Nokia Vaults Higher with Evidence of Development in AI Infrastructure

It sounds like a cliché, but I was recently asked about Nokia on the golf course. I had just returned from a Nokia-sponsored analyst conference at the fancy Biltmore Hotel in Phoenix, and a friend of mine was curious about what they were up to.

“Are they still making phone calls?” asked the friend, who is a retired property consultant. That could be a question most people would ask, not knowing that the company is in the process of a long diversification effort from telecom infrastructure.

In fact, Nokia still sells phones. But now it has new growth in the best neighborhood: AI infrastructure. In its quarterly earnings announced early today in Europe, the Finnish company reported results that reflected a 9% overall revenue increase and big gains in its renewed strategic focus on data center networking and artificial intelligence infrastructure.

Big growth in the Cloud

As evidenced by its recent earnings, Nokia has shown it can grow into new markets, including artificial intelligence. Investors love this. Nokia shares soared 10% in US-based trading today after the results.

Nokia reported third-quarter earnings above market expectations on Thursday, driven by strong optical and cloud demand. This included increasing data center sales with an artificial intelligence focus following the acquisition of optical networking specialist Infinera.

In announcing its results, Nokia management said AI and cloud customers accounted for 6% of the group’s net sales and 14% of network infrastructure sales, while optical networks grew 19%.

Some key takeaways:

• Revenue was up 9% year-on-year (y-o-y).
• Nokia beat EPS expectations by 21%.
• Management said new partnerships and product launches are driving growth.

How Lundmark made his mark

With the news, Nokia shows that the turnaround planned by former Nokia CEO Pekka Lundmark is paying off. Lundmark, frustrated by years of sluggish growth in telecommunications, saw the need to diversify by bolstering products geared toward data center infrastructure. This also included a major acquisition of optical networking company Infinera for $2.3 billion, which was announced in 2024 and completed this year.

In the quarter, the company posted an impressive 11% growth in network infrastructure to €1.95 billion (US$2.26 billion). Cloud and Network Services surprised the street with sales of 645 million euros (US$750 million), 17 percent above estimates, according to Raymond James. Nokia now expects annual operating profit of between 1.7 billion and 2.2 billion euros, a slight upgrade on the previous range of up to 2.1 billion euros.

Lundmark’s recovery plan, which he described as very difficult, now appears to be prophetic. The company is finally emerging from under the long dark telecom cloud, where it has been weighed down by disappointing returns in its 5G infrastructure investment cycle for years.

This year, ahead of the major trade conference Mobile World Congress in Barcelona, ​​Lundmark handed over the reigns to an American, Justin Hotardwho brings a background in datacenter and business. Hotard previously held executive roles at Intel, Hewlett Packard Enterprise and NCR Corporation.

“We have seen some improvements in CSP [communications service provider] The expectations, along with the strong order intake I mentioned in AI and cloud,” Hotard said on the company’s earnings conference call. “In fact, going into the fourth quarter, our backlog coverage is stronger than it has been in recent years. We are also pleased with our progress in acquiring Infinera.”

It’s possible that the telecom debacle was a blessing in disguise. Now, Nokia can sail to the land of rainbows and unicorns: AI. Nokia has now demonstrated that a successful turnaround is underway and is now well positioned with data center networking products, including its SR Linux-powered routing and switching portfolio, as well as Infinera optical products.

Hyperscaler and Neocloud clients

At the recent analyst even in Arizona, Nokia highlighted customers and potential wins in AI infrastructure, including GPU clouds. This area is already cemented by a deal with recent IPO CoreWeave. However, some analysts say there may be a bigger game at play, including Meta and Google.

“We believe Nokia shares a new optical-scale Meta project with Ciena, and optical book-to-account significantly exceeded 1x,” Raymond James analyst Simon Leopold wrote in a research note. “IP traction emerges with bases with Microsoft, Google and CoreWeave and a new deal with Nscale.”

Many Wall St. analysts they were quick to raise their estimates on the news. Raymond James and Deutsche Bank both raised their price estimates for Nokia, with Raymond James raising its target to $6.50 from $5 and Deutsche Bank from €4.75 to €4.25 on European exchanges.

Futuriom highlights Nokia’s potential success with AI-centric clients like CoreWeave. Nokia’s flexible, open-source SR Linux operating system has been a key differentiator, with customers citing its simplicity, reliability and economy. Nokia’s solution delivered high performance while demonstrating significant energy efficiency, a critical factor for large-scale AI networking infrastructures.

This quarter may well represent the start of a new era for Nokia, as it has strengthened its reputation as a leading supplier of networking infrastructure for data centers and artificial intelligence.

Futuriom provides paid research and marketing services to technology companies, including Nokia, with the goal of providing accurate information on how the cloud infrastructure and artificial intelligence markets are evolving. These services include subscription research, custom research and report sponsorships. The author holds no positions in individual technology stocks mentioned in this article.