HELSINKI – Oct 23 (Market Insider) – Finland’s Nokia (NOKIA.HE) delivered a significant beat on its third-quarter profit expectations, a positive surprise driven largely by robust demand for optical networks and cloud services, particularly from the burgeoning needs of AI-driven data centers.
The telecommunications equipment maker reported a comparable operating profit of €435 million for the quarter ending in September. This figure landed well ahead of the €342 million consensus forecast from analysts polled by LSEG, offering investors a much-needed positive signal after a challenging year.
Shifting Gears in a Mixed Market
Nokia’s performance is a notable bright spot after a year marred by several headwinds, including the impact of U.S. tariffs, a broader market slowdown, and a weaker dollar, which had prompted a profit warning back in July.
Furthermore, the company has been grappling with a loss of ground in the crucial North American telecom market. The phase-out of a major 5G contract with U.S. carrier AT&T (T.N) in favor of Nordic rival Ericsson (ERICb.ST), which secured a $14 billion deal in 2023, highlighted the need for Nokia to diversify and strengthen other business segments.
Despite these challenges, quarterly group net sales climbed 12% to €4.83 billion, surpassing the forecast of €4.6 billion. This growth was directly attributed to the strong performance in Optical Networks and cloud services.
AI and Cloud: The New Growth Engine
The earnings report underscored the increasing importance of artificial intelligence and cloud customers to Nokia’s top line. These segments now account for 6% of group net sales and a significant 14% of Network Infrastructure sales. Specifically, the Optical Networks unit saw its sales surge 19% on a constant currency basis.
“AI and data center demand continues to be robust. In fact, it continues to accelerate from our perspective,” commented Chief Executive Justin Hotard in a call with reporters.
Nokia has been strategically investing in this high-growth area, notably through the recent acquisition of U.S. optical networking firm Infinera, which is now contributing to its optical sales momentum. While Mobile Networks remains Nokia’s core business, the strategic pivot and investment in AI-enabled infrastructure appear to be paying dividends.
Slight Upgrade to Full-Year Outlook
Following the strong third quarter, Nokia slightly upgraded its full-year operating profit forecast, now expecting a range between €1.7 billion and €2.2 billion, a modest bump from the previous upper limit of up to €2.1 billion. The company maintains its expectation that the second half of 2025 will be stronger than the first.
The slight revision to the annual guidance is partly linked to a change in financial reporting for its venture fund results. Nokia plans to scale down its passive investments, and as a result, any gains and losses from these funds will now be recorded under financial income and expenses rather than operating profit.
This latest earnings report suggests that while core telecom contracts remain competitive, Nokia’s strategic focus on the infrastructure demands of the AI and cloud revolution is successfully creating a new and accelerating source of profit and growth.
