Nokia Q4 2025 Earnings Call - Optical and AI-Cloud Demand Driving Growth While Integration and Investment Weigh on Margins

David Mulholland, Head of Investor Relations, Nokia: Good morning, ladies and gentlemen. Welcome to Nokia’s fourth quarter and full year 2025 results call. I’m David Mulholland, Head of Nokia Investor Relations, and today with me is Justin Hotard, our President and CEO, along with Marco Wirén, our CFO. Before we get started, a quick disclaimer. During this call, we will be making forward-looking statements regarding our future business and financial performance, and these statements are predictions that involve risks and uncertainties. Actual results may therefore differ materially from the results we currently expect. Factors that could cause such differences can be both external as well as internal operating factors. We’ve identified such risks in the risk factors section of our annual report on Form 20-F, which is available on our investor relations website.

Within today’s presentation, references to growth rates will mostly be on a constant currency and portfolio basis, and other financial items will be based on our comparable reporting. Please note that our Q4 report and a presentation that accompanies this call are published on our website. The report includes both reported and comparable financial results and reconciliation between the two. In terms of the agenda for today, Justin will go through our key messages from the quarter, then Marco will go through the financial performance, and then we’ll move on to Q&A. With that, let me hand over to Justin.

Justin Hotard, President and CEO, Nokia: Hello, everyone, and thank you, David. Overall, our fourth quarter performance was in line with our expectations, reflecting disciplined execution across the business. Net sales grew 3% in the quarter to EUR 6.1 billion, with operating profit of EUR 1 billion and free cash flow of EUR 0.2 billion. For the full year, net sales were EUR 19.9 billion and operating profit was EUR 2 billion, slightly above the midpoint of our guidance. Free cash flow conversion of 72% was also consistent with our guidance. Stepping back, 2025 was a foundational year in repositioning Nokia for long-term value creation. We strengthened our portfolio with the acquisition of Infinera, simplified our operating model, and set a clear strategy at our Capital Markets Day to focus the company on the areas where we see opportunities for differentiation, scale, and sustainable market leadership.

Now, to give you a bit more detail, let me first turn to network infrastructure. In the fourth quarter, net sales grew 7%, driven by optical networks, which grew by 17%. Order intake was solid across both optical and IP networks, with a book-to-bill above 1, supported by particularly strong demand from AI and cloud customers. For the full year 2025, we delivered EUR 2.4 billion in orders from AI and cloud customers. This reinforces our view that optical networking will become an even more critical part of the infrastructure to support the AI super cycle, and we are investing to capture near-term demand while maintaining a long-term perspective on the opportunity. In optical, our 800G ZR and ZR+ pluggable products are shipping, with initial units performing well in the field.

We now have multiple design wins and are supplying into scaled deployments. Our focus is on ramping production to meet the strong demand we see in the market. In IP Networks, we made progress on our expansion into data center switching. We launched two new products in the quarter, the 7220 IXR H6 switching platform, powered by Broadcom’s TH6, and our Agentic AI solution for event-driven automation management, which reduces network downtime by 96%. We also secured a design win for our next-generation data center switching platform. These are encouraging steps, and we continue to believe revenue will ramp over time as we expand our presence in this rapidly growing market. In our mission-critical enterprise customer segment, book-to-bill was well above one in Q4, supported by a growing pipeline from both new and existing customers. Turning to Fixed Networks, performance was stable year-on-year in Q4.

As discussed at our Capital Markets Day, we are deprioritizing certain customer premises equipment products, but we do not have meaningful differentiation in which to dilute margins. In Q4, our fiber OLT business grew 16% year-over-year, offset by declines in these areas I just referenced that we are de-emphasizing. This resulted in overall flat performance for Fixed Networks. As I announced at our Capital Markets Day on January first, we brought together Core Software, Radio Networks, and Technology Standards to form our new Mobile Infrastructure segment. This structure is designed to sharpen accountability, improve profitability, and position the business for long-term technology leadership. Core Software, formerly a part of Cloud and Network Services, is leveraging our differentiated cloud-native core network stack to grow faster than the market and continue improving profitability.

