Speaker Change: No, I'm that's it.

Speaker Change: Thanks honey. We'll take our next question from Felix. Henriksen from Nora Felix, please go ahead.

Felix Henriksen: Hi. Yeah, thanks for taking my question. Um it's called the key of Trials. Look for your flag. Uh someone stable operating modules sequentially partly reflecting a big week uh business mix. Um is this reflective of just a man which you've highlighted or do you also see week to mix in the other segments and also do you have any availability on?

Felix Henriksen: Makes Improvement, uh, for the fourth quarter of the year.

Speaker Change: Yeah, thank you Felix. Uh, I would say if you look normal seasonality that we've seen in the past years, as well, we, we have had quite strong quarter 4. And, um, these seasonally we believe that we we see this year as well. Uh, getting back, more more than normal seasonality. Uh, and, um,

Speaker Change: What comes to uh, second half? We we believe that we have a stronger performance in the second half compared to the first half and um, and also if you look in the past, I think 8 to 10 years seasonally between quarter 2, the quarter 3. Uh, the sense has been uh, flat, uh, and um uh, and this is something that that um, uh is also quite typical of seasonally in the company.

Speaker Change: Uh, and um, but also we want to highlight, what comes to go to 3 specifically, is that uh, in um, in mobile networks, we see, uh, less software compared to quarter 2, uh, and that will have, of course, uh, impact on on the margins, as well, in, in quarter 3.

Speaker Change: Hi, Felix, did you have a follow-up?

Felix Henriksen: Yeah. Just a just a quick 1 on the cost base in Technologies because uh I I guess if we play around with the numbers it would seems like you're 1.1 billion EB guidance. For Technologies of the Year seems a step down in Opex for the back half of the year, uh, assuming that you're sort of sales run rate keeps at the, at the current level. So could you just discuss that a little bit? Uh, why should we expect the lower objects for Technologies in the in the second half of the year?

Yeah, thanks Felix. I I think the key thing here is Opex, is expected to be flat. We have some optimism on, uh, on, you know, on what we'll do in in the second half in terms of Revenue.

Speaker Change: Thanks Felix. We'll take our next question from Sebastian. Stovitz from Kepler. Shro, Sebastian, please. Go ahead.

Sebastian Stovitz: Yeah. Hello everyone. And thanks for taking my question. Uh, have you seen any kind of food in orders affecting any of your businesses, uh, over the past few months or you think the order intake has been tracking, fairly a normal Evolution? That would be the first question. The second 1,

Sebastian Stovitz: Is linked to competition because you're noticed to competitor was blaming stronger price. Competition in the the hard Market over the past few months. Have you seen any kind of change in pricing dynamic or competitive Landscapes over the past few months in mobile networks? Thank you.

Sebastian Stovitz: Yeah, so I think on your first question you again, adjusting for, if you look at it on a constant currency basis,

and then in terms of uh, in terms of your second, question around pricing, I I wouldn't say there's anything that we see that's um,

Sebastian Stovitz: That's abnormal at this point. Um, uh, you know, the as you know, the the market, the market regionally has very different Dynamics. So in terms of,

Pricing Dynamics or specific competitive situations. It very much. Depends on the individual, um, opportunity. I think we feel, you know, we feel pretty good about what we see in terms of the market.

Speaker Change: Thanks advice. And we'll take our next question from Jacob. Bluestone from BNP party bags on Jacob. Please go ahead.

Jacob: Thanks David. Um just to come back to the sort of phasing um as as you've mentioned a few times. It's it's a very Q4 uh, loaded year.

Jacob: And I guess if you can first of all, just explain a little bit more. Why is it quite so heavily skewed into Q4? And if you can maybe also help us understand just around your confidence.

is the midpoint of that guide covered out of your existing order book, um, or how far away are you from sort of, you know, in in, in terms of your orders,

Speaker Change: Yeah, thank you. I can start. And, and then Justin can build on, uh, what comes to the, the seasonality in this industry. Is, is pretty much driven actually, uh, how how customer behavior is, and how they see, what needs they do. Do have when they are, uh, uh, investing in their networks. And, um, and usually towards the the

Better part of the year in quarter 4 as well. If they see that there's, you know, some opportunities for them to to do any upgrades or or, you know, additional Investments uh, in the capex frame that they have. Um, that's when they usually come and and asked us to do and and, and this this has been the the pattern in the market quite a long time.

Speaker Change: and, um, and then what comes to um,

Speaker Change: uh,

Speaker Change: in general, I would say that that um uh

Speaker Change: Different.

Speaker Change: Sectors behave a little bit differently. So these more the CSP side. Then what comes to hyperscaler side there perhaps more focusing on on radial Investments and and um, and not always thinking, um, like csps that that quarter forward would be very heavy, but, but as we said, only 5% of the sales is in, in, um, hyperscalers, uh, today, uh, that's why we are quite dependent on on the cyclist of csps have

Speaker Change: I can mention, I can mention what comes to order coverage. It depends also between different businesses. Uh, when you go to a project business, like mobile networks is usually your order book is longer and you have a more coverage. Uh, a couple quarters ahead. Uh,

Speaker Change: While when you are in more, uh, or shorter term business, like like in network infrastructure, uh, then your coverage is lower.

Speaker Change: But I I I would say that we don't see any any, you know.

Deviations from the normal pattern that we normally have in, in this year.

Speaker Change: Thanks Jacob. We'll take our next question from ml. Eminent from Carnegie. Um ML, please go ahead.

ML Eminent: Hi. Thanks for taking my questions. Uh, just a couple more. Maybe on the order book. Could you go into a little bit of detail on what the order book looks like as a whole in network infrastructure and how it has developed year on year and Q on Q?

Yeah, I think just a couple comments on this, we obviously don't break this down, and, and and detail. But um, you know, overall group book to bill was well, above 1.

ML Eminent: Um, Optical was well, above 1, and as I touched on, even would have remained well above 1 had. We, you know, fulfilled all of the orders we, uh, you know, we would, we historically have fulfilled based on traditional, um, traditional conversion rates. And then, as I touched on the 800 gig order, we, we discussed the 800 gig award that we disclosed, um, that order has not been booked. So, I think, again, as you look at the overall funnel where, um, you know, I think we, we believe it's quite healthy. Um, but having said that, as I touched on earlier,

We have a lot of work to do to continue to grow and scale and and hyperscale because as Marco highlighted were, you know we're at 5% of overall Revenue mix. So there's much more opportunity for us.

Emma: Did you have a quick follow-up? Emma?

Emma: Thanks for that. Then on mobile networks, I just wanted to know how do you think about the segment in terms of what is needed for that to return to to revenue growth?

Emma: Yeah, I think. First of all,

Ing business for us over the last few years. Um second of all the market is is flat, right? If you look at the, if you look at the market, this addressable to us and I'm

you know, I'm really focused on, uh, you know, goes where we can actually sell, we get to participate, the markets largely flat, um,

Emma: You know, that's largely because data consumption is, is somewhat flat subscriber growth is flattened out. So I mean, and and customer metrics are, are there, I think what, uh, you know, what we shared at mwc or the team shared at mwc was that, you know, we had, uh, we were starting to see recovered share from what we had lost in terms of sales sites. From my perspective, what I'm focused on is, you know, to your point is overall Revenue growth. I think right now though it's about, uh, you know, making sure we preserve market share in a flat market. And then, uh, looking at where the opportunities are for us to, uh, to gain share.

