Oct 22, 2026 earnings call — AI and cloud drive optical and IP growth
AI and cloud net sales grew 123% year-over-year and represented 12% of total group net sales.
Revenue $5.8B (est $5.7B) · EPS $0.10 (est $0.08)
Key quotes
"In AI and cloud, net sales grew 123% year-over-year and represented 12% of total group net sales in the quarter."
"Demand for our 800 gig coherent pluggables continues to accelerate, with shipment volumes increasing more than twofold sequentially."
"We now expect restructuring charges of approximately EUR 1.1 billion in 2026, and restructuring and associated cash outflows will now be between EUR 800 million and EUR 900 million."
Analyst Q&A 11
6-inch indium phosphide production progress
Q (Robert Sanders · Deutsche Bank): Analyst asked how the 6-inch indium phosphide yields and ramp are progressing, whether management is confident about the ramp into next year, and what milestones remain. He also asked about the satellite opportunity in North America given recent market developments.
A: Management said Fab 2 (6-inch) progress is strong with most process development complete and the key milestone is entering production by year-end and ramping through next year. They described the ICEYE partnership targeting sovereign communication networks upgrading legacy SATCOM and said satellite will be part of growing connectivity demand, which is why they are also investing in AI RAN.
"Obviously, the key milestone is seeing us enter production by year-end, and then continuing to see production ramp through the year next year." — Justin Hotard (CEO)
IP routing and optical demand outlook
Q (Simon Leopold · Raymond James): Analyst asked for more detail on IP routing and switching order patterns and expansion beyond telcos, and how Nokia sees the optical market over the next two years compared with a competitor's 30% growth forecast.
A: Management said demand for IP and optical comes in three areas: front-end networking, data center interconnect (DCI), and scale across, with scale across today being more optical. They noted telcos are investing in east-west connectivity driven by AI and cloud, they started from a lower IP base but see IP order strength, and they guide combined IP and optical growth of 25% to 30% with optimism optical could contribute more as supply capacity grows.
"We're providing a view of IP and optical combined of 25% to 30%." — Justin Hotard (CEO)
Design wins and pluggable product momentum
Q (Artem Beletski · SEB): Analyst asked whether the highlighted design wins (multi-rail, pluggables, IP) show strengthening momentum and whether these wins will convert to orders later this year. He also asked how Nokia is managing multi-rail 800G pluggables versus competition and whether the strong IP growth can be sustained.
A: Management said they are confident momentum is accelerating, with a large intake earlier in the year and a strong pipeline, and they are investing to meet demand. On pluggables they acknowledged underpenetration historically, but the combined team has improved the portfolio and is building capacity; on IP growth they noted they start from a low base and feel good about the assumptions shared for next year.
"And I'm really pleased with the way this team has come together as one company, one team, to build the portfolio and ramp production." — Justin Hotard (CEO)
AI-driven CSP investment and radio supply issues
Q (Daniel Djurberg · Handelsbanken): Analyst asked for more insight into increased CSP investments tied to AI traffic and the strong mobile radio demand this quarter, and whether this strength should continue into 2027. He also followed up on gross margin headwinds related to supply constraints for radio.
A: Management said AI and cloud demand is driving telco and subsea investments (especially where data centers are located) and that demand is broadening. They warned the supply chain is under broad pressure—impacting costs and lead times—and customers are giving more forward visibility so Nokia can plan; management is working to mitigate supply and price impacts and secure deliveries.
"And just like Justin said, the telco side is quite aware of this now, are getting more and more aware that lead times are slipping when it comes to component supplies and prices are increasing." — Marco Wiren (CFO)
Network Infrastructure gross margin changes
Q (Sami Sarkamies · Danske Bank): Analyst asked management to unpack Network Infrastructure gross margin dynamics, how much new-product ramp is a headwind, and what to expect for Q4 after last year's Q4 margin of 45%.
A: Management said new-product ramps dilute margins temporarily and they expect improvement in Q4, noting AI and cloud work brings strong incremental gross profit and is accretive to operating margin. They also explained the ONT/customer-premises pruning lowers dilutive low-margin business over time and that scaling IP and Optical will improve margins.
