Nokia’s AI network sales jump 123%, but restructuring holds reported margin to 3.8%

Nokia Corporation (Nasdaq Helsinki: NOKIA; NYSE: NOK) reported third-quarter 2026 net sales of €5.154 billion, representing 10% reported growth and 9% growth on a constant-currency basis, as investment in artificial intelligence networking supported demand for its IP and optical infrastructure. Revenue from AI and cloud customers increased 123% year on year, while related order intake rose 118%, demonstrating rapidly expanding commercial activity beyond the company’s traditional telecommunications customer base. Comparable operating profit increased 35% to €605 million, but reported operating profit declined 22% to €196 million because of restructuring and integration expenses. The October 22 results therefore highlight Nokia’s growing relevance to AI infrastructure while raising a more difficult question about when its operating transformation will produce consistently stronger reported profitability.

The contrast is particularly significant because Nokia is repositioning its business around network infrastructure, including technologies connecting large data centres and cloud computing facilities. Management disclosed €1.5 billion in new AI and cloud orders during the quarter and expects combined IP and Optical Networks revenue to grow between 25% and 30% in 2027. Those expectations reflect stronger customer demand and the continuing integration of Infinera, which Nokia acquired to expand its optical networking capabilities.

However, the financial benefits are not yet flowing evenly through the income statement. Comparable operating margin increased from 9.5% to 11.7%, while reported operating margin fell from 5.4% to 3.8%. The divergence matters because investment returns ultimately depend on the economic cost of restructuring, integration and product development, not solely on the adjusted measures used to assess ongoing operations.

Why are Nokia’s AI and cloud networking sales increasing more than 120%?

Artificial intelligence infrastructure requires extensive networking capacity to connect processors, storage systems and data centres. As computing workloads grow, the volume of information moving between systems becomes increasingly important to overall performance. Nokia supplies optical transport and IP networking equipment that supports these connections, creating opportunities alongside semiconductor and computing hardware manufacturers.

The 123% increase in sales to AI and cloud customers indicates that Nokia is benefiting from investment by customers whose priorities differ from those of conventional mobile network operators. These customers may require very high bandwidth, low latency and reliable communications across large computing facilities. Such requirements can create demand for increasingly sophisticated optical and routing equipment.

Nokia also reported a 118% increase in AI and cloud order intake, suggesting that demand has extended beyond equipment already delivered. However, orders should not be confused with recognised revenue or guaranteed operating profit. Customer deployment schedules, equipment availability and contractual conditions will influence when the additional business contributes financially.

The segment is growing from a smaller base than Nokia’s traditional mobile infrastructure operations, making percentage growth especially dramatic. Investors should therefore examine the absolute contribution alongside growth rates. The disclosed €1.5 billion in AI and cloud orders provides an important measure of scale, but it does not establish that this amount will become revenue within any particular quarter.

The longer-term opportunity depends on whether Nokia can maintain technological competitiveness as network architectures evolve. Customers investing billions in computing infrastructure will evaluate suppliers through performance, reliability, price and the ability to deliver at scale. Strong present demand creates an opportunity, but sustained market share must still be earned.

How did IP Networks and Optical Networks outperform Nokia’s mobile business?

Network Infrastructure generated approximately €2.158 billion in quarterly sales, representing 17% reported growth and 15% constant-currency growth. Within the division, IP Networks revenue increased 43% and Optical Networks grew 18% on a constant-currency basis. These figures highlight the importance of the company’s exposure to cloud and data centre networking.

By comparison, Mobile Infrastructure reported revenue of approximately €2.902 billion, representing 5% growth. Nokia indicated that part of this performance reflected the acceleration of revenue from the fourth quarter into the third quarter. This timing effect means the latest result should not automatically be extrapolated into an equivalent increase during subsequent periods.

The distinction also reflects different customer investment cycles. Telecommunications operators frequently make network expenditure decisions based on subscriber demand, competitive conditions and returns from mobile services. Large cloud customers may instead evaluate networking equipment within broader computing infrastructure programmes.

Nokia’s strategy attempts to benefit from both markets, but they have different commercial characteristics. Mobile network investment can provide substantial customer relationships and recurring support opportunities, while cloud infrastructure may offer faster growth and different competitive demands. Balancing these activities is important because dependence on one investment cycle could increase earnings volatility.

The company has also been simplifying its portfolio to focus resources on areas offering stronger commercial potential. Such changes can support profitability over time, but the immediate financial consequences include restructuring and asset-related costs. The latest quarter illustrates both the opportunities and the expenses associated with that transition.

Why is Nokia’s reported operating profit so much lower than its comparable profit?