Thanks Emil. Uh we'll take our next question from France from UBS France swap. Please go ahead

Thank you very much. Uh have a good question on the um on the strategy. Uh just in this uh you know, more integrated uh end to-end, Maybe,

You know what? No cat did that in the past, you know what, uh, you know, Rajiv at at the time when you know, uh, he acquired Alcatel. Uh, the idea is we have to do an end to end, um, and then pick a game and then, you know, realize that maybe it was not the good solution. So we went back to Best of breed.

And now you seem to go to go back again, to the, to the integrated part, and to end. So how different is it from? You know, the previous uh, work of Nokia

Emma: And because you know, what would make it work this time? Um is there anything you can see in the past? You know about uh what have been done and how you can be differently? Just trying to understand the, you know, this strategy given the important work in the past.

Emma: Yeah. So thank you Francois. So first of all I'd say a few things 1 is um in my career, I've worked in many different models.

Uh, and uh and I I I'm quite a spent a lot of time understanding this and probably studied it pretty deeply in terms of my own companies and others. There's no, there is no perfect model. It's really about being customer and marketing oriented. Um, and then being focused on core Innovation for me there, there's a couple things that are really important and I, I don't, I, I think it's also, uh, important not to say we're going, you know, we're going back to something that was there before. Um, that's that's not the case. What's, what's important here? And I think we're building on is BG, accountability is very important. The businesses have, you know, different Cycles, they have different uh different investment areas.

You know, CNS is very, very focused on, uh, Cloud, native software, you know, building a fabric and platform. We talk about apis. That's very different than, uh, uh, you know, a

Emma: A fixed Broadband business. Um, you know, where we're focused on Ouellette customers and, uh, and in places, where it makes sense, you know, obviously selling consumer premise equipment,

Emma: Very, very different businesses. What's important is um that uh we have the accountability around that. The other thing is our customers are 1 customer set. I think, sometimes from a model perspective, it's you can get caught up and having too many, you know, so focused on the portfolio. You missed that the customer wants to engage with you in 1 way because there's 1 Man, organization, there's 1 group CTO. There's yeah, there's there's 1 customer portfolio that they're, you know, they're engaging with then. I think we need to orient to our customers, and that's why we're making a bit of the balance, on the, on the customer facing side on the, on the functional Excellence piece. I think I covered this in my comments, the steps that we took in the past were the right steps at the time. And, and they've delivered value for the company. The reality is, as we look ahead, we felt like they were a different set of steps we needed to take, uh, and, and spend time with the team. I made the decision that we needed to, um, really drive a consistency across the functions. Because again, as I'll point out, when I came in, we had different operating models depending on the function. So the reintegration

Emma: Since particularly on the, uh, on the go to market side.

Speaker Change: Thank you, thanks. Did you have a quick follow-up?

Emma: No, that's fine. I'm conscious of time. Thank you.

Speaker Change: Thank you all. Um, that is our last question for today, ladies and gentlemen. This concludes today's call, I would like to remind you that during the call today. We have made a number of forward-looking statements that involve risks and uncertainties actual results, May therefore, differ materially from the results, we currently expect factors that could cause such differences can be both external as well. As internal operating factors we have identified such risks in the risk. Factor section of our annual report on form 20f which is available on our investor relations website. Thank you all for joining us.

The conference has now concluded, thank you for attending today's presentation. You may now disconnect

Speaker Change: Good morning ladies and gentlemen, welcome to Nokia's, second quarter, 2025 results call, I'm Deon head of investor relations and today with me is Justin, hotard, our president and CEO along with Marco van or CFO.

Speaker Change: Before we get started a quick disclaimer, during this call, we will be making forward-looking statements regarding our future business, and financial performance. On these statements are predictions that involve risks and uncertainties actual results. May therefore, differ materially from the results we currently expect.

Speaker Change: Factors that could cause such differences can be both external as well as internal operating factors.

Speaker Change: We have identified such risks in the risk, factor section of our annual report on form 20 F, which is available on our investor relations website.

Speaker Change: Within today's presentation, references to growth rates were, mostly be on a constant currency and portfolio basis. And other Financial items will be based on our comparable reporting

Speaker Change: Please note that our Q2 report and a presentation that accompanies, this call are published on our website.

Speaker Change: The report includes both reported and comparable, Financial results and Reconciliation between the 2.

Justin Hotard: In terms of the agenda for today, Justin will go through our key messages from the quarter and the market will go through the financial performance and will then move to Q&A with that. Let me hand over to Justin.

Justin Hotard: Thanks, David and good morning.

Justin Hotard: During my first quarter as president and CEO. I've spent significant time engaging with our stakeholders and it has left me with 2 conclusions.

Justin Hotard: First, I have increased optimism about our future opportunity.

Justin Hotard: It is clear to me that connectivity will be a critical differentiator in the AI super cycle.

Justin Hotard: That is.

Justin Hotard: True, not only for the hyperscalers, where it's visible today.

Justin Hotard: But also for Communication, service providers and increasingly in areas like defense and National Security.

Justin Hotard: With our portfolio in Mobile and fiber access.

Justin Hotard: Transport and data center Networks.

Justin Hotard: Nokia is uniquely positioned to be a leader in this market transition.

Justin Hotard: We are investing to capitalize on this opportunity, and we are already starting to see success today in areas like Optical networking.

Justin Hotard: Second. Our customers expect us to engage with them as 1 integrated company as the majority of them partner with us across our portfolio.

We benefit greatly from the financial accountability, our business groups structure gives us. However, we also need to evolve how we work. So we can move faster improve productivity and focus on what brings value to our customers.

Justin Hotard: to help unlock operating, Leverage

Justin Hotard: I'm looking forward to discussing our strategy and full value creation. Story at our Capital markets day in New York on November 19th.

Justin Hotard: Turning to our second quarter results, our performance was mixed.

Justin Hotard: Good growth in both Network, infrastructure and cloud and Network Services was offset by a decline in mobile networks. Primarily related to The Accelerated Revenue recognition seen in the prior year quarter.

Justin Hotard: Our profitability was impacted by currency fluctuations, particularly the weaker US dollar, which was both an operational headwind and a headwind in our Venture fund,

Justin Hotard: We had a 50 million non-cash negative impact from our Venture funds in the quarter, which included a 60 million, euro, non negative impact from currency.

Justin Hotard: Excluding currency our profitability in the quarter.

Justin Hotard: Would have been in line with our expectations.

Justin Hotard: And we continue to make investments in longer term growth opportunities.

Justin Hotard: The second quarter was the first full quarter since we acquired infinera.

Justin Hotard: The combined Optical networks business has been performing well with a book to Bill. Well, above 1 showing continued, strong commercial momentum to our growth.

Justin Hotard: To our growth was tempered somewhat by Supply constraints.

Justin Hotard: And we're on track to achieve our committed synergies from the acquisition.

Justin Hotard: Looking forward the demand environment remains broadly consistent with what we said last quarter.

Customers are largely continuing with the plans. They laid out at the start of the year and there has not been any Major Impact from geopolitical uncertainty.

