Justin Hotard’s AI-first reset of Nokia is beginning to deliver, as seen in its Q2 scores: AI and cloud demand is accelerating, infrastructure growth is returning, and the company is reshaping itself around the networks, components and supply chains powering the next computing cycle.
In sum – what to know:
AI and cloud – Nokia’s order intake hit €2.8 billion in Q2, with Nokia expecting around half to convert into revenue within 12 months.
Optical and IP – These are becoming central to Nokia’s AI infrastructure story, with sales rising 20 percent and 16 percent respectively.
Nips and tucks – Nokia is cutting costs, exiting non-core assets, and expanding optical manufacturing capacity to secure supply.
Nokia is seeing its AI ‘supercycle’ strategy payoff, it seems. Net sales to AI and cloud customers more-than-doubled in the second quarter, ending June 30 – up by 105 percent versus the same period in 2025, when Justin Hotard was sworn in as chief executive, promptly setting the Finnish firm on a new course. As a measure of demand, customers placed €2.8 billion worth of orders, yet to be counted as sales, for its AI and cloud products during the quarter. It expects about half of those orders (roughly €1.4 billion) to turn into actual sales over the next 12 months.
Its latest figures confirm its ‘network infrastructure’ business is its main growth engine. Net sales of AI-geared network products grew 12 percent (on a constant currency basis), compared with 2025 – led by optical networks (up 20 percent) and IP networks (16 percent). They finished on €2.037 billion in the quarter, and drove its total Q2 net sales upwards by nine percent (on a constant currency basis) to reach €4.815 billion. Hotard said: “Demand remains strong, while supply [is] the main industry constraint, prompting customers to place longer-term orders.”
Its mobile infrastructure unit contributed €2.68 billion in sales – up six percent, on a margin of 49.3 percent – and €310 million in profit. Nokia called it a “stable year-on-year profit contribution driven by product mix”. Hotard took the chance to talk up its AI-RAN strategy with Nvidia, following the launch of its (the “industry’s first”) AI-RAN platform, last week – to “help customers unlock more from their networks, including more than 100 percent spectral efficiency gains by 2028”. The spectral gains have raised most eyebrows, between times, and will be scrutinized by analysts.
Overall, Nokia’s group profit, reported as a €50 million loss in the quarter, was depressed by restructuring costs, rather than weaker operations, it said. These will accelerate through the rest of 2026, it said. It will spend about €800 million on restructuring during the year – mostly for layoffs, closures, integration, and reorganisation of its operations – with about €250 million left to go. The cost-cutting will deliver annual savings, already by the end of 2026, of close to €1.2 billion – at the higher end of its original plan, of between €800 million and €1.2 billion.
As well, Nokia will sink about €800-900 million into its optical manufacturing capacity in 2026. It is “on track” with a new facility in San Jose, set to “begin ramping” in the fourth quarter, and is increasing test-and-packaging capacity in Pennsylvania by “10-times”, starting this quarter. It has also just signed to buy an NXP fab (Chandler) in Arizona. The deal is expected to close at the start of 2029, but Nokia hopes to lease capacity in part of the facility early next year (2027) and convert the site to indium phosphide production for optical components ahead of the full takeover.
It stated: “The transaction further strengthens [our] in-house compound semiconductor manufacturing capabilities through the addition of a highly experienced team with deep industry expertise. It also adds US-based indium phosphide semiconductor manufacturing capacity at a time when secure and scalable domestic supply is becoming increasingly important for the broader US technology ecosystem and the AI supercycle build out.”
Besides, Nokia is moving faster to absorb its newly acquired Chinese operations into the rest of the company, bringing forward most of the associated integration costs in exchange for completing the process a year earlier than planned. On top, it has started further restructuring, mainly in Europe, to simplify its organisation and shift resources to higher-growth businesses, mostly AI ‘network infrastructure’. In other words, it is taking a hit now to be more efficient and profitable in the coming years. As such, the firm has an update on its “portfolio businesses”, too.
Nokia has now listed its fixed wireless access (FWA) CPE and Enterprise Campus Edge (ECE) divisions as “discontinued operations” – on the grounds the first has been sold and the second is about to be sold. The FWA unit has gone to mobile broadband specialist Inseego; the deal is expected to close in the fourth quarter. On closing, Nokia will take a seven percent stake in Inseego, worth about $20 million, and also invest $10 million in Inseego at the same time, to bring its total interest in the US firm to around 11 percent.
Meanwhile, the ECE division, which produces its seminal DAC and MXIE products for the ‘campus’-end of the private 4G/5G market, is still up for grabs; a number of firms have taken a look, and turned down a deal. But Nokia stated: “It is highly probable it will reach an agreement to sell ECE.” The word is that a number of firms are circling, mostly industry consulting and integrator companies. The point in its Q2 statement is these businesses, together, were still contributing revenue (€66 million) but were diluting profitability (by about €13 million) – although both numbers have appeared to be going in the right direction. Either way, Nokia is nearly shot of them, it seems. It has restated earlier financial results – for some apples-for-apples benchmarking going forward.
Here’s a full transcript of Nokia’s Q2 figures, as written in its spreadsheets…
Total net sales were €4.815 billion in the quarter, a jump of eight percent (reported, comparable) on a year ago; they were €9.248 billion for the first half of 2026, up six percent on 2025. Gross margin was 46 percent (44.6 percent on a reported basis) in the quarter, and the same for the year-to-date, up by 90bps and 190bps as comparable scores across the two periods. It posted an operating profit of €434 million in the quarter and €735 million in the half, with year-on-year rises of 18 percent and 28 percent respectively; the figures are reported as a loss of €50 million in the quarter and a profit of €33 million in the half – still, a decline of 78 percent on H1 2025, officially.
Operating margin was nine percent and 7.9 percent for the two periods, down by one percent in the three months on a reported basis “due to a faster pace of restructuring”, and up 0.4 percent across the six months (also down by 130bps in growth terms from the year-ago period). On a comparable basis, profit was €414 million and €726 million in the quarter and the half – representing jumps of 64 percent and 70 percent. As reported figures, the numbers dropped by 73 percent and 118 percent from the equivalent periods in 2025, to €27 million and €131 million.
The network infrastructure unit took €2.037 billion in the quarter – up 12 percent on a margin of 42.7 percent, for an operating profit of €166 million. Net sales of ‘network infrastructure’ will be 12-to-14 percent for the full year, based on an assumption that combined IP and optical sales will grow 18-20 percent in 2026. As above: its Q2 scores saw sales of optical networks rise 20 percent in the quarter, and sales of IP networks rise by 16 percent.
Its mobile infrastructure unit took €2.68 billion, up six percent, on a margin of 49.3 percent, for a profit of €310 million. Its portfolio businesses took €94 million, also up six percent on a year ago; they posted a gross margin of 28.7 percent, and delivered zero profit – better than the €11 million loss they cost the company in 2025. Its outlook is unchanged for the rest of the year – except for a €100 million accounting adjustment as a result of reclassifying its portfolio units as “discontinued operations”.
Its guidance range is now between €2.1 billion and €2.6 billion in terms of operating profit for the year. It expects sales from ‘network’ and ‘mobile’ to be three-to-seven percent higher in the third quarter; operating profit will be flat, it said, because of “phasing of software revenue”, with a “meaningful increase” in the final quarter.