During the quarter, we won a 5G Core deal with Telia and announced a collaboration with Bharti Airtel on Nokia’s Network as Code API platform. We now have more than 75 partners using the platform, including 43 telcos. Radio Networks, formerly a part of Mobile Networks, focused on disciplined execution in a largely stable market. We continue to invest to deliver 5G Advanced and ORAN solutions while innovating to establish a longer-term leadership position in 6G and AI-native networks. A key pillar of our strategy is co-innovation, and in Q4, we announced our partnership with NVIDIA. We continue to remain on track to begin trials and proofs of concept on AI RAN later this year. We also announced a market share expansion deal with Telecom Italia, along with contract extensions with Telefonica Germany and SoftBank. Technology Standards remains focused on securing long-term monetization of patent assets of Nokia’s patent assets.

We signed several deals in Q4 and continue to maintain a contracted net sales run rate of approximately EUR 1.4 billion. At our Capital Markets Day, we also announced the creation of Nokia Defense, a new incubation unit that will serve as the central R&D hub and go-to-market for our defense portfolio. Our priority is to deliver defense-grade solutions based on Nokia’s mobile and network infrastructure technologies for Finland and other NATO countries. Nokia Defense also includes Nokia Federal Solutions in the US and includes the technology we acquired from Phoenix Group in 2024. Based on feedback from customers, we see growing demand for our 4G and 5G technology in military environments, both for national security and tactical applications. This is an area where we are continuing to invest, and we will share updates as we make further progress.

Finally, in Q4, we closed the transaction to take full ownership of our joint venture in China, Nokia Shanghai Bell. This gives us greater operational flexibility, and we will bring it into full alignment with Nokia’s global operating model. As a part of that integration, we expect to deliver approximately EUR 200 million of run rate cost synergies, with integration costs of approximately EUR 350 million-EUR 400 million over a period of 24-36 months. Turning to 2026. Looking ahead, our focus is on disciplined execution to capture growth in AI and cloud and increase efficiency while we’re building a high-performance culture across Team Nokia. We now have fewer, clearer priorities, a simplified operating model, and a strategy we are executing with speed and accountability. Network infrastructure remains our primary growth engine, particularly optical and IP networks, where we see strong structural demand.

In mobile infrastructure, our focus is on gross margin and efficiency, while we continue to invest in our portfolio for competitiveness and market share in 5G and to transform the business for long-term success in areas such as AI-native networks and 6G. From a financial perspective, in 2026, we’re targeting an operating profit in the range of EUR 2 billion-EUR 2.5 billion. At our Capital Markets Day, we outlined a series of KPIs to illustrate how our strategic direction translates into financial outcomes. Let me revisit those and what we expect in 2026. Our first KPI is to deliver 6%-8% compound annual growth in network infrastructure between 2025 and 2028 on a constant currency and portfolio basis, and 10%-12% in the combined optical and IP networks businesses.

In 2026, we expect growth rates in both cases to be in line with these long-term targets. As expected, the product prioritization decisions we have taken will limit growth in Fixed Networks, while we expect growth in our fiber OLT portfolio to continue to occur due to strong underlying demand. Our second KPI is to expand Network Infrastructure operating margin to 13%-17% by 2028. This is compared to the 9.5% achieved in 2025. In 2026, we expect measured margin expansion as we ramp new products and continuing investing in the long-term growth opportunity we see in the business. The next two KPIs relate to Mobile Infrastructure, gross margin, and operating profit. In 2026, we continue to expect some top-line headwinds from prior contract losses, but otherwise, a stable market environment.

Our focus is to continue to target at least EUR 1.5 billion in operating profit, consistent with our performance in 2025. As announced at our CMD on January 1, 2025, we have moved 4 businesses into a new unit called Portfolio Businesses. This includes our fixed wireless access, customer premises equipment, and site operations businesses, both from Fixed Networks, our microwave radio business from Mobile Networks, and the enterprise campus edge business from Cloud and Network Services. In 2025, these businesses generated net sales of EUR 850 million and an operating loss of EUR 97 million. In 2026, our target is to conclude a future direction for each of them. We currently assume a lower operating loss in 2026 versus 2025.