Justin Hotard: As a result for the full year, we continue to expect strong growth in network infrastructure growth in cloud and Network Services and largely stable, net sales, in mobile networks in Nokia Technologies, we still expect 1.1 billion euros of operating profit.

Let me share a few highlights from the quarter across our business groups.

In network infrastructure, we continue to see a strong demand environment in Optical networks and a positive reception to the infinera acquisition from customers.

Justin Hotard: 2 deals. I'd like to highlight an optical, our first award from a hyperscaler for 800 gig ZR. ZR plus pluggables and a deal with a large US Communication service provider.

Justin Hotard: Overall, hyperscalers are 1 of the biggest drivers of our order intake in the quarter and remain a significant growth opportunity for our Network infrastructure business.

Justin Hotard: Across the whole of Nokia, hyperscalers, accounted for 5% of net sales in the second quarter.

Justin Hotard: In IP networks, we continued our leading position in the market. Remaining number 1 in Ed trouting and number 2, in total routing,

Justin Hotard: We continue to see a long-term opportunity in AI infrastructure and our investing to accelerate growth.

Justin Hotard: Recently, we've been an active participant in consortiums that are bidding to benefit from the eu's 20 billion Euro program to build AI gigafactories in Europe.

Justin Hotard: in fix networks, we still expect strong growth this year and the appetite for fiber among Tier 1 csps remains strong

You know, strengthen our Market leadership position in the operator premise equipment.

Justin Hotard: Ouellette, and we are continuing to invest in innovation in passive Optical Networks.

Justin Hotard: Turning to mobile networks. At the start of the quarter. We signed an extension to our ran agreement with T-Mobile us, which we announced in our q1 earnings.

Justin Hotard: We also announced 5G deals with Alyssa and Finland and Optus in Australia.

Justin Hotard: We continue to see good overall commercial M momentum. And the competitiveness of our products is resonating with customers.

We are optimistic about the potential 3gpp, technology can bring into the defense sector.

Justin Hotard: In Q2, we announced a partnership with blackned in which Ryan Mattel owns a minority majority stake. And we now have delivered Banshee radio unions to the US Marine Corps through Nokia Federal Solutions.

Justin Hotard: Finally, cloud and Network Services had a strong quarter with new 5G core wins, and deployments including across India, Europe, and the Middle East.

Justin Hotard: We're continuing to progress on our open API Journey with 57. Partners announced for our Network as code platform, including Telstra, and the bridge Alliance in Asia.

We also announced a partnership with Verizon in the UK to provide private 5G networks across multiple tens reports sites.

Justin Hotard: Finally, let me turn to our outlook for the full year 2025

Justin Hotard: as we announced on Tuesday, we decided to take the prudent approach of lowering, our full year, outlook from 1.9 to 2.4 billion euros to a new range of 1.6 to 2.1 billion euros,

Justin Hotard: The first impact is currency.

Justin Hotard: when we issued, our first issued, our guidance for 2025, the euro dollar rate was 1.04 and it has now moved significantly to 1.17

Justin Hotard: altogether. This currency movement is posing a 230 million euro headwind to our operating profit outlook for 2025.

Justin Hotard: Of which 90 million euros is related to the non-cash currency impact in our Venture fund portfolio.

Marco Van: Marco will provide you additional detail on this in his comments.

Justin Hotard: The second is the Tariff situation.

Justin Hotard: For the full year 2025. We now expect to see an impact in between 50 and 80 million euros tied to fulfillment of pre-existing customer orders.

Justin Hotard: The underlying performance across the business is in line with our expectations at the start of the Year. Therefore it is these 2 factors that lead us to change comparable operating profit Outlook. Our guidance for free cash flow conversion remains unchanged at 50% to 80% of comparable operating profit.

Marco: With that, let me hand over to Marco.

Marco Van: Thank you, Justin and hello from my side as well.

Marco: I'll just talk by discussing our overall group performance.

Marco: 42, net sales were 4.55 billion euros.

Marco: And that's a 1% decline on constant currency and portfolio basis.

On Cross margin was stable versus a year ago quarter at 44.7%.

Marco: More by networks and network infrastructure across margins by Pro to stable, while cloud and Network Services delivered on Improvement of 520 basis points, 3 of them by Topline growth,

Marco: Operating margin declined to 6.6% as a result of the negative currency impact to venture funds, as well as the impact of tariffs which were within the 20 to 30 million range. We had expected

Marco: assuming existing tariff rates. We now expect an impact to our full year, operating profit of around 50 to 80 million

Marco: and we generated 88 million euros of recast flow in the quarter and ended the quarter with 2.9 billion of net cash.

now, turning to our business group performance,

Network infrastructure delivered 8% growth.

Marco: and each business unit crew with fixed networks, having a particular strong quarter growing 17%

Marco: Optical networks, grew 6% and IP networks through 3%.

Marco: Opticon networks growth was hampered by some modest supply chain constraints and could have grown over 10%.

Marco: And we expect these issues to improve in the second half.

first margin was rather stable despite the 110 basis points impact from tariffs in line with what we have expected,

Marco: Operating margin declined slightly by 70 basis points year on year to 5.7%.

Marco: And this was mainly the result of higher operating expenses associated with the inferior acquisition, as well as increased investments into growth opportunities.

It is worth noting that the xiner business was dilutive to operate a margin in the quarter. Although the integration process continues and we are moving quickly to deliver on our committed synergies.

Marco: Net sales in mobile networks declined by 13% in a quarter.

Marco: As mentioned much of this decline because of the 150 million euro in accelerated, Revenue recognition from a contract settlement that benefited the Euro quarter.

Marco: Originally, we saw mixed threats, uh Trends in mobile networks, a pause in rollouts impacted India. However we did see some growth in Europe.

Marco: Mobile networks Crossing was 41.1% in the quarter.

A 70 basis points. Decline year-over-year.

Marco: Has favorable product and Regional mix helped the offset a difficult comparison related to the settlement that benefited the prior year.

These factors led to operating profit and margin declining this plan despite lower operating expenses.

Marco: As we look to quarter 3, we expect cross margin to be.

Marco: Below the normal run rate level as we expect an unfavorable product, mix shift in the quarter.

Marco: 37 to 38% range when excluding the 1-time impact. We saw in quarter 1

Marco: Cloud and Network Services. Net sales through by 14% in a quarter reflecting continued momentum in core Networks.

From Regional perspective CNS, so growth, 3M by North America and Asia Pacific and Japan.

The higher level of net sales for a strong expansion in both cross and operating margin, which improved, 520 and 850 basis points respectively.

Marco: Nokia Technologies, net sales increased by 3% on a constant currency basis.

Marco: We signed several new agreements as we continue to make progress in our cross. Uh, in our growth areas of Automotive consumer electronics iot and multimedia.

Marco: Our net sales run rate remains approximately at 1.4 billion euros.

Marco: Now, let's look at the net sales by region, we saw a decline in North America, although this reflects mixed Trends mobile networks declined, because of the settlement in the year ago quarter, while we saw a double digit growth in both Network infrastructure and cloud and Network Services.

Within Apec. India sales were flat reflecting a pause in investment in mobile networks, which was offset by growth in pics networks within Network infrastructure as well as cloud and Network Services.

And created China continued to decline as expected based on the current market trends.