Nokia reported operating profit of €196 million, down from €252 million during the third quarter of 2025. On a comparable basis, operating profit increased from €448 million to €605 million. This €409 million difference between the latest reported and comparable figures reflects items excluded under Nokia’s alternative performance measures, including restructuring and integration-related costs.

The difference is important because adjusted earnings can help investors evaluate the performance of continuing operations without unusual items. However, restructuring expenditure represents an actual economic cost associated with changing the business. If such expenses continue over multiple periods, they remain relevant to shareholders even when management expects long-term benefits.

Reported gross margin declined 220 basis points to 42.2%, while comparable gross margin remained relatively stable at 44.6%. At the operating level, comparable margin improved 220 basis points to 11.7%. This indicates that Nokia is achieving greater efficiency within its adjusted operating framework, even as reported profitability remains affected by portfolio changes.

Reported profit from continuing operations nearly doubled to €176 million, while comparable profit from continuing operations increased 49% to €498 million. The divergence reinforces the importance of reviewing Nokia’s reconciliations rather than relying on one measure. The company is making commercial progress, but a clean improvement in statutory operating margins remains an important future milestone.

How does the Infinera integration change Nokia’s 2027 growth opportunity?

Nokia expects to complete integration of Infinera by the end of 2026, approximately one year ahead of its earlier timetable. Management also expects €200 million in net synergies from the integration, supporting the financial rationale for expanding its optical networking portfolio. These are management expectations and integration targets rather than a guarantee that all benefits will appear in the next financial quarter.

Infinera brought optical transport expertise relevant to the high-capacity connections required between data centres and across telecommunications networks. Combining those capabilities with Nokia’s IP routing and broader network infrastructure businesses could strengthen its ability to serve customers seeking integrated solutions. The financial benefit may emerge through additional sales, better product positioning and operational efficiencies.

However, integration creates risks involving technology roadmaps, employee retention and the consolidation of manufacturing or support systems. Customers may evaluate whether the combined portfolio meets their requirements before making long-term commitments. Nokia needs to preserve the technical capabilities that made Infinera attractive while reducing duplicated operating costs.

Management’s forecast of 25% to 30% growth in combined IP and Optical Networks revenue during 2027 indicates confidence in customer demand. Investors should assess this forecast against future orders, delivery performance and operating margins. Rapid sales expansion would be less valuable if accompanying investment and production costs absorbed most of the financial benefit.

Could semiconductor shortages limit Nokia’s AI infrastructure expansion?

Nokia has indicated that constrained supplies of certain semiconductor components are affecting the networking industry. Sophisticated routers and optical systems depend on specialised chips, making equipment production vulnerable to component availability. Rapid increases in demand can create bottlenecks even when manufacturers have sufficient final assembly capacity.

Such constraints can delay revenue recognition when customer deliveries are postponed. They can also increase procurement expenses or require suppliers to hold more inventory, potentially influencing working capital and margins. Nokia must coordinate production with suppliers while avoiding excessive inventories if demand later moderates.

The company is seeking to improve supply resilience and manufacturing flexibility, but component shortages may persist into subsequent periods. Customers building AI infrastructure could face similar constraints across multiple equipment categories. Strong orders therefore do not eliminate the possibility of delivery delays.

Nokia’s commercial prospects will depend on translating demand into completed shipments without significant cost escalation. Its supplier relationships and manufacturing execution may become increasingly important competitive factors. Investors should watch inventory levels, customer delivery schedules and the conversion of orders into revenue.

What does Nokia’s unchanged 2026 guidance reveal about management’s confidence?

Nokia maintained its full-year comparable operating profit outlook of €2.1 billion to €2.6 billion. Management expects the final result to exceed the midpoint of that range, supported by stronger second-half activity. The company also anticipates fourth-quarter sales increasing approximately 20% to 24% sequentially.

These expectations imply a substantial increase in activity from the €5.154 billion reported during the third quarter. However, the guidance is not equivalent to completed orders or recognised future revenue. Delivery timing and customer investment decisions remain important variables.

The company ended September with approximately €2.584 billion in net cash and interest-bearing financial investments, compared with €3.001 billion a year earlier. This provides a useful measure of liquidity, although it also illustrates that the operating transformation and investment programme continue influencing financial resources. Stronger cash generation would reinforce confidence in the strategy.

Nokia’s October results demonstrate that its expansion into AI and cloud networking is commercially meaningful. The company is attracting major orders and improving comparable profitability, but restructuring costs and supply constraints complicate the financial picture. The decisive test for 2027 will be whether its expanding networking business produces stronger reported earnings and cash flow rather than merely exceptional order-growth percentages.