Nokia’s Profit Beats Estimates as Data Centers Boost Growth

Nokia Oyj’s second-quarter profit strongly beat analysts’ forecasts, as the Finnish mobile network equipment maker’s push to supply gear to data centers propelled sales.

Adjusted operating income rose to €434 million ($496 million) in the period, the Espoo-based company said in a statement on Thursday. That compares with an average analyst estimate of about €372.3 million, according to data compiled by Bloomberg.

Net sales rose 8% year on year to €4.8 billion for the quarter, in line with analysts’ estimates.

Chief Executive Officer Justin Hotard is working to diversify beyond Nokia’s older telecommunications network gear to capitalize on the boom in artificial intelligence-driven data center construction. He announced the pivot last year alongside plans to restructure the company’s operations and sell off under-performing units, promising double-digit operating income growth in the years ahead. The company’s stock has risen 66% so far this year.

While the AI boom has brought new opportunities, the rush to build out new data centers and increase computing resources has led to shortages of key parts, including memory chips, and increasing prices. Rival Ericsson AB warned last week that rising costs would hurt margins, making new orders from its customers more expensive to fulfill.

Nokia said it has agreed to buy a chip fabrication campus in Chandler, Arizona from Dutch firm NXP Semiconductors NV, subject to regulatory approvals. It will start by leasing some of the capacity from early 2027 before repurposing the facility to make optical components for chips used in AI data centers.

The Finnish company has been increasing its manufacturing footprint in the US over the past several years, focused on high-value telecom components and semiconductors. This strategy has helped the company secure federal funding under the US Chips Act while strengthening the resilience of its supply chain.

The company is cutting jobs in Europe as part of a broader restructuring to save as much as €1.2 billion in costs this year. The European cuts will lead to restructuring charges of €200 million, the company said.

Nokia is also using AI to make its equipment more efficient. Last week, the company presented technology with chipmaker Nvidia Corp. that promises to as much as double the amount of data that wireless providers can transmit over the same airwaves. The platforms, set to be released next year, are designed to run with 4G and 5G networks and can easily be upgraded to a 6G standard once the next generation is defined.

Read More: Nokia, Nvidia Unveil AI-Powered Network, Doubling Data Loads

That means that cost-sensitive telecommunications companies can update their networks virtually instead of relying solely on pricey hardware replacements. Hotard said he’s aiming for software subscriptions to become the main driver of the company’s radio-access network business going forward. Nvidia took a $1 billion stake in Nokia last year.