Marco: We saw strength in Europe with growth across all businesses.

Marco: Now, turning to our cache performance, we ended the quarter with a net cash position of 2.9 billion euros.

Marco: You can see on the slide, the working capital as well managed in the quarter.

Marco: As the expected payment of 2024 related. Incentives, was largely offset by strong collection in receivables.

Marco: Free cash flow was positive in 88 million euros, leading to over 800 million. Euro free cash flow in the first half.

Marco: As Justin noted, we continue to Target 50 to 80% free cash flow conversion from comparable operating profit for the full year.

Marco: The last topic I want to cover is our currency exposure. As I know, there have been some questions following our announcement on Tuesday.

First of all, we typically generate about 55% of our net sales and have 50% of our total costs in the US dollars.

Marco: But we report in euros.

Marco: we have said in the past that we have a high degree of natural hatching with our, with our, our operating uh business protecting our operating margin

Marco: But we still have an impact.

Marco: On an absolute basis when you convert USD profit back to euros for reporting purposes.

Then, on top of that, we have a hatching program which helps to Shield us on a short-term basis?

Marco: So what happens this year?

Marco: when we first provide in our guidance in January,

Marco: The Euro USD, the rate was at 1.04.

Marco: Now, the currency rate is around 1.7.

And our guidance is assuming it remains there for the rest of the year.

Marco: That is a significant 13 us Cent movement movement.

There has also been significant strengthening in the Euro against other currencies including the Indian rupee.

Marco: Assuming currency rates, remain at the current level.

Marco: We for the rest of the year, the currency movement compared to January is a 67% impact to our net sales outlook for the full year.

We do have a modest imbalance between net sales and total cost in our operating uh operations. Meaning a strengthening Euro has a slight negative impact on our operating margin which is then largely offset.

Marco: Short-term by hatching.

when you combine all of these together,

we see a 140 million euro operating headwind.

Marco: Compared to our expectations at the start of the year.

Marco: Just that the first 2 quarters, net us. Operational. Exposure is quite well, hatched. And then the decree of hatching drops, the third and fourth quarter.

Marco: And this means that at the start of the year, we still had exposure to currency fluctuations for the second half.

but that, at this point of the year, we are now largely operationally hedged

Marco: Finally, we have currency exposure from our Venture fund Investments.

Marco: A lot of these assets are valued in US dollars.

Marco: These are illiquid investments that are only revalued when there is a capital event event.

Marco: However, under IFRS, we need to Mark the market for currency each quarter.

And this is creating a 90 million impact currently for the full year.

Marco: Considering this is both non-cash and non-operational to our core businesses. We don't hatch this

Marco: through the rest of the year.

Marco: And including the French and fund impact for modeling purposes. We estimate that every 1 US Cent movement in the Euro USD rate could have about 10 to 15 million euro impact on our operating profit in 2025.

Marco: Thank you, Justin and Marco.

Marco: Before we turn to the Q&A session. 1 date for your diary. We recently sent out a save the date confirming. That Nokia will hold its capital markets Day this year in New York on November 19th.

Marco: We will be sending out a formal registration shortly and we hope as many of you as possible will be able to join us.

As usual for the Q&A session as a courtesy, to others in the queue. Could you please limit yourself to 1 question and a brief follow-up?

Speaker Change: Doran, could you please give the instructions?

Marco: so,

Marco: We will now begin the question and answer session.

if you are also viewing the webcast,

please remember to mute the audio on your computer before asking your question, as there is a 302 delay.

Marco: to ask a question, you may press star and then 1 on your telephone keypad,

Marco: If you are using a speaker-phone, please pick up your handset before pressing the keys.

Marco: To withdraw your question. Please. Press star. Then 2

Speaker Change: I will now hand the call back to Mr. David Mullen.

Thanks Tom. We'll take our first question today from Richard. Kramer from oreti Richard, please go ahead.

Speaker Change: Oh, thank you very much. Uh, Justin. I asked last call about what you thought was required to win. Large hyperscaler, deals, and, uh, in your prepared remarks, you were mentioned potential integration of business operations, even though a lot of those hyperscaler deals are for products. That mostly sit in knee given the big increases we've seen

From hyperscaler capex. I mean, what is the unlock or what do do you see as the key issues for Nokia?

Speaker Change: Increasing materially that percentage of sales to hyperscalers that you've got now, and, and moving towards double digits and Beyond.

Speaker Change: Yeah Richard, thank you for that. I I I think a couple of things. First of all, the the functional changes are that we're making are really around functional, support organizations. I think there's plenty of companies that um, you know, that have their operating models aligned, you know, functionally like we're doing and again just to reiterate. If you look at our organizations um, our legal, our legal team, legal compliance, and sustainability was actually operating this way already and the other functions were operating in a slightly different manner. So we're just driving consistency within the company.

Separating that, let's talk about 2 things that are important for hyperscalers. 1 is uh, you know, is is a customer, is the customer relationship and customer intimacy. Um, this is where the BG structure and specifically the sales team. We have an ni including the team that we've integrated from infina, uh, is very important and it's understanding those customers understanding their, you know, predict being able to work with them around product design. Uh, you know, forecasting planning and obviously supply chain execution and delivery uh, as well as, you know, as well as negotiating terms. And, you know, all the things you would expect is I think about this, you know, for me the biggest opportunities for us right now 1 is continuing the focus and building the intimate

To see what those hyperscale customers, uh, through that team and 2 is really the portfolio. And I think if you look at just the progress that we're now disclosing in the second quarter,

Speaker Change: Progress, there's still work to do. Um, and uh, and obviously we're coming from a position of not having as much exposure there as you rightfully noted. Um, so we're in a bit of a Challenger mode and that that also requires just investment in time, as I think I commented on last week.

Speaker Change: Okay. Thanks and just a quick follow-up. I mean, the the area that we're hearing a lot about expansions from Big us. Telos is in their fiber build programs. Is that something you see accelerating into 2026 where these large announcements that have been made by the 2? Largest US carriers. To increase fiber bills is something Nokia can directly address,

Speaker Change: Yes, this is a place where we have a very healthy portfolio as you as you rightfully pointed out that Richard. And and I think the other comment I would make is, uh, really encouraged by the announcements. I think it's, uh, you know, very positive, sign around the, you know, the the big beautiful bill in the US. That was an active in the law earlier this month, uh, that there's going to be continued investment. And I'm also cautiously optimistic that there's, uh, there's going to be investment in Europe as well. Um, I think for this, this for us, this is 2, things. 1 is obviously opportunity for accelerating growth with our core, um, Ouellette portfolio, the operator line terminals. Um, but also opportunity for us to really think about Innovation. How can we continue to help these customers and back to my, my macro comments? I think it's, you know, I'm, I'm also hearing from customers that, uh, you know, we have opportunity to partner with them, uh, in a, in a more complete solution area in this,

Speaker Change: Space. And that's part of why I commented that we're investing in innovation in this area.

Speaker Change: Thanks Richard. We'll take our next question from Frederick lefel from handles bunkin Frederick. Please go ahead.

Thank you and good morning to all. Thanks for taking my question. I have 1. Uh, we saw yesterday AT&T came with a report and they uh

Speaker Change: Talked about their cat-backs for the coming years. Um, we also know Trump's big beautiful, bill act, uh, it seems like operators in the US are getting some

uh, tax advantages here. Can you talk a little bit about what you see there on the CSP place? It's it's that will be a driver for you. Thank you.

