Despite Revenue Dip, Nokia's Q1 Net Profit and Technology Patents Fuel Growth

Nokia Corp NOK reported a fiscal first-quarter 2024 net sales decline of 20% year-on-year (19% in constant currency) to €4.67 billion ($5.07 billion), missing the consensus of $5.10 billion. Comparable EPS was $0.10 (€0.09) versus the consensus of $0.06. 

The reported net profit is €438 million, up from €289 million a year ago. Comparable net profit was €501 million, up from €342 million a year earlier.

Network Infrastructure sales declined by 26% year over year in CC due to the weak demand environment. Cloud and Network Services sales decreased by 13% year over year in CC. Nokia Tech sales climbed by 216% year over year, driven mainly by signing patent license agreements with OPPO, Vivo, and other licensees.

Mobile Network sales declined by 37% year over year in CC due to some moderation in the pace of 5G deployment in India. Net sales slowed primarily due to North America, where demand remained weak.

Margins: Gross margin climbed by 1,040 bps to 47.9%, and comparable gross margin improved by 1,090 bps to 48.6%. The margins reflected the benefits of the catch-up net sales in Nokia Technologies and strong improvements in Mobile Networks gross margin, in part due to a more favorable regional and product mix.

The operating margin increased by 130 bps to 8.6%, and the comparable operating margin grew by 460 bps to 12.8% as licensing catch-up net sales more than made up for low net sales coverage of operating expenses impacting other business groups.

Nokia held €5.1 billion in cash and equivalents and generated €955 million in free cash flow.

Dividend and Buyback: The Board resolved to distribute a dividend of €0.04 per share.

FY24 Outlook: Nokia reaffirmed 2% – 8% growth for Network Infrastructure sales, (15)% – (10)% change in Mobile Networks sales, and (2)% – 3% change in Cloud and Network Services sales.

Nokia reiterated comparable operating profit of between €2.3 billion – €2.9 billion and free cash flow conversion from a comparable operating profit of 30% – 60%.

The fiscal 2024 revenue and adjusted EPS consensus are $23.56 billion and $0.36.

Nokia stock plunged 29% in the last 12 months. Investors can gain exposure to the stock via IShares U.S. Digital Infrastructure And Real Estate ETF IDGT and Defiance Quantum ETF QTUM.

Price Action: NOK shares traded higher by 0.90% at $3.36 premarket Thursday.

Image: Nokia