For Group Common, we expect costs of approximately EUR 150 million in 2026, compared with EUR 190 million in 2025. Overall, we see 2026 as a year where we will make meaningful progress towards our long-term targets. With that, let me turn over to Marco to walk you through the financials in more detail. Marco?

Marco Wirén, CFO, Nokia: Thank you, Justin, and hello from my side as well. As Justin mentioned, we delivered a fourth quarter, which was in line with our expectations and guidance. Net sales were EUR 6.1 billion. That’s up 3% on the prior year. Gross margin was 48.1%, an improvement of 90 basis points, driven by improvements in mobile networks and cloud and network services. Operating margin was 17.3%. And this is 90 basis points below the prior year, impacted primarily by increased investments in growth areas, including the Infinera acquisition. We generated EUR 226 million of free cash flow and ended the quarter with EUR 3.4 billion of net cash. Let’s turn to the business groups now, and starting with network infrastructure, where net sales grew 7%.

In quarter four, AI and cloud customers accounted for 16% of our net sales and 30% of Optical Networks. The book-to-bill for the overall segment was above 1, with strength in IP Networks and Optical Networks. Gross margin declined by eighty basis points to 44.6%. Operating margin was impacted by lower gross margin, along with the increased growth-related investments in R&D, and the costs associated with the acquisition of Infinera. Then let’s go to Cloud and Network Services, where we saw a decline by 4% in the quarter, and this was mainly due to a different phasing of revenue recognition this year. The business delivered 6% of net sales growth for the full year, 2025.

Gross margin increased 650 basis points, partly as a result of the reversal of a provision of EUR 37 million in the quarter. So even without this benefit, we would have seen an improvement in gross margin. Operating margin also increased by 740 basis points, with improvement in gross margin, supported by reduced operating expenses. And then Mobile Networks, net sales increased by 6%, and this was driven by growth in Middle East and Africa, Japan and Indonesia. Full year net sales were stable and consistent with our expectations. Gross margin was 40.1% due to more favorable mix and lower indirect costs. For the full year, gross margin was 37%.

Operating margin was 11.3% in the quarter, reflecting the higher gross margin, as well as the impact of lower operating expenses, benefiting from the ongoing cost saving program. Nokia Technologies, net sales declined by 17% in the quarter. Catch-up sales in this quarter were lower than the previous year, and we signed several new deals in quarter four, and our annual net sales run rate remains at approximately EUR 1.4 billion. Operating profit was impacted by a EUR 20 million impairment charge, and this is related to a prior asset purchase, which we deem to have minimal future value in the context of our product portfolio. Now, let’s look at the net sales by region. As you can see here, in North America, we saw strong growth in Network Infrastructure, while Cloud and Network Services and Mobile Networks declined.

In APAC, Japan and Indonesia grew, while we saw declines in India and Greater China. Excluding Nokia Technologies, Europe grew 4% with strength in network infrastructure. Middle East and Africa grew in both mobile networks and network infrastructure. Regarding cash, we ended the quarter with a net cash position of EUR 3.4 billion, and the free cash flow was positive EUR 226 million, and ending the year with a conversion rate of 72%, which is within our guided range of 50%-80%. In the quarter, cash increased as a result of the NVIDIA equity, equity investment, which was EUR 0.9 billion. We also completed the acquisition of the NSB shares, which impacted cash by EUR 0.5 billion.

This equates to 50% of the net cash in the joint venture, which we paid to the other joint venture equity owner, and was consistent with the liability we had already recorded on our balance sheet. We now fully own our operations in China, and that will give us a greater operational flexibility going forward to manage the business, just like Justin mentioned. Today, we have also published recast financials based on the new operating structure we have implemented at the start of the year. There are a couple of things that I wanted to highlight to help you understand these figures. You will see some differences in the net sales compared to our prior reporting, reflecting those units being moved into the new portfolio business segments, as Justin explained earlier.

