- AI and cloud networking emerged as Nokia's primary growth engine, helping the company beat second-quarter expectations
- Nokia expanded restructuring efforts, increasing planned 2026 restructuring charges to around €800 mn
- The company strengthened its AI infrastructure strategy through AI-RAN development and expanded U.S. manufacturing capacity
Finnish telecom vendor Nokia's second quarter results beat market expectations, driven by robust demand for AI and cloud networking solutions that helped mitigate ongoing pressure in the company's legacy telecom infrastructure business.
“In Q2, our AI and Cloud order intake was EUR 2.8 billion [$3.19 billion], while sales more than doubled year-on-year. The strength was broad-based, as we secured long-term orders in both Optical Networks and IP Networks," Nokia CEO Justin Hotard said. "We expect around half of these orders to convert to revenue over the next twelve months. Demand remains strong, while supply continues to be the main industry constraint, prompting our customers to place longer-term orders."
Overall, Nokia recorded sales of $5.5 billion (€4.8 billion), with growth of 8% year-on-year, though its profit fell from $109.2 million (€96 million) to $5.6 million (€5 million) over the same period. Mobile infrastructure sales grew 6%. Network Infrastructure was Nokia’s fastest-growing business with net sales growing by 12% year-on-year. Optical networks and IP networks were the key growth areas recording growth of 19% and 15% respectively.
In addition, Nokia reclassified its Fixed Wireless Access (FWA) Customer Premises Equipment (CPE) business as discontinued operations after announcing the sale of this division to Inseego earlier this year.
Emphasis on restructuring
The company is in the process of diversifying beyond its traditional telecom network gear business, so it is better placed to benefit from what Hotard repeatedly refers to as the “AI supercycle.” Last year, Nokia announced restructuring of its operations, which included plans to sell under-performing units.
The vendor noted it is accelerating its restructuring efforts as part of its strategy to simplify operations, and now expects to incur around $909.53 million (€800 million) in restructuring charges this year compared with its earlier budget of $284.22 million (€250 million). This includes additional restructuring initiatives, primarily in Europe, which are likely to generate an additional $227.41 million (€200 million) in restructuring costs this year.
Additionally, Nokia is accelerating the integration of its China operations following its acquisition of full ownership of Nokia Shanghai Bell. The integration, originally expected to take up to three years, is now targeted for completion within two years, with $398 million (€350 million) in integration charges recognized by the end of 2026.
“These actions are focused on simplifying the organization, improving productivity and ensuring resources are aligned with our strategic priorities,” explained Nokia CFO Marco Wiren during the earnings call.
Nokia first launched the restructuring program in October 2023, aiming to deliver $909.53 million (€800 million) to $1.36 billion (€1.2 billion) in gross cost savings by the end of 2026. Nokia said it remains on track to achieve the upper end of that savings target, with around $284.22 million (€250 million) in restructuring charges related to the program expected this year.
Focus AI RAN
One of the key initiatives for Nokia was the recent launch of its AI-RAN platform, which will begin pilot deployments by the end of 2026. The company is targeting commercial availability for 2027. Hotard emphasized that the industry is at an inflection point where the transition from traditional RAN to AI-RAN is unavoidable.
“We are at a point where the industry has to transition. While we will have spectral efficiency on our existing hardware and we will have improvements in software, but they will be of an order of magnitude below what we see in AI-RAN,” Hotard said on the call. In addition, the cost and scarcity of leading-edge silicon make the shift inevitable.
AI-RAN is emerging as one of the growth drivers of the global RAN market. Dell'Oro Group recently noted that “worldwide RAN revenues are projected to grow at a 1 percent CAGR through 2030, supported by investments in 5G and emerging opportunities in AI-RAN, Cloud RAN, private wireless networks and early 6G deployments."
Planned acquisition of NXP Semiconductors’ fab unit
Nokia also announced plans, subject to regulatory approvals, to acquire NXP Semiconductors’ fabrication unit in Chandler, Arizona. It plans to initially lease part of the manufacturing facility from early 2027 to produce indium phosphide optical components, a key technology used in AI networking. Nokia plans to acquire the full site by the first quarter of 2029. The investment will help boost supply capacity as demand for AI infrastructure continues to rise.
“This gives us additional capacity to support our own demand and greater optionality recognizing the supply constraints in the market today,” said Hotard.
Over the last few years, Nokia has been expanding its manufacturing presence in the US. Nokia said production at its new fab unit in San Jose will start ramping up in Q4 of 2026, while a separate investment will increase advanced testing and packaging capacity at its Pennsylvania site tenfold starting in the third quarter. All this will help it to meet the growing demand over the next two years.
The way ahead
Nokia believes the current momentum in the AI and cloud market will help it sustain growth going forward. “We enter the second half with momentum and remain on track to deliver somewhat above the midpoint of our comparable operating profit guidance,” Hotard stated in a press release.
“Right now, what we are seeing is continued growth and continued demand in the market and it is largely driven by AI and cloud, particularly around scale across and Data Center Interconnect. And then we are starting to see some emerging growth in sales in our telco customer base and we believe this is also tied to AI demand,” he reiterated on the call.