Speaker Change: Yeah. And I think Frederick, I just answered this but uh, but absolutely, we're optimistic about this, uh, I think anything that's invested. You know, it's enabling investment in infrastructure as a positive, uh, you know for us and really encouraged by the comments out of some of our major customers in the US including specifically AT&T where we, you know, we're a key supplier today. But having said that, I I think that doesn't, you know, does doesn't mean we can sit on our hands. We have to invest in Innovation, which is why I made the comments I did.

Speaker Change: You have a follow-up, Frederick.

Yeah, maybe a follow-up. If, if you could sort of expand a little bit on Europe, it it looked quite healthy in the quarter. Uh, if, if it really goes based or could you sort of Pick 3 drivers behind the the good momentum. You saw in Europe

Yeah, hi. This is Marco and and uh,

Speaker Change: we see, we actually saw a quite broad base, um, development in Europe in in all businesses. And uh, it was quite quite healthy, um, and and uh, welcome to just wall. Uh, considering that Europe has been a little bit muted in the past.

Speaker Change: Um, and um, of course, we hope that that we can see some some more development in Europe, going forward just like, uh, just to mention that. Hopefully the fiber Investments also in Europe will um, uh, take off more. Um, but also um, the whole macroeconomic environment would give some some um, Improvement here.

Thanks Frederick, we'll take our next question from Oreck. Roth from Bernstein Oreck, please go ahead.

Oreck Roth: Yeah, thanks very much. I wanted to ask about the guidance revision 2 days ago, just to clarify. So so you are halfway through the year but um I know that the range was was uh still 500 million as it was at the beginning of the year. So this is mean, uncertainty is have increased quite materially doubled, essentially, was there any other reason to keep the range? And then in this

Context also, um, why did you not just indicate a lower end of the prior range but but actually lower the midpoint of the range because the the range was pretty wide. The downside sort of fits in that and it could have just said uh oh it's it's now at the low end of the original range um bit more explanation every player. So thank you.

Speaker Change: Yeah, so, all right, thank you for that, uh, couple of comments. So first of all, I think, if you go back to q1, um, Marco and I both highlighted that we, you know, given the 1-time charges we had in MN and then the Tariff and Q2, which largely played out as expected, the 20 to 30 million that we called out.

Speaker Change: Top end of the range would be challenging and then obviously now we've we've Incorporated a full full year. Look on tariffs.

And, uh, and then a, and then obviously this currency shipped significant, 90 million of it being non-operational, uh, with, you know, with the impact of venture funds. So, with all of that in Play, We felt, you know, we, we felt it was prudent to lower the range. As we said, you know, what I would highlight is, uh, you

Speaker Change: Is what I highlighted in addition to that. Is that underlying it, I think we feel pretty good about operations because what you probably noted is we did not, um, we did not actually call down an impact from the 1 time charge at mobile. Um, and I think that's actually, you know, that that actually probably underscores a little bit of optimism outside of currency and tariffs, which, uh, we just felt it was, it was not prudent to assume we could absorb and still meet the guidance range.

Speaker Change: Did you have a follow-up?

Speaker Change: No, just to come back to part of the question. Thank you for that answer. Um but but why why? Why is the range still 500 million when when you have, you know, 6 months now, I'll report it. Yeah, yeah. Maybe just the other point I'll make and I'll let Marco comment is, uh, in the second. You know, obviously, if you look at our first half versus the second half and particularly in Q4,

Marco: You know, other than 23 and probably 20 which disruption from coid in 23. We had a significant shift in capex from the uh on the mobile network side. If you know, if you look at the business where historically very back-end loaded and uh, you know, as we talked about, we had, uh, you know, expectation, this quarter, uh, that we'd see more more demand from India and mobile networks, that did not happen. Um, so we feel very back-end loaded and and we want to be balanced and disciplined in our forecast, because so much is in the second half, Marco anything? You want to add there? Yeah, just that as well. That that we are still a little bit on the Fly and what comes to tariffs. So now we are assuming the situation is today, but as we all know that, you know, we don't exactly know how these Diaries will land in the end. And um that's why we want to keep the the range a little bit wider. So we have flexibility there.

Thanks Oreck. We'll take our next question from Sami saris from danske Bank Sami. Please go ahead.

Sami saris: Uh, hi. Uh, could you provide a bit of color on network infrastructure performance in Q2 and uh, how do you expect things to develop, uh, during, uh, third and fourth quarter for knee? When we look at Q2, we see a bit weak growth at IP and Optical combined with gross margin weakness.

Speaker Change: Hey, thanks. Uh, yeah, a couple of comments from my end. I think, first of all, if you if you look at us against our, our us peers. Obviously, we're showing constant currency. There's a benefit that you have to also consider for currency Tailwind that they're reporting. So that's that's 1 balance that we, you know, we didn't enjoy. Um, the other thing I would just highlight and we talked about this was, we had a bit of a, um, you know, a bit of a shortfall due to supply chain constraints and an increasing demand environment. I'll make 2 comments on that, and we would have expected double you just on that alone. On a constant currency basis, we would have expected double digit growth that we fulfilled that demand to a more consistent historical level. Um, second comment I would make is even with that. We have a strong book to Bill. And then again, that's without the award that I, that I touched on in my comments. Uh, so we feel feel quite good about the opportunity, uh, in terms of, uh,

Speaker Change: In terms of the second half but again uh you know again uh this is largely driven off of an. You know what we see as an in is an increasing mix in hyper scale uh and and AI Data Center and our customers.

Speaker Change: Do you have a follow-up for me?

Speaker Change: Uh, maybe a quick 1, uh, you talked about the need to have a more integrated fast moving and later Nokia, uh, can you elaborate on this a bit further? And, uh, will you be communicating related changes in the near term?

You know, broadband and fiber, fiber access Networks.

Speaker Change: Well, that's important. Um, it's also important to understand that our customers are thinking about things on a more integrated basis, uh, because they're also considering their customers who are, you know, they're, they're increasing, many of our customers are increasingly addressing them in a more integrated Manner. And then strategically from a technology road map perspective, we need to be thinking about it. And, and, uh, and if you think about things like security, uh, obviously platforms and services, uh, Ai and automation, there's there's clear opportunities and to end, I've heard that from many of our customers, both strategically and tactically and, uh, that's all very important. So, better service for customers number 1, and underneath that, I think, you know, I I think if you look at um,

You know, some of the industry players, certainly, some of our partners, I, you know, I spend time studying our partners as well. And if you look at some of our partners that have announced, um, you know, continued operating, uh, operating leverage opportunities both using AI further, op, uh, operations. Many of them, uh, you know, have focused on productivity and Agility as the key North, North Stars. And and so, for us I I feel like it's similar that we need to have. We need to have that kind of mindset of functional excellence. And so, uh, you know, we talked about this quite a bit as a leadership team and made the decision that this was the right step for the company. A consistent operating model across the functions and our mindset around Excellence, so that we can improve agility and on on rock, on, lock operating level with Justin said, we we believe that it's important that all the businesses

Will have the pnl responsibility and our ambition is not to increase the headquarters. If we want to do something, it's actually decreased the number, the cost of level of of headquarters.