In Group Common, the recast cost base for 2025 is EUR 180 million, as we have reallocated approximately EUR 193 million of the cost to the primary operating segments to better reflect the nature of these costs. As discussed at our Capital Markets Day, the operating segments are expected to drive efficiencies in the organizations to mitigate those costs over time that we have transferred to them. However, this reallocation have a short-term impact on the segment profitability in NI and MI. And finally, Justin already introduced our new 2026 financial outlook, but I just wanted to share some comments on additional modeling assumptions for this year. For Q1, historic seasonality would imply a 24% sequential decline in our net sales, excluding Nokia Technologies.

Considering the above normal seasonality we’ve seen in quarter four, 2025, we currently expect quarter one, 2026 net sales to decline somewhat more than normal seasonality would imply. We also assume the operating margin to be only slightly better than the prior year. Then for the full year of 2026, we expect comparable financial income and expenses of between positive EUR 50 million to EUR 150 million. And we assume a comparable income tax rate of around 26% and 27%, with a slight increase related to the regional mix of profit generation. Cash tax outflows are expected to be approximately EUR 500 million, and we are planning for CapEx of between EUR 900 million and EUR 1 billion as we invest in additional manufacturing capacity for Optical Networks, along with some real estate renewal projects.

And finally, we expect free cash flow conversion of between 55%-75%. With that, let me hand it back to David for Q&A.

David Mulholland, Head of Investor Relations, Nokia: Thank you, Marco, and Justin, for the presentations. Alicia, could you please give the instructions for the Q&A session? As a reminder, and as a courtesy to others in the queue, if you could please limit yourself to one question and a brief follow-up. Alicia, please go ahead with the instructions.

Conference Operator: We will now begin the question and answer session. If you are also viewing the webcast, please remember to mute the audio on your computer before asking your question, as there is a 30-second delay. To ask a question, you may press Star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press Star, then two. I will now hand the call back to Mr. Mulholland.

David Mulholland, Head of Investor Relations, Nokia: Thank you. We’ll take our first question today from Alex Duval from Goldman Sachs. Alex, please go ahead.

Various Analysts, Analyst, Goldman Sachs, Raymond James, Danske Bank, SEB, Morgan Stanley, Nordea, DNB Carnegie, BNP Paribas, Kepler Cheuvreux: Yes, good morning, everyone, and thank you for the question. Couple of quick questions. Firstly, on optical, it grew 20% in the quarter, but it seems you’re saying it will only grow 10%-12% in full year 2026. You referenced good order momentum as well as a solid percentage contribution from AI. So I wondered to what degree your guidance for the segment reflects conservatism. And secondly, as a brief follow-up, you’re guiding to a somewhat subseasonal trend into the first quarter for the group. I wondered to what degree that’s just normalization of a better than seasonal Q4, or whether there are other factors to take into account. Many thanks.

Justin Hotard, President and CEO, Nokia: Yeah, sure. So, Alex, good to hear from you, and let me answer your first question. You know, you’re right. We obviously grew 17% in Q4 on optical networking. And when you look at our optical networking business, we are being balanced on the 10%-12% across IP and optical networking, as you said. What I would also emphasize is we are still transitioning from a base that was, you know, still very telco-centric in 2025, so 70/30. And if you think about where we were, you know, before that, certainly before the Infinera acquisition, you know, significantly telco-centric. So we’re building off that base, and we’re excited about the order momentum. And then, of course, in parallel, we’re, you know, we’re working to scale production.

So, you know, I think as you and I have talked about, you know, we wanna be disciplined and, you know, in our, in our execution and our predictability, and, and so therefore, that’s why we’ve guided the way we have. But I continue to be very optimistic about this business and the long-term opportunity for some of the factors like, Scale-Across networking, the demand we’re seeing in overall, you know, overall fiber, some of the recent announcements in this area. So I think this is a place where absolutely, it’s a strategic priority for us. Absolutely, it’s a focus of capital allocation, and I believe it’s a market that will be a significant player in for, for many years ahead.

But balance on where we are today, given the starting point that we had, which is really only, you know, three quarters deep in terms of aggressively pursuing the AI and cloud segment.

