Nokia Q1 2025 results show resilient networks growth and stabilising mobile performance

How Did Nokia Perform in Q1 2025?

Nokia Corporation reported its Q1 2025 financial results on 24 April 2025, presenting a complex picture of strength in Network Infrastructure and Cloud and Network Services, offset by continued challenges in the Mobile Networks and Nokia Technologies segments.

Total reported net sales declined by 1% year-on-year to €4.39 billion, while on a constant currency and portfolio basis, net sales fell 3%. Despite the headline decline, Nokia pointed out that after adjusting for the €400 million catch-up licensing revenues recorded in Q1 2024, underlying sales growth stood at a healthy 7%.

Profitability metrics showed pressure, as comparable gross margin dropped by 820 basis points to 42.3%, and comparable operating margin fell by 990 basis points to 3.6%. The decline was largely driven by a one-time €120 million contract settlement related to a customer project dating back to 2019. This settlement fully resolves the associated financial exposure but impacted Mobile Networks’ profitability sharply during the quarter.

Despite these setbacks, Nokia generated a strong free cash flow of €0.7 billion in Q1 2025 and ended the quarter with €3.0 billion in net cash. The quarter included the acquisition of Infinera Corporation, completed at a total cost of €2.5 billion. Nokia also completed its €703 million share buyback programme, cancelling 150 million shares to support shareholder value.

Which Business Segments Drove Growth in Nokia Q1 2025 Results?

Network Infrastructure led Nokia’s Q1 2025 performance, delivering 11% year-on-year net sales growth on a constant currency and portfolio basis. Optical Networks, augmented by the integration of Infinera, posted 15% growth, while IP Networks grew 7%, and Fixed Networks rose 9%.

The Infinera acquisition immediately bolstered Nokia’s scale in the Optical Networks segment, adding €143 million to net sales for the month of March alone. Nokia stated that customer momentum in hyperscaler markets continued to build, with multiple new orders and strong order intake.

Mobile Networks achieved modest 2% year-on-year net sales growth, driven by solid gains in North America. However, profitability sharply deteriorated, with an operating margin of -8.8% compared to -1.9% in Q1 2024. The €120 million one-time settlement heavily impacted the unit’s gross margin, which fell by 1,000 basis points to 30.9%.

Cloud and Network Services reported 8% year-on-year growth, fuelled by robust demand for Nokia’s 5G Core products. Major wins were recorded with AT&T, Boost Mobile, and Ooredoo, with further momentum seen in Core Networks. Both gross and operating margins improved significantly, reflecting better product mix and operational efficiencies.

Nokia Technologies experienced a sharp 52% drop in net sales, mainly due to the absence of the prior year’s catch-up licensing deals. Nonetheless, the licensing arm continued to execute on its growth strategy, signing new agreements with Amazon and others, boosting the contracted annual run-rate to approximately €1.4 billion.

How Did Regional Markets Contribute to Nokia’s Results?

Regional performance varied significantly across geographies during the quarter.

Sales in the Americas increased by 18% year-on-year on a constant currency and portfolio basis. North America, in particular, recorded strong growth in Optical Networks and Mobile Networks, supported by investment recovery and major customer wins.

Asia-Pacific posted a 12% rise in sales, led by India, where Fixed Networks and Mobile Networks expanded strongly, especially in fixed wireless access deployments. Sales growth in Japan and Southeast Asia partially offset the 18% decline recorded in Greater China.

In the EMEA region, net sales fell 21%, weighed down heavily by the Nokia Technologies licensing comparison base. Even after adjusting for this factor, EMEA saw softness primarily within Mobile Networks, with declines noted across both Europe and the Middle East and Africa subregions.

What Are Nokia’s Updated Financial Targets for 2025?

Nokia maintained its full-year 2025 guidance, with a forecast of comparable operating profit between €1.9 billion and €2.4 billion. Free cash flow conversion is expected to range between 50% and 80% of comparable operating profit.

Management flagged potential disruption from recently announced tariffs, which are estimated to have a €20 million to €30 million impact on Q2 2025 comparable operating profit. Beyond the second quarter, no additional assumptions related to tariffs have been factored in due to visibility constraints.

Strategically, Nokia plans to leverage the flexibility of its global manufacturing footprint to mitigate tariff exposure. It also continues to invest in growth areas such as private wireless networks, hyperscaler partnerships, and industrial digitalisation.

How Has Nokia’s Stock Responded to Q1 2025 Results?

Nokia’s American depositary shares fell sharply by 9.7% on 24 April 2025 following the results announcement, closing at $4.86 compared to the previous day’s close of $5.31. The market reaction was driven by investor concerns over the profitability decline, the one-time settlement impact, and warnings of tariff-related headwinds.

Earlier in the week, Nokia’s shares had risen by 4.14%, driven by optimism around Network Infrastructure’s performance and the successful integration of Infinera.

The sharp reversal post-earnings highlighted market sensitivity to near-term earnings volatility, even as strategic fundamentals remain strong.

Sentiment Analysis and Investment Insight: Buy, Sell, or Hold?

Market sentiment towards Nokia following Q1 2025 results is cautious. Institutional investors appear to have taken a wait-and-watch approach, reassessing exposure amid growing tariff uncertainty and margin pressures.

Nokia’s €703 million buyback, completed ahead of the results, supported the stock’s underlying valuation by reducing share count and offsetting dilution from the Infinera acquisition.

In terms of investment outlook, Nokia’s long-term prospects remain intact. Growth in hyperscaler infrastructure, private wireless networks, and 5G Core solutions continues to accelerate. However, short-term risks, including profitability pressures and global trade disruptions, cannot be ignored.

Based on the current operating dynamics, Nokia is best rated as a Hold. Investors are advised to monitor Q2 2025 results closely, especially for improvements in Mobile Networks margins and further traction in Optical and IP Networks. If Nokia can stabilise its margins and effectively mitigate tariff impacts, an upgrade to Buy could be justified later in the year.

How Is Nokia Strategically Positioned for Long-Term Growth?

Nokia’s strategic emphasis on industrial digitalisation, hyperscaler networking, and sustainability initiatives positions it well for the future.

Recent wins in optical networking, private wireless deployments, and new licensing deals in automotive and IoT markets demonstrate the breadth of Nokia’s addressable market expansion. The early success of the Infinera integration, coupled with disciplined capital allocation and a net-zero emissions roadmap by 2040, underlines management’s long-term focus.

Although Nokia’s Q1 2025 results reveal short-term financial turbulence, the company’s strategic foundation and customer momentum suggest a resilient growth trajectory in the years ahead.