Speaker Change: Just to be clear here as well.

Speaker Change: Thanks, honey. We'll take our next question from Simon Leupold. From Remy James, Simon. Please go ahead.

Simon Leupold: Thank, thank you very much for for taking the question. Um, so Justin you've been at the firm now for, you know, roughly 100 days. Uh, and you've talked a little bit about sort of priorities, but I guess, what, what I'd like to get a sort of understanding of here is, um, having had sort of this period to to learn and adjust and you've talked about some organizational shifts. How do you characterize your priorities going forward? Versus what you thought. When you first took the job and started

Yeah. Thank thanks. Simon. I I think a few probably

Simon Leupold: Few key learnings and maybe I'll talk about them, cross customers technology. And then, um, you know, operational and financial execution. I think, first of all, from a customer perspective, uh, I think there's

Simon Leupold: A real opportunity to partner, uh, and and to co-innovate with our customers and certainly and and obviously every customer has a slightly different strategy and and, and value, you know, value position and how they, how they compete. But there are, I think there's been a number of conversations or I've been really encouraged about the opportunity, to be, um, you know, to be innovating with our customers. Uh, in a way that perhaps we haven't on the technology side. Uh,

Simon Leupold: Look, I think what's important here is, we have a lot of great technology and great people in the organization, particularly, you know, within uh, within our engineering, uh, engineering and R&D teams. I think what we have opportunity to do is continue to be better members in the in the tech ecosystem. And what I mean by that is partner externally, think outside in and collaborate, more uh, with what's happening and uh, in in Tech and across the industries that we play in. Um, and then I'll make the other comment of just focusing. And not only the, the comments I made at the top around mobile and fixed access networks, transport and data center. But also, as you think about in the stack, where does it make sense to partner versus where? Does it make sense to invest in, uh, in in core, uh, in core technology? Last comment. I'll make is just, you know, around financials and operations. And I think this is maybe the thing I haven't emphasized in the comments, I just made on function on the functions.

Simon Leupold: That Marco and I touched on uh, is that specifically? I think we have an opportunity also to be more predictable and more productive. Uh, and I think, you know, that that's 1 of the objectives I have is that, uh, you know, is not only to drive growth but to drive a level of predictability and I think growth because obviously, when you look back historically, as you as you all, well know, um, we haven't been as predictable as certain we would uh, we would expect ourselves to be

Speaker Change: As a followup. Yes, please. Um, it it at the end of June there. There were some press reports suggesting uh that Nokia might be taking some actions to reduce headcount and to do some cost cutting. Uh, I I know it sounds like a little bit of reorganization efforts on your part, uh, but it doesn't sound like there were any major initiatives. Could you update us on, uh, really what you're thinking about in terms of any initiatives around Staffing cost structure, uh, that might be related to those press reports. Thank you.

Speaker Change: Yeah, thanks Simon. I, I just make a couple of comments there. I think. First of all, we had a, a major restructuring program in 23 that we announced that we're still executing

Um, so I think that's important to understand, and we set some targets around that and obviously a range around the restructuring charges at that time. We're still within that, you know, that point of execution uh, of of that program. So we're still within the window. Their second comment, I would make is, um, is that I'm not a, you know, having been in this situation before. Um, I don't think going forward are, are objective, should be to announce a big program, but also, you know, but but much more building the, the muscle and the capability around driving productivity and operating Leverage is a discipline. Um, so there's nothing. Nothing new to update today on a on our restructuring program, but in addition, I think, you know, if you look at, you know, best practice, it will be around making announcements around continuing a productivity and I think you'll see that in our results over time versus me telling you it's going to happen Marco. You want to

Speaker Change: no, I think it just

Marco Van: What what, what you just said, several times is continuously, improving is something that we have to have in our genes. And this is something that every part of the company has to, you know, Brooke on on that species as well. And and um, uh, and this is something that we will focus on very much and and uh, hopefully see improvements in our efficiency and and um, productivity in the company.

Speaker Change: Thanks, Simon. We'll take our next question from Rob Saunders at Deutsche Bank robbed. Please go ahead.

Rob Saunders: Yeah. Hi. Um Justin can you discuss your view of the mobile networks business? I mean, is this a business where you're okay being relatively self-care and treading water or do you have strong Ambitions to build back scale and and recover? Share in 6G I I guess another way of asking this question is relative to your 5% of sales, it's hyperscaler lead. How much of your R&D budget is going to go towards hyperscalers because I'm just trying to see trying to understand how you're going to orient the business of going forward. Thanks.

Speaker Change: Thank you. So

First of all, it's sort of 2 questions there. So let me let me ask, you're kind of asking, I think an implicit Capital allocation question as well. So let me let me answer the mobile networks business. I think, first of all, I I believe this is a unique and highly strategic asset. There's 4 scale players in the world. Uh, 2 are in the west, uh, you know, us, and and Ericson. Um, what I think is important, and I've said this, you know, consistently is, I don't think it's just about mobile networks, I understand how we report. But I think you have to look at Mobility Co every 1 of the scale players, including the 2 and the 2 competitors, we have out of China, have the core networks business, mobile network, the mobile networks assets radios, and and ran, and have a robust IP portfolio. And I think you have to look at the business in totality even as you report, the segments. Uh, and so I think, first of all, that's, that's really critical second, I would say

Speaker Change: When you look at our customer base, it's very clear to me. And I hear from my customers that we have opportunity to do more with them. And uh and and then I would just say third, as I've said before, I believe, the AI super cycle is going to drive a refreshed wave of investment in the space, it's not there today, but I think we have to be, you know, we have to have a view of, you know, over the longer term of whether it's smart glasses, drones autonomous vehicles. Um, you know, obviously innovations that, I think we'll see even in the, in the traditional mobile, handset business. Uh, there's going to be a set of innovations that drive opportunity for us and opportunity for our customers. Uh, and this is where also being uh, you know, an a thoughtful partner to our customers. As I touched on earlier, is going to be important, uh, in terms of capital allocation, you know, I think, what's what's happened in knee? And I, I would, I would just I, you know, emphasize this is 1 of the reasons I think in funaro is a very, very good acquisition for us is the market has shifted.

To cloud and AI driving the investment, uh, you know, the investment in The Innovation curve on, um, fixed networks. It used to be a lot of this Innovation was out of Transport networks. That's now more and more, you know, transport networks and data center driving the left Edge. Whether you think about, um, uh, you know, ethernet switching speeds or obviously Optical technology what's happening with pluggables in inside the data center, which we just talked about you. The Innovation curve is shifted. So,

Speaker Change: By default, our R&D has to be invested in that areas, but it's not just in that. I think if you look at the hyperscalers and public Cloud, they set an expectation for security, they set an expectation for um, you know, for ease of use and and uh,

Speaker Change: Hug players and those hyperscalers are partners for us on mobile. We've been out, we talked about announcements and, you know, in our Core Business. As as we've moved much more to a a cloud first strategy for core in terms of the tech stack. But also in terms of where we run, uh, those platforms and I think over time, we're going to see some of those things, move even into, uh, into ran. And I think we need to be, you know, we need to be a, a partner there. So, as I look at the, uh, if I look at Capital allocation, that's 1 element, as I think about, uh, these Partners as being, you know, broad Partners across our business. I think there's significant opportunities

Speaker Change: Did you have a quick follow-up? Rob?