Marco Wirén, CFO, Nokia: For the second question, if you look in the past as well, when we have had a very strong and higher than normal seasonality in quarter four, we usually see a larger decline as well. This is a little bit based on as well, how our telco customers are buying. This is more, I would say, visible in mobile network area and also the telco customer base, that when they have had a lot of purchases in quarter four, then usually the start of the year are a little bit slower, and that’s why we guide that we see a somewhat slower, somewhat lower than what we normally see.

David Mulholland, Head of Investor Relations, Nokia: Thank you, Alex. We’ll take our next question from Richard Kramer from Arete. Richard, please go ahead.

Various Analysts, Analyst, Goldman Sachs, Raymond James, Danske Bank, SEB, Morgan Stanley, Nordea, DNB Carnegie, BNP Paribas, Kepler Cheuvreux: Thanks very much. Justin, you’re pledging to grow CapEx to really record levels of EUR 900 million-EUR 1 billion. Do you have visibility in your order book of optical or IP orders? And or is leveraging this investment require additional unannounced wins with hyperscalers, and where are you in that sales cycle?

... and on my follow-up. Thanks.

Justin Hotard, President and CEO, Nokia: Yeah, and obviously, Richard, when you think about CapEx investments in manufacturing and in optical, particularly semiconductor manufacturing, as you’re well aware, I’m sure this is not something you invest in in a year and you start generating returns. So this is something where we’re looking at the long-term trends, and we’ve got a lot of confidence in the long-term market trend, supported by the near-term demand that we see.

Various Analysts, Analyst, Goldman Sachs, Raymond James, Danske Bank, SEB, Morgan Stanley, Nordea, DNB Carnegie, BNP Paribas, Kepler Cheuvreux: Okay. And, and for Marco, Marco, EUR 300 million of restructuring in 2025, and you’re guiding to another EUR 450 million in cash outflow. Can investors look forward into 2027, where you think these very heavy impacts on reported versus comparable earnings drop to immaterial revenues levels?

Marco Wirén, CFO, Nokia: Yeah. I think, as we announced already in 2023 October, that we have this cost-cutting program and efficiency program, and there we laid out also the different years until 2026, where we have this restructuring cost. And we guided by that time that we expect cost savings between EUR 800 million-EUR 1.2 billion. And we said that also the costs to generate these savings will be about the same, and also the cash flow is following that. And usually the cash flow, considering that we have more footprint in the European area, and that’s usually there’s delays on acting on those different cost actions that we are doing. And this is the reason why we see that 2026 is more heavier on the cash outflow side as well.

But we are following the plan, well, according to what we have laid out earlier as well.

David Mulholland, Head of Investor Relations, Nokia: Thanks, Richard. We’ll take our next question from Simon Leopold, from Raymond James. Simon, please go ahead.

Various Analysts, Analyst, Goldman Sachs, Raymond James, Danske Bank, SEB, Morgan Stanley, Nordea, DNB Carnegie, BNP Paribas, Kepler Cheuvreux: Thank you very much for taking the question. First thing I wanted to ask about is, particularly within the optical space, Scale-Across projects are a new variant for data center interconnect. Your peers have discussed these projects. Can you elaborate on Nokia’s position and how you envision this opportunity developing over the next few years? And then I’ve got a follow-up.

Justin Hotard, President and CEO, Nokia: Yeah, sure, Simon. Good to hear from you. Just a couple of things here. One, this is a space that we think is a part of the long-term trend on optics. I mean, if you look at the long-term demand on optics, think of the drive around, you know, Scale-Across right now as being one of the most significant near term. But obviously, then you have speeds, right? We’ve gone through the 400 and 800 gig transition very quickly. You know, we’re ramping on 800 gig, multiple pluggable wins, as we’ve talked about. You know, a lot of active customer conversations on that space, continued momentum in the market in terms of what we see.

