Welcome to Nokia's Capital Markets Day 2025 David Mulholland Head of Investor Relations 1 © 2025 Nokia Public Disclaimer It should be noted that Nokia and its business are exposed to various risks and uncertainties and certain statements herein that are not historical facts are forward-looking statements. These forward-looking statements reflect Nokia's current expectations and views of future developments and include statements preceded by "believe", "expect", "expectations", "ensure", "commit", "anticipat ...

Core Viewpoint - China Unicom's Zhongshan branch has launched a pilot project for a 10G park in collaboration with Huawei, marking a significant step towards the establishment of a 10G network era in Zhongshan [1] Group 1: Project Details - The pilot project is located in the Zhongshan Torch High-tech Industrial Park and utilizes Huawei's latest 50G PON and Wi-Fi 7 technologies [1] - The initiative aims to restructure production and management scenarios within the park, enhancing industrial competitiveness [1] Group 2: Future Plans - China Unicom plans to deepen strategic cooperation with Huawei to expand "10G + AI" application scenarios [1] - The project will support the development of a domestic industrial chain and establish a cross-regional digital corridor relying on the Shenzhen-Zhongshan Passage [1] - There is a focus on accelerating the large-scale deployment of 10G networks in parks, residential areas, and factories to empower high-quality economic development in Guangdong [1]

Financial Data and Key Metrics Changes - The company reported a 9% increase in net sales for Q3, with all business groups contributing to this growth [4][13] - Gross margin declined by 150 basis points year-on-year, primarily due to product mix issues in Network Infrastructure and Mobile Networks [13] - Operating margin was 9%, down 220 basis points from the previous year, largely due to a one-time benefit from a loss provision reversal in the prior year [13][14] - Free cash flow generated was EUR 429 million, with a net cash position of EUR 3 billion at the end of the quarter [14][18] Business Line Data and Key Metrics Changes - Network Infrastructure saw an 11% growth, with Optical Networks leading at 19% sales growth [15] - Cloud and Network Services experienced a 13% increase in sales, with gross margin improving by 380 basis points [16] - Mobile Networks net sales increased by 4%, driven by growth in Vietnam and the Middle East & Africa, but gross margin declined by 370 basis points due to a lower software contribution [17] - Nokia Technologies reported a 14% increase in net sales, maintaining an annual run rate of approximately EUR 1.4 billion [18] Market Data and Key Metrics Changes - In North America, strong growth was observed in Network Infrastructure and Cloud and Network Services, while Mobile Networks saw a slight decline [18] - APAC region, particularly India, showed growth in Network Infrastructure, while Mobile Networks returned to modest growth [18] - Europe remained stable, with no significant changes reported in Q3 [18] Company Strategy and Development Direction - The company is focused on operational leverage through continuous productivity improvement and digital instrumentation, rather than large restructuring programs [15][40] - The integration of the Infinera acquisition is ahead of schedule, contributing positively to net sales and order intake growth [5][11] - The company aims to unlock the full potential of its portfolio and deliver ongoing growth and operating leverage, with a strategy to be shared at the upcoming Capital Markets Day [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the demand environment, particularly in AI and cloud sectors, with a strong order intake and backlog coverage [4][5] - The company expects Q4 net sales to grow sequentially, slightly above historical seasonality of 22% [11] - Management highlighted the importance of focusing on innovation and technology leadership to improve returns in Mobile Networks [83] Other Important Information - The company is scaling down passive venture fund investments and will consider targeted direct minority investments to accelerate its strategy [10][11] - The AI supercycle is seen as a significant driver for demand in advanced connectivity solutions, positioning Nokia as a leader in this market [12] Q&A Session Summary Question: Progress on IP Networks and switching business - Management acknowledged positive design wins and emphasized that they are still a small player in the IP Networks space, with much work ahead [27] Question: Growth opportunities in AI and cloud - Management identified hyperscalers and sovereign clouds as significant growth opportunities, with current demand primarily driven by hyperscalers [29] Question: Insights on Scale Across for optics - Management noted that while Scale Across is not new, the increasing bandwidth demands from AI data centers create new opportunities for innovation [31][32] Question: Mobile Networks margins and future outlook - Management indicated that improving returns in Mobile Networks is a priority, focusing on customer engagement and innovation [83] Question: Demand in Europe and revenue decline - Management stated that demand in Europe is stabilizing, with potential upside if regulations address high-risk vendor status [77]

