Nokia has slashed its full-year profit forecast after a disappointing second quarter, hit hard by a weakening U.S. dollar and tariff issues.
The company’s operating profit fell by 29% year-on-year to €301 million, far below market expectations. Analysts had anticipated closer to €402 million, according to a consensus compiled by Infront.
This is one of Nokia’s highest quarterly stumbles in recent years. The telecoms equipment manufacturer now expects 2025 operating profit to land between €1.6 billion and €2.1 billion, down from the earlier projection of €1.9 billion to €2.4 billion.
The downgrade shows a €230 million hit from adverse currency movements, mainly due to the euro gaining against the dollar (EUR/USD from 1.04 to 1.17), and an additional €50–80 million in tariff-related costs.
CEO Justin Hotard, addressing the media in a post-earnings call, said: “Considering these two headwinds, we decided it was prudent at this point to lower our comparable operating profit outlook.”
The company’s shares sank 7.6% on Wednesday, its steepest one-day drop since April, before making a 1% rebound in early trading on Thursday. The market hadn’t priced in the scale of the financial impact.
Hotard, who took the role in April after leading Intel’s AI and data centre business, has made it apparent that Nokia’s sustainability lies in what he calls “AI-powered connectivity” and mission-critical infrastructure.
And he’s not just talking, Nokia has already ramped up its R&D investment by 6% year-on-year, now standing at €1.126 billion. Focus areas include 5G standalone core networks, edge computing, and optical systems.
A big part of Nokia’s strategic play is defence. With NATO countries agreeing in June to raise defence spending to 5% of GDP by 2035, the company sees a long runway of opportunities, especially in secure private networks and AI-enhanced tactical communications.
“There’s a growing need for national security-grade connectivity infrastructure,” Hotard told Reuters, adding that NATO’s push opens the door for deeper collaboration in areas like cybersecurity and military-grade telecoms.
The second quarter’s financials confirmed earlier estimates: revenue inched up to €4.55 billion, but it wasn’t enough to offset losses driven by a €60 million currency revaluation and €20–30 million worth of tariff-related expenses.
Currency sensitivity remains a major concern, Hotard estimates a 10 to 15 million euro hit for every single cent the euro gains over the dollar.
The company, however, wants to reduce complexity and redirect focus. Hotard says Nokia will simplify parts of its operations while continuing to build out its presence in both traditional telecom markets and emerging security-focused sectors.
It’s a transition for a company once known for its iconic 3310 handsets. A decade after ditching its consumer phone business, Nokia now straddles the line between legacy telecom infrastructure and frontier technology, with AI as its core growth engine.
The firm expects to monetise AI infrastructure by 2027, suggesting it’s not merely a short-term bet, but a long-term pivot.
Despite the rocky start to the year resulting in low profit, Nokia maintains a cash cushion of €2.9 billion and is optimistic about a stronger second half, especially in Q4, which typically benefits from seasonal demand in network deployments.
