Nokia Corporation Financial Report for Q3 and January-September 2018

Nokia Corporation

Interim report

October 25, 2018 at 08:00 (CET 1)

Nokia Corporation Financial Report for Q3 and January-September 2018

Full year 2018 guidance reiterated following solid Q3 results

This is a summary of the Nokia Corporation financial report for Q3 and January-September 2018 published today. The complete financial report for Q3 and January-September 2018 with tables is available at www.nokia.com/financials. Investors should not rely on summaries of our financial reports only, but should review the complete financial reports with tables.

RAJEEV SURI, PRESIDENT AND CEO, ON Q3 2018 RESULTS

Nokias third-quarter results validate our earlier view that conditions would improve in the second half of 2018. This was particularly evident in our excellent momentum in orders, growth across all five of our Networks business groups, and improved profitability compared to the first half of the year. Despite some risks related to short-term delays in project timing and product deliveries, we remain on track to deliver on our full-year guidance.

We are executing well on our strategy with particularly good progress in Nokia Software and expansion to select enterprise vertical markets. Separately today, we announced steps to accelerate that progress as well as sharpen our customer focus and maintain cost leadership. These are important steps that give us added confidence in our ability to deliver on our 2020 financial commitments.

Q3 and January-September 2018 reported and non-IFRS results. Refer to note 1, Basis of Preparation, note 2, Non-IFRS to reported reconciliation and note 15, Performance measures, in the Financial statement information section for details.

EUR million (except for EPS in EUR) Q318 Q317 YoY change Constant currency YoY change Q1-Q318 Q1-Q317 YoY change Constant currency YoY change

Net sales 5 458 5 500 (1)% 1% 15 695 16 496 (5)% 0%

Operating profit/(loss) (54) (230) (611) (403)

Operating margin % (1.0)% (4.2)% 320bps (3.9)% (2.4)% (150)bps

EPS, diluted (0.02) (0.03) (0.13) (0.19)

Operating profit/(loss) (non-IFRS) 487 668 (27)% 1 060 1 583 (33)%

Operating margin % (non-IFRS) 8.9% 12.1% (320)bps 6.7% 9.6% (290)bps

EPS, diluted (non-IFRS) 0.06 0.09 (33)% 0.10 0.20 (50)%

Net cash and current financial investments 1 876 2 731 (31)% 1 876 2 731 (31)%

Reported net sales in Q3 2018 were EUR 5.5bn, compared to EUR 5.5bn in Q3 2017. On a constant currency basis, reported net sales grew by 1% year on year.

Reported net sales in Q3 2018, excluding non-recurring catch-up licensing net sales which benefitted the year-ago period, grew by 3% year-on-year (4% on a constant currency basis). In Q3 2018, we achieved year-on-year growth across all five of our Networks business groups, as well as in Nokia Technologies.

Reported diluted EPS in Q3 2018 was negative EUR 0.02, compared to negative EUR 0.03 in Q3 2017, primarily driven by lower restructuring and impairment charges, partially offset by the absence of non-recurring catch-up licensing net sales, which benefitted the year-ago period, our gross profit performance and income taxes.

Non-IFRS diluted EPS in Q3 2018 was EUR 0.06, compared to EUR 0.09 in Q3 2017. Non-IFRS diluted EPS, excluding non-recurring catch-up licensing net sales, declined by EUR 0.01 year-on-year, as we were able to partially offset our gross profit performance with continued operating expense reductions, in line with our cost savings program.

Net cash and current financial investments decreased by approximately EUR 270mn sequentially. In Q3 2018, we generated cash profits, which were more than offset by changes in net working capital, capital expenditures, payment of dividend withholding tax and restructuring and associated cash outflows. We expect to end 2018 with a strong financial position, based on strong seasonality in Q4.

We reiterate 2018 non-IFRS diluted EPS guidance and remain on target to deliver EUR 1.2bn of recurring annual cost savings in full year 2018.

OUTLOOK

Metric Guidance Commentary

Nokia Non-IFRS operating margin 9-11% for full year 2018 and

12-16% for full year 2020 Nokias guidance for significant improvement between full year 2018 and full year 2020 is primarily due to expectations for:

Improved results in Nokias Networks business, which are detailed below;

Improved results in Nokia Technologies, which are detailed below; and

Benefits from our EUR 700 million cost reduction program announced on October 25, 2018, which are detailed in the Cost savings program discussion in the Financial results section. (updated commentary)

(This is an update to earlier commentary for lower Nokia support function costs within Nokias Networks business and Group Common and Other.)

Non-IFRS diluted earnings per share EUR 0.23 - 0.27 in full year 2018 and

EUR 0.37 - 0.42 in full year 2020

Dividend Approximately 40% to 70% of non-IFRS diluted EPS on a long-term basis Nokias Board of Directors is committed to proposing a growing dividend, including for 2018.

Recurring free cash flow Slightly positive in full year 2018 and clearly positive in full year 2020 Recurring free cash flow is expected to improve over the longer-term, due to lower cash outflows related to restructuring and network equipment swaps1 and improved operational results over time.

Recurring annual cost savings for Nokia, excluding Nokia Technologies Approximately EUR 1.2 billion of recurring annual cost savings in full year 2018, of which approximately EUR 800 million are expected from operating expenses1 The reference period is full year 2015, in which the combined operating expenses of Nokia and Alcatel-Lucent, excluding Nokia Technologies, were approximately EUR 7.3 billion.

As a result of active efforts to drive 5G adoption, and in the interest of our long-term strategy given the acceleration

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