Nearly every time investors expect the worst from Nokia Corporation (NYSE: NOK), the company beats consensus estimates. And when the company is expected to at least meet analyst targets, Nokia misses badly. On July 26, Nokia reported second-quarter results that badly missed expectations.
Nokia reported profits in the second quarter falling a drastic 42%. Profit margin in its core business of networking weakened. Net sales fell 5.5% due mostly to the lag in the 5G refresh. With telecom capex spending uncertain, the implementation of 5G is also unclear. Near-term gross profit will suffer. In Q2, this key figure fell 13% to EUR 2.04 billion.
Nokia is still keeping to its full-year targets, forecasting networking spending will resume in two quarters (Q4). Nokia expects the 5G super-cycle will still happen. It anticipates its performance will strengthen in 2019 and accelerate in 2020. The 5G cycle will start in the next quarter (Q3).
Near-term pressures
Weak demand for 5G gave buyers the power to negotiate. The customers asked for price reductions but Nokia opted not to give in so easily. Any price reductions will prove temporary, assuming customers ramp up infrastructure upgrades. The roll-out of 5G and the ever-increasing demand for 5G technology will drive Nokia’s revenue.
Investors just need to expect the worst in Nokia in the short-term but forecast a 5G upgrade to drive revenue growth.
Tech Insider
