• Nokia’s new CEO, Justin Hotard, is less than a month into the role
• He helped to deliver the vendor’s first-quarter financial report on Thursday morning
• It was a mixed bag that didn’t please investors, though there were at least some positives for the company’s mobile networks unit
• Now Hotard needs to make his mark and make clear his strategic and portfolio plans

Justin Hotard just found out the hard way what it means to be the CEO of Nokia. Less than a month after taking over the role from Pekka Lundmark, the former head of the AI and datacentres unit at Intel delivered a first-quarter earnings report that featured a year-on-year dip in sales, an operating loss and a slump in margins, all of which weighed heavy on the vendor’s share price, which sank by almost 8% to €4.32 on the Helsinki stock exchange. 

Like-for-like revenues were down 3% to €4.39bn, gross margins slipped to 42.3% from 50.5% a year earlier, and the company’s operating profits crashed by 74% to €156m.

There are reasons for the slips and slumps – the vendor’s Mobile Networks took an apparently unexpected €120m contract settlement charge related to a historic project that went awry, a sum that ate into the operating margins, while its highly profitable patent licensing division, Nokia Technologies, didn’t do nearly as well as it did a year ago, when it reported an unusually healthy quarter due to “catch-up licensing deals” that couldn’t be matched. In the first quarter of this year, Nokia Technologies reported revenues of €369m, down by 51% year on year. 

Those factors contributed to the first-quarter financials, of course, but there’s nearly always at least one fly in the ointment, right? 

And one of those flies in the second quarter (and probably beyond) will be the impact of US trade tariffs. Nokia stated: “Regarding the tariff situation, there could be some short-term disruption. We will continue to utilise the flexibility of our global manufacturing network to minimise [the] impact of the evolving tariff landscape. Based on what we see today, we currently expect a €20m to €30m impact to our comparable operating profit in the second quarter from the current tariffs. Given the lack of visibility, we have not taken an assumption related to tariffs in the second half of 2025.”

In addition, the Financial Times reported that Hotard would “absolutely entertain” the potential of increasing Nokia’s manufacturing capabilities in the US, where it already has facilities that could help to offset the impact of President Trump’s tariffs. 

It wasn’t all doom and gloom, though. After a crushing two years, the Mobile Networks division not only reported a slight increase (2%) in year-on-year, like-for-like revenues to €1.73bn but it also announced a major 5G radio access network (RAN) deal with influential US telco T-Mobile US – see Nokia lands strategic 5G RAN deal with T-Mobile US to enhance nationwide connectivity.

This will come as a relief to Hotard and the rest of the management team as rumours had been swirling that T-Mobile US might join Verizon and AT&T in sidelining Nokia from their cellular networks. But T-Mobile US clearly likes the cut of Nokia’s jib, not only for its ongoing regular 5G rollout but also for its exploration of future AI-RAN options. Ulf Ewaldsson, president of technology at T-Mobile US, noted: “T-Mobile’s nationwide standalone 5G network has solidified our global leadership by delivering tangible benefits to our customers. This new agreement with Nokia will further enhance our current network capabilities as we strengthen our journey supercharged with 5G-Advanced, laying a robust foundation for future innovation.” 

But the Mobile Networks division is still losing money – an operating loss of €152m in the first quarter – and, as we’ve heard on more than one occasion already this year, the RAN sector has shrunk over the past two years and isn’t expected to grow again any time soon. Add to that the potential impact and disruption of the current US administration and the RAN sector isn’t looking like a great market opportunity right now. With stabilised revenues and the positive impact of the T-Mobile US deal, could Hotard look to offload the Mobile Networks division? Market speculation earlier this year suggested a deal was previously explored but terms could not be agreed, with market watchers identifying Samsung Networks as the most likely buyer as it looks to boost its telco sector influence. 

Hotard, who says his current focus is on capital allocation, will need to share his views sooner rather than later so that uncertainty doesn’t hold the company back. He noted in his prepared remarks for the earnings report that, over the coming months, he will “continue to listen and learn from customers, employees, shareholders and other stakeholders. I will provide an update with our Q2 results and I look forward to presenting our complete value creation vision for Nokia at our capital markets day which we now expect to hold in November.”

What seems certain is that Nokia’s Network Infrastructure division (optical, routing, fixed broadband) will be at the heart of his growth strategy but that won’t be anything particularly new as his predecessor had already identified the datacentre infrastructure, and associated data transport networks, as the key to Nokia’s future growth, which is why the vendor splashed out $2.3bn to acquire optical networking specialist Infinera, a deal that closed only a few weeks before Hotard took the helm.  

In the first quarter of this year, the Network Infrastructure division reported revenues of €1.72bn, up by 11% on a like-for-like basis, while its operating profit increased by almost 60% to €135m. This is where the profitable growth is to be found for Nokia – will the new CEO take a brutal strategic approach and offload the company’s telco RAN business, focusing instead on the potential of Network Infrastructure’s various business lines and the opportunities in the enterprise sector with private networks and the defence sector, where Nokia has been building up its portfolio? 

Hotard is well and truly in the hot seat. 

- Ray Le Maistre, Editorial Director, TelecomTV