Finnish telecom equipment maker Nokia announced on Thursday that its operating profit for the second quarter fell by 32% due to continued weak demand for 5G telecom equipment. However, the company forecasted an improvement in demand in the second half of the year.
Nokia’s comparable operating profit dropped to 423 million euros ($462.38 million), down from 619 million euros in the same quarter last year. Both Nokia and its Swedish rival Ericsson have been impacted by a decrease in telecom equipment purchases by customers, leading to thousands of layoffs in response.
“We are navigating a tough economic landscape, but the underlying demand for our technologies remains strong,” Lundmark stated. “We anticipate a rebound in the latter part of the year as our customers ramp up their 5G deployments and network upgrades.”
Net sales for Nokia fell 18% year-on-year in constant currency, primarily due to a slowdown in the pace of 5G technology investments in India. India, which contributed about 12.5% of Nokia’s total sales in 2023, experienced a significant decline after rapid growth the previous year. “The most significant impact was the challenging year-ago comparison period, which saw the peak of India’s rapid 5G deployment with India accounting for three-quarters of the decline,” Nokia explained.
Despite these challenges, Nokia forecasted a return to growth in the second half of the year. “While the dynamic is improving, the net sales recovery is happening somewhat later than we previously expected,” CEO Pekka Lundmark said. “Looking forward, we believe the industry is stabilizing and given the order intake seen in recent quarters, we expect a significant acceleration in net sales growth in the second half,” he added.
Ericsson also predicted a market recovery last week, noting an uptick in demand in North America. Lundmark echoed this sentiment, stating, “The fiber market in North America is showing promising signs. We signed new important deals there.”
Nokia has maintained its full-year guidance for comparable operating profit, expecting it to be between 2.3 billion and 2.9 billion euros.