Rob: Uh, just quickly on the the fixed wireless access roll out in India. Um, how long can this last, uh, in terms of being a Tailwind for your business? Thanks.

Rob: Yeah, you want to talk about this Mark? Yeah, I get. Um, thank you. Um,

Rob: I would say that many, many operators globally. Uh, are are looking into opportunities to utilize fixed wireless access whenever they especially the areas, where they see that, the, the, uh, mobile networks is not utilized, uh, fully, which is usually outside of the city centres. And there's 1 way for them to capture more opportunities and customer base. And if, and when there would be any fiber, uh, connection later, then the panel already did that customer connection, and they can just swap over that customer from fixed price access into Fiber customer. Um, and

Different operators, see these opportunities, uh, coming, um, you know, different time time, uh, lines as well. But right now we've seen that that Indian operators have been, uh, you know, quite active and seeing these opportunity to capture the customer base. Uh, and that's why we've seen the Tailwind there.

Speaker Change: I would just add, uh,

Rob: Just add on that front. Uh, I, I think, when we look at this, there's a couple of opportunities here, I think. First of all Broadband Access Wireless, uh, you know, Wireless or fiber are opportunities for growth for us. Second, there's opportunities on the operator side, you know, and you think about that as Ouellette as I touched on on my comments but also, um, it's actually Innovation and services and, and Technology we can deliver at the radio layer and we see that not only in India but in North America as well. But there's probably more we can do there. Uh, and then I would just say third, um, you know, obviously, uh, you know, it's, it's hard to predict exactly where you know where the demand will go and Marco rightfully pointed out, that there'll be a, you know, there's there's a, there's usually a balance between how much wireless access you want to provide before you want to, you want to lay fiber. Um, but I think the good thing the unique thing for us is we can potentially benefit on both sides.

Thanks Rob. We'll take our next question from Sandeep. Daesh Panda. From JP Morgan Sandeep. Please go ahead.

Speaker Change: And deep, we can hear you.

Hello, sorry. Uh, can you hear me?

Speaker Change: Yes, go ahead. Yeah, yeah. Hi uh, my question is on network infrastructure. Uh, uh in the network infrastructure business, you're seeing this very strong, uh, growth in uh, the fixed a fixed network based this. I mean, and we've talked, you've talked about that in the earlier questions. I want to go back to the optical business where you highlighted, these 6% organic growth. I mean, given the strength in the hyperscalers. Why is that business not growing stronger at this point? Or is it that you need to expand your footprint at the customer base more and following up on that? Uh, where are you in terms of the router with the routing and switching in the hyperscalers and can, uh, where, uh, in terms of expanding your footprint, with the hyperscalers

Speaker Change: Yeah. Thank thanks, Andy. I think a couple things so on optical again. I think if you, if you look at that um largely, you know, pre pre pre-acquisition, Nokia was not, uh, penetrated heavily in in Optical and and Optical within the the AI and Cloud space, um, within finura we've gained footprint there, but we're behind our competition, in terms of, of market, share penetration, I believe we have opportunity. That's why things like what we announced with uh, you know, with the 800 gig pluggable, uh, platform.

Speaker Change: Form is are important because that gets us back to being competitive and you'll note that we were behind in that space. So I think the work that David and the team have done to start to catch up, there is very important and we need to continue to do work to make sure we hit the if you hit future product intercepts.

On what we, you know, what we believe we can do. There is we as we come to Capital markets today

Speaker Change: Thanks. Did you have a quick follow-up?

Speaker Change: No, I'm that's it.

Thanks, we'll take our next question from Felix Hendrickson from Nordo Felix. Please go ahead.

Speaker Change: Hi, thanks for taking my question. Um, it's calling the Q3 out. Look for your flag. Uh, somewhat stable. Operating modes sequentially partly reflecting a bit tweak, the business mix. Um is this reflective of just a man, which you highlighted or do you also see, we can mix in the other segments and also do you have any availability on mix Improvement? Uh, for the for square of the year?

Speaker Change: Yeah, thank you Felix. Uh, I would say if you look normal seasonality that we've seen in the past years, as well, we, we have had quite strong quarter 4. And, um, these seasonally we believe that we we see this year as well. Uh, getting back, more more than normal seasonality. Uh, and, um,

Speaker Change: What comes to uh, second half? We we believe that we have a stronger performance in the second half compared to the first half and um, and also if you look in the past, I think 8 to 10 years seasonally between quarter 2 is the quarter 3. At the same time has been, uh, flat.

Speaker Change: Uh, and um, uh, and this is something that that, um, uh, is also quite typical of seasonally in the company.

Speaker Change: And, um, but also we want to highlight, what comes to quarter 3, specifically, is that, uh, in um, in mobile networks, we see, uh, less software compared to quarter 2, uh, and that will have, of course, uh, impact on on the margins, as well, in, in quarter 3.

Speaker Change: Thanks. Felix. Did you have a follow-up?

Felix Henriksen: Yeah. Just a just a quick 1 on the cost base in Technologies because uh,

Felix Henriksen: I guess if we play around with the numbers, it would seems like your 1.1 billion dollars for Technologies of the year as we use a step down in Opex for the back half of the year, uh, assuming that you're sort of sales run rate.

Felix Henriksen: Keeps at the at the current level. So could you just discuss that a little bit? Why should we expect the lower offex for Technologies in the in the second half of the year?

Yeah, thanks Felix. I I think the key thing here is Opex, is expected to be flat. We have some optimism on on, you know, on what we'll do in in the second half in terms of Revenue.

Thanks Felix. We'll take our next question from Sebastian, from Kepler Shira, Sebastian. Please go ahead.

Sebastian Stovitz: Yeah. Hello everyone and thanks for taking my question. Uh, have you seen any kind of food in orders affecting any of your businesses, uh, over the past few months? Are you think the order intake has been tracking fairly a normal Evolution? That would be the first question. The second 1,

Sebastian Stovitz: Is linked to competition because you're not D to, competitor was blaming stronger price, competition in the the hard Market over the past few months. Have you seen any kind of change in pricing dynamic or competitive Landscapes over the past few months in mobile networks? Thank you.

Sebastian Stovitz: Yeah, so I think on your first question, I, you know, again adjusting for if you look at it on our constant currency basis,

Speaker Change: Um I think uh, we we feel pretty good about, you know, the the forecast I think it's it's pretty consistent nothing in terms of Poland's I think probably more. What we're you know, what Marco and I are looking at is just giving some of the news particularly which is a question earlier about in the US as their is there. More opportunity though that feels like it's more, you know, a 26 and Beyond thing based on some of the announcements that have been made, um, and then in terms of uh, in terms of your second, question around pricing, I I wouldn't say there's anything that we see that's um,

Speaker Change: That's abnormal at this point. Um, uh, you know, the as you know, the the market, the market regionally has very different Dynamics. So in terms of,

Pricing Dynamics or specific competitive situations. It very much. Depends on the individual, um, opportunity. I think we feel, you know, we feel pretty good about what we see in terms of the market.

