HELSINKI — Nokia Oyj (HEL:NOKIA) delivered a robust second-quarter performance that surpassed market expectations, fueled by accelerating demand from data centers and a sharp uptick in artificial intelligence-related orders. The Finnish telecom equipment maker reported a comparable operating profit of €434 million, an 18% increase year-over-year and approximately 14% above the consensus estimate of €382 million.
Group net sales rose 8% to €4.815 billion, with the standout performance coming from the AI and cloud segment. Revenue from that customer group doubled to €446 million, accounting for roughly 61% of the overall sales growth. Its contribution to group revenue increased to 9.3%, up from about 4.9% a year earlier.
Perhaps the most striking figure was the order book. Nokia secured €2.8 billion in new AI and cloud contracts during the quarter, representing 6.3 times the segment's quarterly sales. Management indicated that roughly half of these orders, or about €1.4 billion, is expected to convert into revenue within the next 12 months—equivalent to 3.1 quarters at the current run rate.
The strong performance was led by the Network Infrastructure division, which saw sales increase 12%. Optical Networks rose 20%, while IP Networks gained 16%. Chief Executive Justin Hotard noted that demand remains robust and that supply constraints are now the primary limiting factor. Extended lead times are prompting customers to place larger orders with longer planning horizons.
Comparable gross margin widened by 70 basis points to 46.0%, and the comparable operating margin improved to 9.0% from 8.3%. However, reported operating profit swung to a loss of €50 million, reflecting an acceleration of restructuring charges, particularly in Europe and China. The company expects full-year restructuring costs to total €800 million.
Nokia raised its official annual profit forecast to a range of €2.1 billion to €2.6 billion, but the €100 million increase was purely technical—stemming from the reclassification of two business units as discontinued operations. The operational outlook was unchanged. Hotard continues to anticipate performance slightly above the revised midpoint of €2.35 billion.
The results stand in contrast to rival Ericsson (STO:ERIC-B), which last week reported a 6% drop in sales and a 7% decline in adjusted operating profit. Ericsson's Networks division revenue slid 8%, and executives warned that rising memory costs tied to AI could pressure margins. Ericsson's shares fell nearly 12% following that warning. Nokia's comparable margin improvement suggests that AI-driven demand is currently boosting revenue rather than driving up component costs.
Looking ahead, Nokia projects third-quarter sales to rise between 3% and 7% sequentially, with operating profit expected to remain largely stable before a more substantial increase in the fourth quarter. Key risks include supply constraints that could slow order conversion and potential chip price increases that may pressure margins. The company also faces restructuring cash outflows of €700 million to €800 million this year.
Nokia's stock rose 1.0% to €9.26 in late-morning trading on the Nasdaq Helsinki exchange. The broader European technology sector declined 2.7% on Thursday, while the STOXX 600 index slipped 0.5%.