Nokia Q3 profit beats estimates on AI data centre equipment demand

By Paula Doenecke

 

Nokia Oyj’s third-quarter profit beat analyst expectations, driven by rising demand for data center networking equipment as investment in artificial intelligence infrastructure surges. 

Adjusted operating income rose to 605 million euro($680 million) in the period, the Espoo, Finland-based company said in a statement Thursday, beating a 454 million euro average analyst estimate compiled by Bloomberg. Nokia benefited from delivering some of its backlog of data-center equipment.

 

Nokia shares slipped about 1 per cent on Thursday morning in Helsinki, while European tech peers declined as investor sentiment toward the AI trade weakened. A UBS basket of European stocks seen benefiting from AI declined 2.9 per cent.

 

 

Chief Executive Officer Justin Hotard is seeking to make data centers a bigger source of growth for Nokia as demand from its traditional telecommunications customers is expected to remain subdued following a sluggish buildout of 5G networks. Last year, he unveiled a strategy aimed at capitalising on the AI infrastructure boom, alongside a restructuring. Nokia has since divested several businesses. 

 

Nokia said it had increased the scale of its restructure, leading to full-year charges of as much as 1.1 billion euro, up from a previous forecast of 800 million euro.

 

Net sales for the period rose 10 per cent to 5.2 billion euro, a little above analyst estimates, fueled by a boom in demand from AI and cloud customers.

 

The company acquired optical-networking company Infinera last year as part of its pivot, and expects to fully integrate the business by the end of 2026. Nokia said it expects to benefit from 200 million euro in cost synergies, and the wider optical and IP networking business to grow as much as 30 per cent in 2027.

 

The rapid expansion of AI infrastructure has created challenges for equipment makers. Supplies of components such as memory chips are constrained, and prices have gone up. Rival Ericsson AB has said it’s mitigated the impact, helped by customers bringing forward purchases during contract negotiations, ahead of anticipated price increases.

 

There are signs that Nokia’s customers are also bringing forward orders, with sales in its mobile infrastructure division up 5 per cent year on year to 2.9 billion euro, above an average analyst estimate of 2.8 billion euro, driven by an “acceleration of revenue” from the fourth quarter.

 

“I do believe we’re seeing customers become more diligent about recognising supply shortages,” Hotard told Bloomberg during a call with reporters, adding that the company was addressing cost increases across the business.

 

Nokia is expanding capacity to alleviate production bottlenecks for optical network gear, with its second facility in San Jose, California expected to be fully up and running by the end of the month, Hotard said. There are still constraints in “other parts of the semiconductor supply chain,” he added.

 

Nokia is working with Nvidia Corp. on mobile-network equipment that uses the US chipmaker’s advanced chips, rather than relying solely on the purpose-built silicon traditionally used in telecom networks. The partnership is part of Hotard’s broader effort to position Nokia for a future in which AI computing extends beyond data centers and into communications networks.