Nokia (NYSE:NOK) reported 9% constant-currency net sales growth for the second quarter of 2026, with executives pointing to strong demand from AI and cloud customers and continued progress on the company’s strategy outlined at its Capital Markets Day.
President and CEO Justin Hotard said the quarter showed “continued progress” against Nokia’s priorities, with the company focused on what he called the “AI super cycle.” He said net sales from AI and cloud customers more than doubled year over year to EUR 446 million, while order intake in that segment reached EUR 2.8 billion.
Margins Improve as Network Infrastructure Leads Growth
CFO Marco Wirén said comparable net sales grew 9% in the quarter, supported mainly by Network Infrastructure. Gross profit totaled EUR 2.2 billion, while gross margin rose 70 basis points to 46%. Comparable operating profit was EUR 434 million, with operating margin increasing 70 basis points to 9%.
Wirén said the quarter benefited from some software revenue recognition that came in during the second quarter instead of the third quarter. He also noted that higher stock-based compensation expense created a 150-basis-point year-over-year headwind to operating margin, driven by Nokia’s share price increase, an expansion of the program and earlier issuance this year.
Network Infrastructure net sales grew 12%, with Optical Networks up 20% and IP Networks up 16%. Wirén said Optical Networks benefited from continued AI and cloud demand as well as demand from telecom customers investing in transport infrastructure. IP Networks benefited as order momentum from the second half of 2025 began converting into revenue.
Fixed Networks sales declined 2%. Within that business, Optical Line Terminal sales rose 18%, while ONT sales fell 16% as Nokia continued to focus on higher-value parts of the portfolio. Network Infrastructure gross margin increased 240 basis points to 42.7%, helped by higher revenue scale, Infinera acquisition synergies and favorable mix in Fixed Networks, partly offset by growth investments in Optical and IP Networks.
Mobile Infrastructure Grows, But Q3 Margin Expected to Dip
Mobile Infrastructure net sales increased 7% in the quarter. Wirén said core software grew 1%, radio networks increased 7% and technology standards rose 15%. Technology standards benefited from new agreements and catch-up revenue recognition, though Nokia continues to expect full-year technology standards sales and profitability to be similar to 2025 levels.
Mobile Infrastructure gross margin was 49.3%, which Wirén said was better than expected because of a higher contribution from software sales that had previously been anticipated in the third quarter. Because of that phasing, Nokia expects Mobile Infrastructure gross margin in the third quarter to be closer to 44% to 46%, before improving again in the fourth quarter in line with normal seasonality.
By customer segment, AI and cloud was Nokia’s fastest-growing area, with net sales up 105% year over year. Telecom sales increased 4%, while technology licensing grew 15%.
AI-RAN Platform and Optical Investments Highlight Strategy
Hotard said Nokia launched what it described as the industry’s first commercial AI-RAN platform, which he said marks a shift from hardware-defined radio networks to software-defined platforms. He said the platform is expected to deliver more than 100% spectral efficiency gains by 2028, effectively doubling the capacity operators can obtain from existing spectrum.
The platform is open, programmable and O-RAN compliant, and Nokia expects pilot deployments to begin at the end of 2026, with commercial availability in 2027. In the Q&A session, Hotard said the company expects more significant volume in 2028.
Nokia also highlighted investments in optical manufacturing capacity. Hotard said a new indium phosphide fab in San Jose is processing test wafers and remains on track for volume production by the end of the year. Nokia also announced plans to scale its Pennsylvania facility, increasing advanced test and packaging capacity for optical systems by 10 times, and said it acquired a manufacturing site from NXP in Arizona to increase indium phosphide fab capacity.
Hotard said the Arizona fab is expected to come online no earlier than 2029, while the San Jose facility should ramp in 2027 after volume manufacturing starts later this year.
Discontinued Operations and Restructuring Updates
Wirén said Nokia has classified its Fixed Wireless Access business and Enterprise Campus Edge business as discontinued operations. The move followed Nokia’s agreement to sell the Fixed Wireless Access business to Inseego and its view that the sale of Enterprise Campus Edge is now highly probable.
For the second quarter, Wirén said the reporting change reduced comparable net sales by EUR 66 million and increased comparable operating profit by EUR 13 million. It also caused minor cost allocation changes between Network Infrastructure and Mobile Infrastructure.
Nokia remains on track to complete its 2023-2026 restructuring program this year and achieve EUR 1.2 billion in gross cost savings. Wirén also said Nokia is accelerating the integration of its Chinese operations into its global operating model after taking full ownership at the end of 2025. The company now expects to recognize about EUR 350 million of planned one-time charges for that program by the end of 2026. Additional efficiency programs, mainly affecting Europe, are expected to result in EUR 200 million of restructuring charges in 2026.
Overall, Nokia expects restructuring charges of about EUR 800 million in 2026.
Cash Flow Weakens Seasonally; Outlook Maintained
Free cash flow was negative EUR 732 million in the quarter. Wirén said the second quarter is typically Nokia’s weakest for cash generation because annual employee incentives are paid during the period. The company also saw working capital increase as the business continued to grow. Nokia ended the quarter with EUR 2.8 billion in net cash.
Because of higher restructuring costs and investments in working capital to prepare for growth, Nokia now expects to track toward the low end of its free cash flow conversion assumption of 55% to 75%.
Nokia said there was no operational change to its comparable operating profit guidance, aside from the technical adjustment related to discontinued operations. Wirén said the company continues to track “somewhat above the midpoint” of its operating profit range. For the third quarter, Nokia expects sequential net sales growth of 3% to 7% and operating profit broadly similar to the second quarter, followed by a meaningful improvement in the fourth quarter.
During the Q&A session, Hotard said Nokia remains broadly supply constrained in optical networks, particularly for leading-edge products. He said if more supply were available, Nokia would “probably generate more revenue.” He also said memory remains the most significant supply chain constraint, alongside broader component limitations affecting the technology ecosystem.
About Nokia (NYSE:NOK)
Nokia Corporation, headquartered in Espoo, Finland, is a global telecommunications and technology company with roots dating back to 1865. Over its long history the company moved from forestry and cable operations into electronics and telecommunications, becoming widely known in the 1990s and 2000s for its mobile phones. In recent years Nokia refocused its business toward network infrastructure, software and technology licensing, and research and development, following the divestiture of its handset manufacturing business and the acquisition of Alcatel‑Lucent in 2016, which brought Bell Labs into its portfolio.
Today Nokia’s core activities center on designing, building and supporting communications networks and related software.