Speaker Change: Thanks so much and we'll take our next question from Jacob Bluestone from BNP Paragon. Jacob, please go ahead.

so heavily skewed into Q4 and if you can maybe also help us understand just around your confidence is the midpoint of that guide covered out of your existing order book um or how far away are you from sort of, you know, in in terms of your orders

Yeah, thank you. I can start. And, and then Justin can build on, uh, what games do the, the seasonality in this industry is is pretty much driven actually, uh, how customer behavior is, and how they see what needs they do. Do you have when they are, uh, uh, investing in their networks and, um, and usually towards the the later part of the year in quarter, 4 as well, if they see that there's, you know, some opportunities for them to to do any upgrades or or, you know, additional Investments, uh, in the capex frame that they have, um, that's when they usually come and, and, uh, asked us to do and, and, and this, this has been the the pattern in the market quite a long time.

Speaker Change: and um, uh and then what comes to um,

Speaker Change: uh,

in general, I would say that that um uh

Speaker Change: Different uh, sectors, behave a little bit differently. So these more the CSP side then what comes to hyperscaler side there perhaps more focusing on, on gradual Investments and and um, and not always thinking, um, like csps that, that quarter forward would be very heavy, but, but as we said, only 5% of sales is in in hyperscalers, uh, today. Uh, that's why we are quite dependent on on the cyclists that csps have.

I can mention, I can mention what comes to order coverage. It depends also between different businesses. Uh, when you go to a project business like mobile network proxies usually your order book is longer and you have a more coverage. Uh, a couple quarters ahead. Uh, while when you are in more, uh, or shorter term business, like, like in network infrastructure, uh, then your coverage is lower.

Speaker Change: But I I, I would say that we don't see any any, you know, deviations from the normal pattern that we normally have in in this year.

Speaker Change: Thanks Jacob, we'll take our next question from eminent from Carnegie. Um emo. Please go ahead.

Speaker Change: Hi. Thanks for taking my questions. Uh, just a couple more. Maybe on the order book. Could you go into a little bit of detail on what the order book looks like as a whole in network infrastructure and how it has developed year on year and Q on Q?

Yeah, I think, just a couple comments on this. We obviously don't break this down, and, and and detail, but, um, you know, overall group book to build was well, above 1. Um, Optical was well, above 1 and as I touched on, even would have remained well above 1 had. We, you know, fulfilled all of the orders we, uh, you know, we would, we historically have fulfilled based on traditional, um, traditional conversion rates. And then, as I touched on the 800 gig order, we we discuss the internet gig award that, we disclosed, um, that order has not been booked. So, I think, again, as you look at the overall funnel where, um, you know, I think we, we believe it's quite healthy. Um, but having said that, as I touched on earlier,

Speaker Change: We have a lot of work to do to continue to grow and scale and and Hyper scale because as Marco highlighted we're you know we're at 5% of overall Revenue mix so there's much more opportunity for us.

Speaker Change: Did you have a quick follow-up? I know.

Speaker Change: Thanks for that. Then on mobile networks, I just wanted to know how do you think about the segment in terms of what is needed for that to return to to revenue growth?

Speaker Change: Yeah, I think. First of all,

Speaker Change: Um obviously this has been a challenging business for us over the last few years. Um second of all the market is is flat, right? If you look at the, if you look at the market, this addressable to us and I'm

Speaker Change: you know, I'm really focused on, uh, you know, goes where we can actually sell, we get to participate, the markets largely flat, um,

Can share.

Speaker Change: Thanks Emil. Uh we'll take our next question from France from UBS France swap. Please go ahead

Speaker Change: Thank you very much. I have a quick question on the um on the strategy. Just in this uh you know, more integrated uh end-to-end maybe.

You know what Noah did that in the past? You know what, uh, you know, Rajiv at at the time when, you know, he acquired Alcatel the idea is was to do an end to end, um, and then picka came and then, you know, realize that maybe it was not a good solution. So we went back to Best of breed.

Speaker Change: And now, you seem to go to go back again, to the, to the integrated part end to end. So, how different is it from? You know, the previous uh, work of Nokia

Speaker Change: And because you know, what would make it work this time? Um is there anything you can see in the past? You know about uh what have been done and how you can be differently? Just trying to understand the, you know, this strategy given it didn't work in the past.

Yeah, thank you Francois. So first of all, I'd say a few things 1 is um, in my career, I've worked in many different models.

Uh, and uh and I I I'm quite a spent a lot of time understanding this and probably studied it pretty deeply in terms of my own companies and others. There's no, there is no perfect model. Um, it's really about being customer and marketing oriented. Um, and then being focused on core Innovation for me there, there's a couple things that are really important and I, I don't, I, I think it's also, uh, important not to say we're going, you know, we're going back to something that was there before. Um, that's that's not the case. What's, what's important here? And I think we're building on is BG, accountability is very important. The businesses have, you know, different Cycles. They have different uh, different, different investment areas.

Speaker Change: You know, CNS is very open, very focused on, uh, Cloud, native software, you know, building a fabric and platform. We talk about apis. That's very different than, uh, uh, you know, a

Speaker Change: A fixed Broadband business. Um, you know, where we're focused on Ouellette customers and, uh, and in places, where it makes sense, you know, obviously selling consumer premise equipment,

Speaker Change: Very, very different businesses. What's important is um that uh we have the accountability around that. The other thing is our customers are 1 customer set. I think, sometimes from a model perspective, it's you can get caught up in having too many, you know, so focused on the portfolio. You missed that the customer wants to engage with you in 1 way because there's 1 procure organization, there's 1 group CTO. There's you know, there's there's 1 customer portfolio that they're, you know, they're engaging with then I think we need to orient to our customers and that's why we're making a bit of the balance, on the, on the customer facing side on the, on the functional Excellence piece. I think I covered this in my comments, the steps that we took in the past where the right steps at the time and, and they've delivered value for the company. The reality is, as we look ahead, we felt like they were a different set of steps we needed to take, uh, and, uh, and spend time with the team. I made the decision that we needed to, um, really drive a consistency across the functions. Because again, as I'll point out, when I came in, we had different operating models depending on the function. So the reintegration

Speaker Change: of MBS the alignment to the the functions. To a consistent model I think is, uh, is going to be valuable. I think it's better for our people. Uh, and uh, and I think it'll ultimately unlock operating leverage. And those were, those were really my 2 key decisions in this. So, I, I would, I would spend, you know, obviously I study history. I'm a student of of history of what's happened, studied other models. But I wouldn't say that we're, you know, dropping uh, you know, the prior model for the for the model that was you know, 2 Generations ago. I don't think that's the case at all. I think we're

Speaker Change: I think we're taking a step in evolution. That's that's setting us up to be better positioned and early feedback from customers. And candidly from our people has been very positive around, uh this more integrated approach since particularly on the uh on the go to market side.

Speaker Change: Thank you, thanks. Did you have a quick follow-up?

Speaker Change: No, that's fine. Conscious of time. Thank you.

Speaker Change: Thank you all. Um, that is our last question for today, ladies and gentlemen. This concludes today's call, I would like to remind you that during the call today. We have made a number of forward-looking statements that involve risks and uncertainties actual results, May therefore, differ materially from the results, we currently expect factors that could cause such differences can be both external as well. As internal operating factors we have identified such risks in the risk. Factor section of our annual report on form 20f which is available on our investor relations website. Thank you all for joining us.