In Q3, the company’s net sales experienced a 15% year-on-year decline when measured in constant currency (or a 20% decline as reported). This downturn was influenced by macroeconomic uncertainty and higher interest rates, which continued to put pressure on operator spending.
On the other hand, enterprise net sales saw a 5% year-on-year growth when measured in constant currency, with a flat reported figure.
The comparable gross margin decreased by 120 basis points year-on-year, landing at 39.2% (reported gross margin declined by 140 basis points to 38.7%). This drop was primarily caused by regional shifts in the Mobile Networks segment. However, there was a 140 basis point improvement in the Mobile Networks gross margin thanks to a more favorable regional mix.
The comparable operating margin also saw a year-on-year decline of 200 basis points, ending up at 8.5% (reported operating margin dropped by 350 basis points to 4.8%). This demonstrates the company’s ability to maintain profitability relative to the decline in net sales.
The comparable diluted earnings per share (EPS) amounted to EUR 0.05, while the reported diluted EPS was EUR 0.02.
The free cash flow was negative, at EUR 0.4 billion, with a net cash balance of EUR 3.0 billion. There are expectations that things might improve in Q4. The company has announced an acceleration in its strategy execution, which involves granting more operational autonomy to business groups. Additionally, a new change in the operating model is that sales teams will be integrated into business groups.
Nokia is targeting to achieve gross cost savings of EUR 800 to 1,200 million by 2026. This could lead to workforce reductions to achieve consistency with the expectations for the full year 2023, with anticipated net sales falling within the range of EUR 23.2 to 24.6 billion. The operating margin should be in the range of 11.5% to 13.0%, and that could be achieved if Nokia Technologies closes outstanding deals.
So, just to sum it up, Nokia’s Q3 report reveals a drop in net sales due to economic uncertainty. Cost-saving measures are on the horizon!