But then we expect that, you know, that at 1.6 and 3.2 will come. And when you look at that Scale-Across is the tailwind for, you know, for both the technology transitions and the demand. And then, of course, over time, we see scale out increasingly being an opportunity for coherent optics. So that’s the, that’s the tailwind we see. The other thing I would just reference as you think about this is, you know, routing for us, in particular, Scale-Across is a tailwind for. So switching is much more about, you know, the data center racks, you know, the spine-leaf architecture. But when you think about routing, yeah, that’s another tailwind.

But key thing for us right now is spending the time doing the work, co-developing, co-innovating with our customers, making sure we’re, you know, we’re scaling production capacity to take advantage of this opportunity over the long term. And fundamentally, what I see is a much more mature and larger optical market driven by the AI, the AI infrastructure build-out, than we’ve seen in the past, and I think a much more maturing ecosystem as well. So there’s a lot of work to do for us as an ecosystem and as an industry, but I think a much bigger market, and that’s absolutely why we’re investing into it and why you see us leaning in on capital and, you know, both in terms of CapEx, but also R&D capital in this space.

David Mulholland, Head of Investor Relations, Nokia: Do you have a follow-up, Simon? Simon? Nope. I, I guess we’ll move on. We’ll take our next question from Sami Sarkamies, from Danske Bank. Sami, please go ahead.

Various Analysts, Analyst, Goldman Sachs, Raymond James, Danske Bank, SEB, Morgan Stanley, Nordea, DNB Carnegie, BNP Paribas, Kepler Cheuvreux: Thanks. You had 5% growth at the IP Networks in 2025. What needs to happen for this to step up? Are the bottlenecks related to product offering, customer logos, or design wins? And then, on timing, how much time do you think we need for improvements? Could it happen already this year as you have signed new customers during last year?

Justin Hotard, President and CEO, Nokia: Hey, Sami, thank you for that. Yeah, I would just say a couple of things here. First of all, we’ve talked about the fact that, you know, while we were well-positioned post the integration of Infinera to go after the optical networking platform, this is a space where we’ve been, you know, even a little further behind. So it’s been a big focus for me as we started, as I started, and obviously for David as he took over. And in fact, we just announced earlier this week that we have a new head of IP networking, Greg Dorai, and Vach Kompella, who, for those of you that have been around this industry, know Vach has been, is an industry legend, is retiring.

But part of that in bringing, you know, in Vach’s successor, was looking for someone that had deep data center experience. So the net of all of that is, as I said, at CMD and even, you know, even in some of our, our recent discussions, you know, with investors... This is a space where I think it’s going to take us a little bit of time to see the growth, but I’m really, really pleased with the design win we had in Q4 that I referenced. I’m pleased with the order backlog, but I think this business needs a little bit of time to ramp. Absolutely, you know, big tailwind as a part of the AI and data center build, and encouraging progress on mission-critical, where we play in select vertical markets that value, scale, security, and availability.

Obviously, things we bring from, you know, from our legacy in this space and, in telcos.

Speaker 5: Did you have a quick follow-up, Sami?

Various Analysts, Analyst, Goldman Sachs, Raymond James, Danske Bank, SEB, Morgan Stanley, Nordea, DNB Carnegie, BNP Paribas, Kepler Cheuvreux: Okay, I’m wondering, on the CapEx outlook, is this going to be like a multi-year undertaking, if you think about, higher CapEx, or just like one-year thing?

Justin Hotard, President and CEO, Nokia: Yeah, I think what we’ll continue to do, Sammy, on this, and I’ll let Marco comment, is we’re always going to show investment against the opportunity we see in the markets. I would look at this as in line with supporting the guidance we’ve given you, for now, and really in line on optical networking growth as, you know, as we see it. So obviously, that’s, you know... In the future, if we saw a different, you know, different growth potential in optical, we might give you a different view on CapEx. Marco, anything to add?

Marco Wirén, CFO, Nokia: No, I just, just building on what you said, that we definitely see opportunities, and that’s why we believe that it’s the right timing to invest more to capture those opportunities and secure also that we have manufacturing facilities and capacities that are needed to be able to deliver those demands that we see, that especially in optical side are increasing. But still, you know, we—it, it’s not so that these are huge, huge CapEx investments compared to other data center investments. So these are still quite reasonable investments, and we believe that there’s a very good return on those investments as well.