Financial Data and Key Metrics Changes - The company reported a 9% increase in net sales for Q3, with all business groups contributing to growth [3][11] - Gross margin for the group declined by 150 basis points year-on-year, primarily due to product mix [11] - Operating margin was 9%, down 220 basis points from the previous year, mainly due to a one-time benefit from a loss provision reversal in the prior year [11][12] - Free cash flow generated was $429 million, with a net cash position of $3 billion at the end of the quarter [11][16] Business Line Data and Key Metrics Changes - Network Infrastructure saw an 11% growth, with Optical Networks leading at 19% sales growth [12] - Cloud and Network Services experienced a 13% increase in sales, with gross margin improving by 380 basis points [13] - Mobile Networks net sales increased by 4%, driven by growth in Vietnam and the Middle East & Africa, but gross margin declined by 370 basis points [15] - Nokia Technologies reported a 14% increase in net sales, maintaining an annual run rate of approximately €1.4 billion [16] Market Data and Key Metrics Changes - In North America, strong growth was noted in Network Infrastructure and Cloud and Network Services, while Mobile Networks saw a slight decline [16] - In APAC, India experienced growth in Network Infrastructure, driven by demand for fixed wireless, while Mobile Networks returned to modest growth [16] - Europe remained stable, with no significant changes reported in the quarter [16] Company Strategy and Development Direction - The company is focused on operational leverage through continuous productivity improvement and digital instrumentation rather than large restructuring programs [12][37] - Strategic partnerships, such as with N-Scale and Supermicro, are aimed at enhancing networking technologies and expanding the footprint of Nokia's network operating system [5] - The company is optimistic about growth opportunities in AI and cloud, particularly with hyperscalers and sovereign clouds [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year outlooks, expecting Q4 net sales to grow sequentially above historical seasonality [4][9] - The demand environment remains healthy, with strong order intake in AI and cloud sectors [3][4] - Management acknowledged the need for continued innovation and collaboration with customers to improve returns in Mobile Networks [78] Other Important Information - The company is ahead of schedule with the integration of the Infinera acquisition, contributing positively to net sales and order intake growth [4] - A strategic review of venture fund investments led to a decision to scale down passive investments, focusing instead on targeted direct minority investments [8] Q&A Session Summary Question: Progress on IP Networks and switching business - Management noted positive metrics and wins in IP Networks but acknowledged that they are still a small player in the market [23] Question: Growth opportunities in AI and cloud - The biggest opportunities are seen in hyperscalers and sovereign clouds, with significant demand driving growth [25] Question: Impact of Scale Across for optics - Management indicated that while the technology is not new, the demand for innovation is increasing due to bandwidth demands driven by AI data centers [27][28] Question: 6G mobility investments - Investment in 6G standardization has already started, with ongoing work in pre-standard 6G radio technology [32] Question: Factors driving positive surprise in Q3 - Improved gross margins in Cloud and Network Services and successful traction in 5G standalone core implementations contributed to the positive surprise [40] Question: Demand in Europe - Management indicated that demand is stabilizing, with potential upside if regulations address high-risk vendor status [73]

Core Insights - The upcoming 2025 China International Information and Communication Exhibition (also known as "Beizhan") is focusing on the integration of AI and communication technologies, with Huawei signaling that the deep fusion of 5G-A and F5G-A with AI computing will drive growth in the communication industry [1] Group 1: Commercialization Paths - Huawei is advancing three main commercialization paths: 5G-A, F5G-A, and edge computing, targeting individual, family, and industry scenarios [2] - As of now, 5G-A networks have been deployed in 300 cities, with over 30 million subscribers and more than 100 million compatible devices, expected to reach 250 million by year-end [2] - The true value of 5G-A lies in its ability to support multi-modal AI interactions and real-time applications through enhanced uplink capacity and reduced latency [2] Group 2: Home Solutions - Huawei is transforming homes into "AI to H" localized carriers using FTTR, 50G PON, and Wi-Fi 7, enabling low-latency support for voice/video interactions and local lightweight inference [3] - F5G-A is upgrading homes from "living spaces" to "intelligent centers," with plans for services like fresh food direct purchasing [3] - The establishment of 384 super nodes is tailored for low-latency, large-scale inference needs, with a shift from large data centers to provincial and municipal computing facilities [3] Group 3: Business Model Innovations - Huawei is collaborating with operators to standardize the "network + computing + application" package, with the "dedicated line + X" model already benefiting over 3 million SMEs in China [4] - The "rent instead of build" approach for computing resources is gaining traction, allowing businesses to pay for usage and reducing upfront capital expenditures [4] - The industry is transitioning from large data centers to provincial deployments to meet compliance and reduce costs [4] Group 4: Challenges and Future Trends - The integration of AI is seen as a "software engineering" challenge rather than just hardware expansion, focusing on model engineering and operational sustainability [5] - Future applications of 5G-A and AI are expected to emerge in personal and family cloud intelligence services, with specific requirements for bandwidth and latency [6] - Huawei's strategy of "using computing to assist connectivity and using connectivity to promote computing" encapsulates its approach to the evolving communication landscape [6]

