Nokia has cut its full-year profit outlook following a disappointing second-quarter performance, marked by a steep 29% drop in operating profit to €301 million, well below market expectations. The company cited a weakening U.S. dollar and mounting tariff costs as major headwinds.
With analysts expecting €402 million, the shortfall prompted the telecom giant to lower its 2025 profit projection to between €1.6 billion and €2.1 billion, down from its previous range of €1.9 billion to €2.4 billion. A €230 million loss from currency shifts and an additional €50–80 million in tariffs further deepened the blow.
Chief Executive Officer Justin Hotard, who stepped into the role in April, said the dual pressure from adverse exchange rates and trade costs made it necessary to revise the outlook. Nokia’s shares reacted sharply, plunging 7.6% on Wednesday, the company’s worst trading day since April, before a modest 1% rebound on Thursday. Despite revenue rising slightly to €4.55 billion, it wasn’t enough to offset losses caused by a €60 million currency hit and €20–30 million in tariff-related expenses.
Nevertheless, Nokia is doubling down on its pivot to AI-powered connectivity and strategic defence partnerships. The company has raised its R&D investment by 6%, reaching €1.126 billion, with a focus on 5G standalone networks, edge computing, and optical systems.
Hotard sees significant long-term prospects in military-grade communication technologies, particularly with NATO’s commitment to increasing defence spending. The firm is also eyeing cybersecurity and private network contracts as part of a larger shift toward national security-grade infrastructure.
Despite early-year setbacks, Nokia remains upbeat about a stronger second half, especially the traditionally strong fourth quarter. Backed by a €2.9 billion cash reserve, the firm is also moving to simplify its operations and sharpen its focus on both core telecom and emerging tech markets.
The Finnish company, once famed for its 3310 handsets is now steering firmly towards AI-driven growth, targeting monetisation of its AI infrastructure by 2027 in what it describes as a long-term strategic pivot.