Nokia's Q2 2025 Earnings: A Strategic Reassessment Amidst Weak Mobile Networks Performance and Strong Infrastructure Growth

Nokia's Q2 2025 earnings report paints a complex picture of a company navigating a volatile global landscape. While the Finnish tech giant reported a 1% year-over-year decline in net sales to €4.55 billion, the results were not uniformly bleak. The company's Network Infrastructure segment surged 8% year-over-year, driven by 17% growth in Fixed Networks, while Cloud and Network Services posted a 14% increase. However, the Mobile Networks segment—once Nokia's crown jewel—slumped by 13%, dragging down overall performance. This divergence raises critical questions: Is the decline in Mobile Networks a temporary setback, or a structural shift? And does Nokia's resilience in infrastructure and licensing justify buying the dip in a stock that has underperformed broader tech indices in recent years?

The Good: Strategic Shifts Pay Off in Infrastructure and Licensing

Nokia's pivot toward infrastructure and cloud services is paying dividends. The Network Infrastructure segment's 8% growth, despite supply chain constraints, underscores its importance. Fixed Networks' 17% increase—a standout in a sector where demand for fiber-based connectivity is surging—highlights Nokia's role in enabling the global shift to high-speed broadband. Meanwhile, Cloud and Network Services' 14% growth and margin improvement (from -6.9% to 1.6% operating margin) signal progress in monetizing 5G standalone core deployments.

Nokia Technologies, the licensing arm, remains a cash-cow, with 3% growth, 100% gross margins, and a clear path to its €1.4-1.5 billion mid-term target. This unit's stability provides a buffer against the volatility of hardware-driven segments.

The Bad: Mobile Networks in Retreat

The 13% decline in Mobile Networks net sales is alarming. While management attributes this to a prior-year contract settlement and project delays in India, the operating margin contraction from 8.8% to 4.4% suggests deeper challenges. Competitors like Ericsson and Huawei are also grappling with 5G deployment delays in emerging markets, but Nokia's margin pressure is more severe. The segment's 41.1% gross margin remains strong, but without top-line growth, its contribution to profitability will wane.

Regionally, the Americas and Asia-Pacific declines (-22% and -17%, respectively) further complicate the outlook. Currency fluctuations (particularly the weaker dollar) are a drag, but Nokia's exposure to tariffs and geopolitical tensions in key markets adds another layer of risk.

The Strategic Reassessment: Is Now the Time to Buy the Dip?

Nokia's revised full-year operating profit guidance of €1.6-2.1 billion reflects its acknowledgment of near-term headwinds. Yet, the company maintains a robust net cash position of €2.9 billion and a free cash flow conversion rate of 50-80%. These metrics suggest operational discipline, even as the business restructures.

For investors, the key question is whether Nokia's underperformance is cyclical or structural. The Mobile Networks segment's struggles could persist in the short term, but the long-term tailwinds in infrastructure—5G, fiber expansion, and edge computing—favor companies with Nokia's scale. The recent 800G ZR/ZR+ hyperscaler award and 5G deals with Elisa and Optus indicate that Nokia remains competitive in high-growth areas.

However, risks remain. The company's reliance on volatile markets like India and the U.S. exposes it to macroeconomic shocks. Additionally, its revised guidance suggests that management is not confident in offsetting currency and tariff impacts.

A Cautious Bull Case

If Nokia can execute on its strategic priorities—scaling Network Infrastructure and Cloud Services while stabilizing Mobile Networks—it could emerge stronger from this downturn. The upcoming Capital Markets Day in November 2025 will be a critical test of management's ability to articulate a clear path to growth.

For investors, the current dip may present an opportunity, but it requires careful timing. A prudent approach would be to allocate capital to Nokia only if it meets two conditions: (1) the stock trades at a discount to its intrinsic value based on infrastructure and licensing segments, and (2) there is visible progress in Mobile Networks by Q3 2025. Given its cash reserves and exposure to secular trends, Nokia is not a speculative play—but for long-term investors willing to tolerate short-term volatility, the risk-reward balance is beginning to tilt in favor of a cautious buy.

In a market where cyclical downturns often mask long-term value, Nokia's Q2 results suggest that the dip is real—but so are the growth levers it has in motion.