Core Viewpoint - The company has implemented a "Quality Improvement and Efficiency Enhancement" action plan for 2025, focusing on optimizing operations, governance, and investor returns to support high-quality economic development [2]. Group 1: Business Performance - The company reported a net profit attributable to shareholders of 28.09 million yuan, a decrease of 48.17% year-on-year, and a net profit of 19.11 million yuan after deducting non-recurring gains and losses, down 48.23% year-on-year [2]. - The company is focusing on the computing power sector, increasing R&D investment, and enhancing its core competitiveness through product line upgrades and global market expansion [2][3]. Group 2: R&D Investment - R&D investment reached 49.48 million yuan, accounting for 11.42% of revenue, supporting technological breakthroughs in high-end optical modules and other products [3]. - The company achieved small-scale trial production of 400G coherent modules and completed iterations of 400G/800G computing power products, with ongoing development of 1.6T ultra-high-speed modules [3][4]. Group 3: Governance Structure - The company has optimized its governance structure by canceling the supervisory board, with the audit committee of the board taking over supervisory functions to enhance efficiency and transparency [5][6]. - The company emphasizes compliance management and has conducted special inspections in key business areas to improve internal control systems [4][6]. Group 4: Investor Relations - The company has published 56 announcements in the first half of 2025, ensuring accurate and timely information disclosure, with a 100% response rate to investor inquiries [6][7]. - The company actively engages with investors through various channels, including telephone conferences and participation in events organized by the Shanghai Stock Exchange [6][7]. Group 5: Dividend Policy - The company has announced a cash dividend of 3.00 yuan per 10 shares, totaling 60.17% of the net profit attributable to shareholders for 2024, with cumulative cash dividends of 142 million yuan since 2022 [7]. - The company aims to maintain a reasonable dividend policy while focusing on core business and stable operations to ensure long-term investor returns [7]. Group 6: Management and Performance Alignment - The company has implemented a long-term incentive mechanism by granting restricted stock to 322 core technical and business personnel, aligning their interests with shareholder returns [8]. - The annual compensation plan for directors and senior management is closely linked to the company's performance and operational goals, promoting long-term stability and value enhancement [8].

Core Insights - Huawei is committed to deepening its strategic focus on the healthcare industry, emphasizing systematic approaches to digital transformation [1][4] - The healthcare sector faces three main challenges in its digital transformation: innovation in technology architecture, transformation of service systems, and conversion of talent skills [2][4] Digital Transformation Challenges - **Technological Architecture Innovation**: Traditional IT architectures are inadequate for the high demands of AI in terms of computing power, data, and real-time processing, leading to data silos [2][4] - **Service System Transformation**: There is a need for integrated services covering the entire digital transformation lifecycle, requiring a robust digital platform to connect online and offline services [2][4] - **Talent Skill Conversion**: Both users and technology providers must shift from training single-skilled personnel to developing more versatile talent, focusing on enhancing AI literacy and skills [2][4] Methodology for Digital Transformation - Huawei has developed a "Three Layers, Five Stages, Eight Steps" methodology for implementing digital transformation, which includes redefining intelligent business, AI development and delivery, and continuous operation of intelligent applications [6][10] - The methodology emphasizes collaboration with partners to create industry solutions, leveraging Huawei's ICT infrastructure [6][10] Case Study: Ruijin Hospital - Ruijin Hospital has been actively pursuing digital transformation in its pathology department since 2021, collaborating with Huawei to publish the first "Digital Intelligent Pathology Construction White Paper" in 2023 [7][8] - The RuiPath pathology model, developed in partnership with Huawei, was recognized at the "AI for Good" global summit [8] Strategic Goals - Huawei aims to bridge the "digital divide" in healthcare by making digital transformation accessible to organizations of all sizes, from large hospitals to community clinics [9][12] - The "Partner + Huawei" model allows various healthcare institutions to leverage Huawei's technology and solutions for their digital transformation [9][12] Service System Upgrades - Huawei is transitioning its service model from traditional fault repair and project delivery to a comprehensive service covering the entire digital journey, including planning, construction, operation, and iteration [10][11] - The introduction of the "Excellence Navigation Plan" provides dedicated architects to assist large institutions in their digital transformation [10][11] Collaborative Ecosystem - Huawei is building a collaborative ecosystem with partners, transforming them from mere technical executors to co-innovators, enhancing the overall service delivery in the healthcare sector [11][12] - The O3 partner service platform integrates Huawei's delivery experience and enables deep collaboration with partners [11][12] Practical Applications - Huawei has successfully implemented various digital solutions in healthcare, such as the "Digital Pathology Integrated Machine" for grassroots medical institutions and the "Ascend + DeepSeek" integrated solution for smart healthcare applications [13][14] - The collaboration with Shenzhen Nanshan People's Hospital has led to the deployment of the world's first 50G PON technology in healthcare, showcasing Huawei's commitment to advancing digital transformation in the industry [14]