Nokia Q3 2026 Earnings Beat Estimates as AI and Cloud Sales Surge 123%

Nokia Q3 2026 Earnings Exceed Expectations on AI-Driven Revenue Growth

Nokia reported Q3 2026 earnings that surpassed Wall Street expectations, with comparable operating profit reaching €605 million, a 35% increase from €448 million in the same period last year1

1

. The result beat the consensus estimate of €453 million from analysts2

2

. Net sales climbed 10% to €5.15 billion, exceeding the expected €5.05 billion, driven primarily by surging AI demand from data center customers1

1

. Despite the strong earnings beat, Nokia shares fell approximately 5.7% in premarket trading as investors weighed concerns about negative free cash flow, elevated restructuring costs, and working capital requirements3

3

.

AI and Cloud Sales Drive Nokia Financial Performance

The data center boom has become Nokia's primary growth engine, with AI and cloud sales reaching €631 million compared to €279 million a year earlier, representing a 123% surge in constant currency1

1

. Order intake from AI and cloud customers jumped 118% year-over-year, with Nokia securing €1.5 billion in new orders during the quarter2

2

. AI and cloud customers now account for approximately 12.2% of Nokia's total sales3

3

. CEO Justin Hotard emphasized that "growth is accelerating, operating leverage is becoming more visible and I'm confident in the long-term shareholder value Team Nokia is creating"1

1

. The company's strategic positioning in AI-powered networking infrastructure has positioned it to capitalize on intensifying demand from hyperscalers and telecom operators for high-capacity connectivity to support artificial intelligence workloads5

5

.

Network Infrastructure and Optical Networks Lead Growth

Network Infrastructure delivered robust performance with net sales growing 15% in constant currency, driven by 43% growth in IP Networks and 18% expansion in Optical Networks1

1

. Nokia achieved significant technological milestones, with 800G coherent pluggable shipments increasing 2.4 times quarter-over-quarter and design wins secured from 29 customers for 800G ZR/ZR+ pluggables5

5

. Mobile Infrastructure net sales rose 5%, partly because revenue shifted from the fourth quarter into the third1

1

. Nokia's comparable gross margin reached 44.6%, while comparable operating margin improved 220 basis points to 11.7%1

1

. The company projects combined growth of 25% to 30% in 2027 for its Optical and IP Networks units, reflecting confidence in sustained AI demand2

2

.

Restructuring Costs and Free Cash Flow Concerns Weigh on Investor Sentiment

While Nokia delivered strong AI-driven growth, reported operating profit fell 22% to €196 million due to accelerated restructuring and integration costs1

1

. The company raised its full-year restructuring cost forecast to €1.1 billion from €800 million previously3

3

. Free cash flow turned negative at €99 million in the quarter, prompting Nokia to lower its full-year free cash flow conversion forecast to 35% to 55% of comparable operating profit, citing higher working capital investment and accelerated restructuring costs4

4

. The company now plans to invest an additional €400 million in working capital this year to secure supply and support the growth opportunity in 20274

4

. Despite these concerns, Nokia maintained its full-year outlook for comparable operating profit of €2.1 billion to €2.6 billion and expects fourth-quarter net sales to rise 20% to 24% from the third quarter1

1

.

Physical AI and Next-Generation Connectivity Shape Nokia's Future Strategy

CEO Justin Hotard outlined Nokia's vision for the next wave of connectivity, stating that the next users won't be people but machines—robots, vehicles, and equipment that act in the real world and require fast, reliable networks4

4

. Nokia is developing AI-RAN, radio networks that run AI directly on cell sites, positioning the company for what Hotard calls "AI-native networks moving into the physical world"4

4

. Together with T-Mobile and Nvidia, Nokia completed "the world's first AI-RAN call in a live operator network"4

4

. Early results show promise, with Deutsche Telekom's lab tests demonstrating typical uplink speed gains of 10% to 15% from AI-based channel estimation4

4

. Finnish carrier Elisa expects commercial services in 2027, while BT is preparing a live trial in Birmingham that same year4

4

. Nokia is also expanding optical-networking capacity, including a second facility in San Jose expected to become fully operational by the end of October, though semiconductor supply constraints remain a challenge3

3

. The company is on track to finish integrating Infinera by the end of 2026, with €200 million of net synergies expected1

1

. Nokia shares have gained 48% so far in 2026, reflecting investor optimism around growth prospects amid rising demand for AI-related infrastructure2

2

.