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Nokia Delivers Solid Q4 Growth Driven by AI Infrastructure Demand
Nokia achieves quarter-over-quarter sales growth across all segments and regions except Nokia Technologies and sets 2026 profit target up to EUR 2.5 Billion.
01/30/2026
Key Highlights
- Nokia met its 2025 guidance with a EUR 2.0 billion comparable operating profit and EUR 1.5 billion in free cash flow, supported by a 3% Q4 sales increase and a robust net cash position of EUR 3.4 billion.
- Starting January 1, 2026, Nokia has simplified its operations into two core segments, Network and Mobile Infrastructure, to evolve from a legacy telecom vendor into a dedicated architect for the global AI supercycle.
- The full integration of Infinera provides Nokia with a formidable optical portfolio, featuring 1.2T engines and low-latency switches designed to handle the massive East-West traffic required by hyperscale AI clusters.
- Through a $1 billion partnership with NVIDIA, Nokia is launching AI-RAN products that integrate GPU-accelerated processing directly into radio sites, enabling real-time Physical AI applications like autonomous robotics.
- As a homegrown champion, Nokia is firmly positioned to secure the EU’s digital future by providing a trusted, geopolitically sound replacement for high-risk vendors like Huawei and ZTE.
The News
Nokia reported Q4 2025 net sales growth of 3%, driven by strong demand for AI and cloud infrastructure, while achieving a full-year comparable operating profit of EUR 2.0 billion. Looking ahead, the company has set a 2026 comparable operating profit target of EUR 2.0 to 2.5 billion as it transitions to a simplified operating model focused on Network and Mobile Infrastructure. For more information, read the Nokia press release.
Analyst Take
Nokia’s Q4 and full-year 2025 financial results reflect a company in transition, meeting its prior guidance while pivoting toward AI-driven infrastructure. Despite facing higher restructuring charges that impacted reported margins, Nokia achieved solid constant currency sales growth and strong gross margin expansion, supported by a favorable product mix and robust demand in its Network Infrastructure segment.
Q4 2025 Financial Highlights
- Sales Performance: Q4 net sales grew 3% year-over-year (constant currency), bolstered by growth in both Network Infrastructure and Mobile Networks.
- Profitability: Comparable gross margin reached 48.1%, though operating margins were slightly tempered by growth investments, including the integration of the Infinera acquisition.
- Full-Year Totals: For 2025, Nokia delivered EUR 2.0 billion in comparable operating profit and a healthy free cash flow of EUR 1.5 billion, representing a 72% conversion rate.
- Shareholder Returns: The Board has proposed a dividend authorization of EUR 0.14 per share, reflecting confidence in the company’s net cash position of EUR 3.4 billion.
Moving into 2026, Nokia is simplifying its operating model into two core pillars: Network Infrastructure and Mobile Infrastructure. This shift is designed to capitalize on the structural shift of AI moving into real-world systems. For the 2026 fiscal year, Nokia has set a comparable operating profit target of EUR 2.0 to 2.5 billion, signaling expectations for improved efficiency and market capture in the AI and Cloud sectors.
Nokia: Transforming into an AI-Native Powerhouse for the Global AI Supercycle
We see Nokia gaining a competitive edge in the 2026 AI infrastructure market as it executes the deliberate transformation from a traditional telecom vendor into a dedicated AI-native infrastructure provider. By restructuring its operations at the start of the year, the company has positioned itself to capture two critical growth areas: the high-volume East-West traffic moving between AI clusters and the burgeoning demand for distributed AI at the network edge. This strategic pivot ensures Nokia is not just supporting connectivity, but is fundamental to the underlying architecture of modern artificial intelligence.
A primary driver of this success is the full integration of Infinera into Nokia’s Network Infrastructure segment, which has resulted in one of the industry's most formidable optical networking portfolios. This enables Nokia to provide the massive, low-latency bandwidth required to interconnect GPUs across modern data centers through advanced 1.2T optical engines and high-capacity switches. Furthermore, Nokia’s vertical integration, owning both the silicon and the software, enables the optimization of power consumption across optical links, addressing a major pain point for data centers struggling with the energy demands of AI scaling.
We find that Nokia is also redefining mobile connectivity by transitioning its mobile business toward an AI-native architecture. Rather than simply using AI as a management tool, the company is building networks designed to natively support AI agents and autonomous systems. A key component of this effort is a strategic partnership with NVIDIA, which integrates AI processing directly into the Radio Access Network (RAN). This AI-on-the-Edge capability enables data to be processed locally at the cell site, reducing latency for real-time applications like autonomous robotics while simultaneously positioning Nokia as a leader in AI-optimized air interfaces for 5G-A enhancements and the upcoming 6G transition.
