Nokia Turns To Net Profit In Q2, But Profit From Cont Opns Down; Cuts FY25 Profit View

Nokia reported a Q2 net profit of €96 million, reversing last year's loss, though profit from continuing operations plunged 78% to €83 million despite a 2% sales increase to €4.546 billion. The company subsequently lowered its fiscal 2025 comparable operating profit outlook to €1.6 billion - €2.1 billion from the previous €1.9 billion - €2.4 billion, attributing the revision to currency headwinds from a weaker USD and tariffs, despite underlying business trends remaining largely as expected. Nokia anticipates a stronger second half, particularly Q4 due to seasonality, and declared a dividend of €0.04 per share.

Analysis

Nokia's second-quarter results present a mixed but predominantly cautionary picture, characterized by severe margin compression and a reduced forward outlook. While the company reported a net profit of €96 million, reversing a prior-year loss, this was primarily an accounting-driven result due to the absence of losses from discontinued operations. The more indicative figure, profit from continuing operations, plunged 78% to just €83 million, a stark contrast to the modest 2% year-over-year increase in net sales to €4.546 billion. This divergence signals significant pressure on profitability. The most material development is the downward revision of the fiscal 2025 comparable operating profit guidance to a range of €1.6 billion to €2.1 billion, down from the previous €1.9 billion to €2.4 billion. Management attributed this cut to external headwinds, specifically currency effects from a weaker US Dollar and tariffs, while noting the underlying business is trending as expected. Despite the company's anticipation of a seasonally stronger second half, this guidance reduction, coupled with a decline in comparable EPS to €0.04 from €0.06, overshadows the positive signal of a €0.04 per share dividend distribution.

Key Decisions for Investors

• Investors should revise their valuation models to reflect the materially lower fiscal 2025 comparable operating profit guidance, as this is the most significant forward-looking indicator from the report.
• Closely monitor macroeconomic factors, particularly the EUR/USD exchange rate and any news related to trade tariffs, as the company has explicitly cited these as key risks to its profitability.
• Scrutinize future earnings for any evidence of margin stabilization, given the 78% collapse in profit from continuing operations on slightly higher sales indicates a critical challenge to the core business's profitability.