Nokia Q4 operating profit down 27%, beats forecast on margin boost

STOCKHOLM (Reuters) -Finnish telecom equipment supplier Nokia (HE:) on Thursday reported a 27% drop in fourth-quarter operating profit, hurt by lower demand for 5G gear across North America and a slowdown in markets such as India, but still beat expectations.

Comparable earnings before interest and tax (EBIT) fell to 846 million euros ($920.19 million) from 1.15 billion euros a year earlier, beating the 767.5 million euros expected by analysts in an LSEG poll.

Nokia, however, saw improvement in gross margins boosting profits as sales of products shifted towards software, which brings in higher margin.

Gross margin rose to 43.1% from 41.4% a year earlier.

“Looking ahead, we expect the challenging environment of 2023 to continue during the first half of 2024, particularly in the first quarter,” CEO Pekka Lundmark said in a statement.

Telecoms equipment suppliers, including Swedish rival Ericsson (BS:), are set for a challenging year as mobile operators tighten their purse strings on new 5G gear purchases.

Nokia had warned in late December that it wouldn’t meet its full-year 2023 targets, citing pending resolution of patent disputes. On Wednesday, the company said it had signed a patent deal with Chinese smartphone maker Oppo.

Comparable net sales dropped 23% to 5.71 billion euros, missing estimates of 6.28 billion euros.

($1 = 0.9194 euros)