Nokia Surpasses Profit Expectations Amid AI Data Center Boom

Nokia Surpasses Expectations on AI and Data Center Boom

Nokia’s third-quarter profits exceeded analyst forecasts, driven not by its legacy mobile phone business or the cell towers that often come to mind, but by a surge in demand for data center networking equipment. This crucial infrastructure underpins the burgeoning artificial intelligence sector.

Financial Performance

The Finnish telecommunications giant reported net sales of €5.154 billion for the quarter, a 10% increase year-over-year on a reported basis, or 9% when adjusted for comparability. The most striking growth came from sales to AI and cloud customers, which surged by an impressive 123% compared to the previous year, effectively more than doubling in twelve months. Orders from this segment also saw a significant boost, rising 118% to €1.5 billion during the quarter.

Profitability kept pace with revenue growth. Nokia’s comparable operating profit margin climbed to 11.7%, a 2.2 percentage point improvement. The Network Infrastructure segment was a primary contributor to this success, with sales increasing by 15% on a comparable basis, fueled by a 43% jump in IP Networks and an 18% gain in Optical Networks.

Outlook and Strategic Initiatives

CEO Justin Hotard maintained the company’s full-year outlook, with Nokia still projecting comparable operating profit between €2.1 billion and €2.6 billion for 2026. The company also anticipates its Network Infrastructure segment to grow between 12% and 14% for the full year, with continued momentum in AI and data centers cited as key drivers.

Progress on the acquisition of Infinera was also highlighted. Nokia stated that the integration is proceeding ahead of schedule, with completion expected by the end of 2026. Infinera’s capabilities in optical networking and data center interconnects are expected to bolster Nokia’s offerings.

Technological Advancements

On the technology front, Nokia announced the completion of what it described as the world’s first live AI-RAN call. This milestone event occurred on October 21, 2026, utilizing T-Mobile’s network in collaboration with NVIDIA. AI-RAN refers to the integration of AI workloads within the radio access network, the component of a mobile system connecting devices to cell towers. Approximately 20 operators are currently participating in pilot programs for this technology.

Strategic Realignment and Market Position

The recent financial results reflect a strategic pivot initiated by Nokia in early 2026. The company reorganized into two primary business segments and began reducing its reliance on traditional telecom operators. This shift has positioned Nokia favorably, with nine of the ten largest cloud providers now utilizing its technology, granting it a strong presence within a customer base aggressively investing in AI capacity.

While the 123% surge in AI and cloud sales is a significant headline figure, the €1.5 billion in new orders may hold greater long-term importance, suggesting sustained demand beyond a single quarter.

Risks and Future Considerations

However, potential risks remain. The concentration of growth driven by a few major cloud companies means any reduction in their AI spending could directly impact Nokia’s financial performance. The improvement in profit margins, however, offers some reassurance, indicating that the new business is not only generating revenue but doing so profitably.

The potential adoption of AI within radio networks by operators could open new avenues for Nokia, allowing it to sell AI-related technology to both its established telecom clients and its new cloud customers. With around 20 operators currently in pilot phases, this remains a development to monitor in future quarters.

Key areas to watch include the continued growth of AI and cloud orders, whether the Network Infrastructure segment achieves its projected full-year growth range of 12% to 14%, and the successful completion of the Infinera integration within its accelerated timeline.