"We believe that this dilution that we've seen is temporary." — Marco Wiren (CFO)
AI/cloud order timing and profitability
Q (Richard Kramer · Arete): Analyst asked what portion of the roughly EUR 5 billion AI and cloud order book is for 12-month delivery versus longer-term deals, and when AI and cloud will be margin neutral or accretive (2027 or later).
A: Management said the majority of orders are within a 12-month time frame and largely within 2027, with some portion outside 12 months; the main constraint is supply not demand. They stated AI and cloud is accretive to profitability but IP volumes start from low levels so it will take time for operating leverage; they expect Q4 to be better than Q3.
"So in terms of the growth that we see in the order book and what we're -- what we continue to see is the majority of orders are -- majority of orders we've seen are kind of in a 12-month time frame." — Justin Hotard (CEO)
Radio networks prebuying and market outlook
Q (Emil Immonen · DNB Carnegie): Analyst asked whether customers are prebuying radio equipment because of cost inflation, and for the view on radio market into Q4 and 2027.
A: Management said they do not see prebuying and believe they cannot pre-supply given constraints; instead they expect more stable forecasting rather than an imminent investment cycle and view the market as flat. They also expect pricing to increase due to cost inflation and noted pockets of faster projects or opportunities, but overall telco demand is flattish.
"But what we do anticipate is that we're going to see more stable forecasting." — Justin Hotard (CEO)
Operating leverage and OpEx for growth
Q (Felix Henriksson · Nordea): Analyst asked how operating leverage will work as optical and IP grow and whether there are larger incremental OpEx needs to enable growth next year.
A: Management said product mix affects gross margin but they see opportunities across the company to improve profitability and mitigate component cost increases, and they will invest where it creates long-term shareholder value. They noted operating leverage began to appear in Q3 but is partly hidden by portfolio cleanup; they are taking ongoing capital allocation decisions to capture leverage.
"Also, when it comes to the capacity investments, we invest in those areas where we believe that we can create shareholder value in the long term" — Marco Wiren (CFO)
Chandler fab plans and near-term focus
Q (Jakob Bluestone · BNP Paribas): Analyst asked about the Chandler facility plans, what it will focus on (indium phosphide only or broader) and how Nokia is coordinating capacity additions with customers.
A: Management said they are positioning the Chandler facility to give flexibility to support emerging demand and believe there are multiple ways to monetize it through indium phosphide manufacturing with a 2029 time frame for that solution. They emphasized near-term execution is fully focused on getting Fab 2 operating and hitting yield and output targets first.
"But in terms of near-term execution, the focus right now, 100% is on making sure we get Fab 2 up and running and supporting the growth and, of course, hitting the yield and output targets that we expect." — Justin Hotard (CEO)
New optical products and restructuring timing
Q (Janardan Menon · Jefferies): Analyst asked how customer response has been to new optical products (LPO pluggable, external laser) and whether these will contribute to the medium-term outlook. He also asked when restructuring savings show up and whether the program tapers next year and where benefits appear (MI vs NI).
A: Management said the 2027 assumption does not assume additional upside beyond current portfolio and orders, though they see broader opportunities and are working with customers on designs. On restructuring, they said China integration is being accelerated to 12–24 months to get savings faster, they have reached the top of the EUR 800m–1.2bn range and are continuing to streamline locations and the company broadly to capture further benefits.
"And we said originally that this will take up to 3 years, but now we're actually accelerating and we're able to do that in 12 to 24 months." — Marco Wiren (CFO)
IP design wins and operating leverage
Q (Sandeep Deshpande · JPMorgan): Analyst asked whether Nokia is expanding the number of IP customers (hyperscalers) and if IP will be a bigger percent of AI/cloud orders in 2027–28, and whether current operating leverage can get the company to the top end of EBIT guidance.
A: Management said they think in terms of design wins (each acting like its own product revenue stream) rather than customer counts, and they are optimistic about long-term potential given competitive design feedback. They cautioned operating leverage takes several quarters to materialize, they are not there yet despite progress, and the guidance ranges remain as stated with some non-linearities across businesses.
"The way I think about it, I don't think about it at a customer-by-customer level." — Justin Hotard (CEO)