Nokia (NYSE:NOK) reported third-quarter 2026 net sales growth of 9% on a constant-currency basis and said comparable operating margin expanded 220 basis points to 11.7%, as demand tied to artificial intelligence and cloud infrastructure lifted its Network Infrastructure business.
President and CEO Justin Hotard said AI & Cloud was the company’s largest growth engine during the quarter. Net sales in the customer segment rose 123% year over year and accounted for 12% of group sales, while order intake increased 118% to €1.5 billion.
“Growth is accelerating in the areas where we have chosen to focus and invest,” Hotard said, adding that the company is beginning to see stronger operating leverage from its strategy.
AI and Cloud Demand Drives Network Infrastructure
Network Infrastructure sales rose 15% in the quarter, supported by growth in Optical Networks and IP Networks. Optical Networks revenue increased 18%, while IP Networks revenue climbed 43% as earlier design wins began converting into sales.
Hotard said Nokia continues to see demand exceeding supply in both businesses. The company now expects Optical Networks and IP Networks to grow somewhat above its prior 18% to 20% full-year assumption. For 2027, Nokia expects the businesses to grow 25% to 30% on a combined basis.
The company cited demand spanning front-end networking, data-center interconnect and broader network connectivity. It also said telecom operators are investing in transport and connectivity infrastructure to support AI and cloud customers.
- Shipments of 800G coherent pluggables more than doubled sequentially.
- Nokia said it has secured design wins for the technology with 29 customers.
- Its Multi-Rail optical technology has secured three design wins, with the first customer receiving initial volumes.
- IP Networks added two hyperscaler design wins, including a next-generation data-center gateway win.
Hotard said the company also won telecom contracts for edge and core routing, IP aggregation and 5G backhaul in Japan, Europe and the U.S. He said Nokia’s AI & Cloud order book is largely intended for delivery within 12 months, though some orders extend beyond that period and largely into 2027.
Network Infrastructure gross margin declined 150 basis points to 41.2%, which CFO Marco Wirén attributed to product mix and costs associated with ramping new AI and cloud products, particularly in IP Networks. Wirén said the company expects gross margin in the segment to improve in the fourth quarter.
Mobile Infrastructure Grows as Supply Constraints Persist
Mobile Infrastructure sales rose 5% in the third quarter. Radio Networks revenue increased 10%, aided in part by contract deliveries that moved from the fourth quarter into the third. Core Software sales declined 13% as Nokia de-emphasized certain applications, while some operators delayed projects because of supply constraints involving server infrastructure.
Technology Standards sales grew 8%, supported by new licensing agreements and recognition of catch-up revenue. However, Wirén said Nokia expects slower licensing deal activity and lower revenue in the fourth quarter than in recent quarters.
Mobile Infrastructure gross margin was broadly stable at 47.5%. The segment benefited from higher Radio Networks revenue, operating efficiency and a larger contribution from Technology Standards, Nokia said.
Hotard said the company does not see broad customer pre-buying in mobile networks, nor does it expect an imminent investment cycle. Nokia continues to expect the traditional telecom market to remain broadly flat, although it sees pockets of opportunity in IP and optical networking.
He said component constraints and cost increases have become more widespread, affecting leading-edge semiconductor nodes, memory, source materials and printed circuit boards. Customers are increasingly providing Nokia with longer-term visibility into their plans, he said.
AI-RAN, Manufacturing and Portfolio Actions
Nokia highlighted progress in AI-RAN, its effort with NVIDIA to deploy AI-native radio software on NVIDIA’s Aerial RAN Computer platform. T-Mobile recently completed its first live voice call over AI-RAN in a production network, while Elisa ran voice, mobile data and AI workloads simultaneously on the platform in its commercial network, according to Nokia.
Hotard said Nokia has demonstrated spectral-efficiency gains of more than 20% in live environments and is working toward a 100% improvement target in 2028. The company said 19 customers are now working with it on AI-RAN.
In manufacturing, Nokia’s San Jose six-inch indium phosphide facility remains on track to start production before year-end. Hotard said 90% of process development and process recipes have been completed, with 24/7 operations expected to begin by the end of October. The company expects production to continue ramping during 2027.
Nokia also said it completed the sale of its fixed wireless access business to Inseego and signed an agreement to sell its enterprise campus edge business to AURELIUS.
Profit, Cash Flow and Outlook
Comparable operating profit was €605 million in the third quarter, while gross profit totaled €2.3 billion and gross margin was largely stable at 44.6%. Financial income and expenses benefited from positive venture-fund revaluations, supporting net profit and earnings per share.
Free cash flow was negative €99 million, reflecting restructuring payments and increased working capital, including higher receivables and inventory as growth accelerated. Nokia ended the quarter with net cash of €2.6 billion.
The company now plans to invest an additional €400 million in working capital relative to its expectations at the start of the year, given demand and anticipated 2027 growth. It expects 2026 free-cash-flow conversion of 35% to 55%.
Nokia maintained its comparable operating-profit guidance and said it was tracking above the midpoint of its outlook range. For the fourth quarter, it expects sequential net sales growth of 20% to 24%, though it said third-quarter deliveries pulled forward from the fourth quarter will reduce normal Mobile Infrastructure seasonality.
The company expects approximately €1.1 billion in restructuring charges in 2026 and restructuring-related cash outflows of €800 million to €900 million. Nokia said its Infinera integration is largely complete and remains on track to deliver €200 million in synergies by year-end, one year earlier than previously planned.
About Nokia (NYSE:NOK)
Nokia Oyj is a Finland-based technology company that provides communications networking equipment, software and related services to telecommunications operators, enterprises, governments and other organizations worldwide. Its offerings support fixed and mobile broadband, optical and IP networks, data centers, cloud environments and private wireless communications.
The company’s business activities include mobile network infrastructure, network automation and management software, fiber and broadband access, optical networking, routing, data-center networking, and cloud and network services.
