Nokia earnings beat estimates as artificial intelligence and cloud demand fuel data center pivot

Nokia Delivers Strong Q1 Performance Amid Strategic Transformation

Nokia reported first-quarter adjusted operating profit of €281 million ($329 million), exceeding analyst estimates of approximately €244 million1

1

. The Nokia earnings beat signals that the Finnish telecom equipment maker's aggressive data center pivot is gaining traction. Net sales reached €4.5 billion ($5.26 billion) for the quarter, representing a 4% year-over-year increase, though slightly missing analyst expectations of €4.6 billion2

2

.

CEO Justin Hotard stated the company "delivered a solid start to the year" and is tracking "above the mid-point" of its full-year guidance of €2 billion to €2.5 billion in comparable operating profit1

1

. This performance marks the first quarterly results under Nokia's restructured business model, which now focuses on two primary units: Network Infrastructure and Mobile Infrastructure.

Artificial Intelligence and Cloud Demand Drive Revenue Surge

The most striking aspect of Nokia's quarterly performance came from AI and cloud customers, where sales jumped 49% year-over-year2

2

. This segment now accounts for 8% of group sales, with Nokia booking €1 billion ($1.17 billion) in orders from these customers during the quarter alone. Hotard emphasized that the company is "increasing our growth assumption for Optical and IP Networks" and "investing to capture accelerating demand from AI & Cloud customers"2

2

.

The company has significantly revised its market outlook, now expecting a 27% compounded annual growth rate in the AI and cloud addressable market from 2025 to 2028, compared to the 16% previously estimated at its November capital markets day2

2

.

Optical Networks Emerge as Growth Engine

Nokia's Network Infrastructure segment grew 6% year-over-year, propelled by a 20% increase in Optical Networks sales2

2

. This growth underscores the company's successful transition away from its legacy mobile equipment business, which has stagnated as anticipated carrier spending on network upgrades failed to materialize1

1

.

At the OFC optical conference in March, Nokia unveiled a suite of innovations including four new Digital Signal Processors powering 13 new solutions designed to boost network efficiency while reducing total cost of ownership by up to 70%2

2

. These products are expected to begin sampling in mid-2027, with volume production scheduled for the second half of that year. The company's indium phosphide manufacturing site in San Jose, California, remains on schedule to start ramping output later in 2026.

Strategic Partnership with Nvidia Corp. Strengthens Position

Nokia's pivot toward AI infrastructure gained significant validation when chipmaker Nvidia Corp. took a $1 billion equity stake in the company last year1

1

. As part of this partnership, Nvidia will supply Nokia with AI-powered computers for wireless networks, positioning the Finnish company to capitalize on the global AI spending boom.

Investor optimism around Nokia's AI strategy has driven the company's shares to nearly double over the past year1

1

. Following the Q1 earnings announcement, Nokia shares surged approximately 12% in pre-market trading2

2

.

Market Dynamics and Competitive Landscape

While Nokia benefits from increasing cloud demand for AI-enabling compute infrastructure, the competitive environment presents challenges. European rival Ericsson AB warned of rising chip costs due to increased demand when it reported earnings below analyst expectations last week1

1

. Nokia acknowledged that supply-chain lead times are stretching as investment activity scales up2

2

.

For full-year 2026, Nokia maintained its comparable operating profit outlook of €2.0 billion to €2.5 billion ($2.34 billion to $2.93 billion). The company projects Network Infrastructure sales growth of 12% to 14% on a constant-currency and portfolio basis, with optical and IP Networks together expected to grow 18% to 20%2

2

. For the second quarter, Nokia expects net sales to rise 5% to 9% quarter-over-quarter, with Q2 operating profit representing 12% to 16% of the full-year total.