Historically viewed as an outside the data center carrier company, Nokia has successfully made inroads into the data center segment through its IP Networks division. Its SR Linux and specialized switching fabrics are increasingly favored by cloud providers and large enterprises seeking competitive alternatives to key providers like Cisco, HPE Juniper, and Arista. In a global geopolitical climate that prioritizes security, Nokia’s status as a trusted partner makes it a top consideration choice for critical AI infrastructure projects across North America and Europe.
The simplification of Nokia's operating model into two core segments, Network Infrastructure and Mobile Infrastructure, has sharpened its organizational focus. This new structure reduces organizational complexity and R&D overlaps that previously hindered agility, allowing for more streamlined execution. By separating these units, Nokia can now invest more in high-growth AI and cloud initiatives within its Network Infrastructure division while maintaining a lean, highly profitable Mobile unit, harvesting both innovation and fiscal accountability.
Nokia: Ready to Replace High-Risk Vendors in Europe’s Digital Future
From our perspective, Nokia is solidly positioned to capitalize on the European Union's move to advance stripping Huawei and ZTE from member-state networks due to its status as a homegrown European champion and its recent strategic pivot toward high-performance AI infrastructure. As of 2026, the push for technological sovereignty in the EU has turned Nokia from a mere equipment vendor into a critical partner for regional security and economic resilience.
As such, Nokia can serve as a logical trusted alternative for European operators now mandated to rip and replace Chinese hardware. This transition is underpinned by strict geopolitical alignment, Unlike Huawei and ZTE, Nokia’s hardware and software architectures are fully compliant with the EU 5G Cybersecurity Toolbox. Furthermore, as the European Union prioritizes technological sovereignty, choosing Nokia enables member states to allocate more infrastructure spending within the Eurozone, directly supporting the bloc's broader industrial policies and economic resilience.
Nokia is prepared for the massive logistical undertaking of network replacement thanks to its deep investments in OpenRAN (Open Radio Access Network) and software-defined networking. This focus on interoperability can make it easier for operators to swap out legacy Huawei base stations for replacements, such as Nokia units, without requiring a total overhaul of existing network components. Additionally, Nokia’s R&D and manufacturing footprint within Europe can minimize the supply chain risks and lead times often associated with vendors using China-linked manufacturing hubs.
Beyond the network edge, Nokia offers built-in security in the IP core and optical backbone where sensitive data is aggregated. The 2025 integration of Infinera has established Nokia as a top contender in optical security and data-center-interconnect (DCI) capacity, providing a level of scale that few rivals can match. This is particularly vital for European operators who prioritize safeguarding the integrity of their networks, as Nokia provides a secure environment for government and enterprise data.
Nokia is also helping the EU bridge the AI gap by providing the infrastructure necessary for the next decade of innovation. By pivoting to AI-native networks, Nokia offers telcos a clear path to monetize 5G through autonomous logistics and smart manufacturing. This evolution is bolstered by the strategic partnership with NVIDIA, which includes a $1 billion investment in Nokia to develop AI-RAN technologies. This collaboration can help ensure networks remain at the cutting edge of AI performance without relying on restricted foreign silicon.
Finally, Nokia enters 2026 with the financial and operational stability required for decade-long rip and replace contracts. With a strong net cash position of EUR 3.4 billion and a 2026 operating profit target of up to EUR 2.5 billion, the company has the fiscal strength to support long-term infrastructure commitments through 2035. This scale can enable Nokia to out-invest smaller regional players in R&D, ensuring it remains a dominant, stable partner for Europe’s digital future.
Looking Ahead
We believe Nokia is solidly positioned to swiftly expand its influence across the AI infrastructure ecosystem by transitioning from a connectivity provider to a fundamental architect of AI-native networks. Central to this expansion is the full integration of Infinera, creating an advanced optical networking portfolio capable of supporting the massive East-West data center traffic required by hyperscale AI clusters.
Beyond the core, Nokia is aggressively capturing the edge through its $1 billion partnership with NVIDIA, launching AI-RAN products that integrate GPU-accelerated AI processing directly into the radio access network to support real-world Physical AI applications such as autonomous robotics. By simplifying its operating model into dedicated Network and Mobile Infrastructure segments as of January 1, 2026, Nokia has sharpened its focus on high-growth areas like data center switching and hybrid AI inference, ensuring it stands out as a trusted, geopolitically sound partner for enterprises and cloud providers navigating the AI supercycle.
Ron Westfall | VP and Practice Leader for Infrastructure and Networking
Ron Westfall is a prominent analyst figure in technology and business transformation. Recognized as a Top 20 Analyst by AR Insights and a Tech Target contributor, his insights are featured in major media such as CNBC, Schwab Network, and NMG Media.
His expertise covers transformative fields such as Hybrid Cloud, AI Networking, Security Infrastructure, Edge Cloud Computing, Wireline/Wireless Connectivity, and 5G-IoT. Ron bridges the gap between C-suite strategic goals and the practical needs of end users and partners, driving technology ROI for leading organizations.