Speaker 5: Thanks, Sami. We’ll take our next question from Artem Beletski from SEB. Artem, please go ahead.

Various Analysts, Analyst, Goldman Sachs, Raymond James, Danske Bank, SEB, Morgan Stanley, Nordea, DNB Carnegie, BNP Paribas, Kepler Cheuvreux: Yes, hi, and thank you for taking my questions. So I would like to pick your thoughts regarding recent news coming out from Brussels. So what comes to this Cybersecurity Act or Digital Network Act. So how do you see those proposals impacting your business outlook, what comes to upcoming years?

Justin Hotard, President and CEO, Nokia: Yeah, look, I think on the Cybersecurity Act and the CSA and the Digital Network Act, DNA. Look, first of all, we’re pleased with this. I mean, this is, these are some of the things we’ve been calling for. Certainly, since I started, I’ve been very vocal about. I think the key thing on the Cybersecurity Act around trusted networks is seeing, you know, a few things. One is the clarity on replacement schedules. I also think it’s important, as we’ve said, that there’s support for, you know, for network operators, this kind of replacement is a big lift. Now, from a supplier perspective, this is well within our capacity.

If you think about the pace at which we’ve deployed networks in India or even in North America, in terms of upgrades, the network upgrades that are required in Europe are something well within our scope and capability, and manufacturing capacity. But it’s a complex, you know, technology project. So we think this is something that, you know, we recognize there’s complexity and support. And our view is the urgency is now. You know, that we need to continue to move, and certainly, you know, for our customers, they need to have clarity because the platforms we’re investing in today will be all the, you know, things that need to become 6G ready in the near future.

And if you think about what we’re talking about AI RAN as an example of that, that is a great example of where if you buy an AirScale platform today, it’s going to be upgradable to AI RAN as we launch that platform. And so that’s the kind of opportunity where making the investment decision now and having clarity now as an operator, as you run that project over a two or three-year period, we think is particularly important. And that’s why it requires support, because obviously, it’s not in anybody’s budgets to run an accelerated CapEx program, you know, among our customers. But it’s also not just radio. We tend to focus on that.

This is actually a really important opportunity for fiber networks and access networks, and just as important, because fixed access networks are critical for consumer, they’re critical for business. And then, of course, there’s the transport networks and all the underlying infrastructure. So this is a pretty significant step. We’re very, you know, we’re very pleased with it. I also think when you link it to DNA and you look at some of the things around spectrum harmonization, and you look at the opportunity in Europe, and this is something that I’ve been, you know, certainly vocal about, was, you know, was talking about last week in Davos, is this is an opportunity for Europe to reshape its long-term competitiveness. Its long-term competitiveness in technology, its long-term competitiveness in infrastructure and innovation, and ultimately, national security, sovereignty, and economic competitiveness.

So I think this is really, really important. And you can just look back at the internet super cycle to see where the winners in the internet super cycle came from as a result of significant infrastructure investment. When you think about Europe and AI, Europe is incredibly well-positioned. It’s well-positioned because you’ve got great industrial automation technologies, obviously manufacturing industries like automotive, and you’ve got great talent in Europe. And obviously, as a, you know, it being our largest talent base in the company, and we want to see more investment here, so we can continue to support the talent here, building technology for Europe, to support Europe and see a broader ecosystem develop.

Speaker 5: Did you have a quick follow-up, Artem?

Various Analysts, Analyst, Goldman Sachs, Raymond James, Danske Bank, SEB, Morgan Stanley, Nordea, DNB Carnegie, BNP Paribas, Kepler Cheuvreux: Yes, I would like to ask a follow-up on Optical Networks, and could you maybe comment whether you see some supply-related constraints when it comes to growth?

... I recall from CM days, so you have been commenting about order growth year to date of being more than 40%, and we do understand that the market fundamentals are really robust on that front.

Justin Hotard, President and CEO, Nokia: Yeah, look, it’s a great question, Artem. So first of all, you know, obviously, if you think about the broader ecosystem, the one thing I would remind everybody is the consistent thing in the AI data center build, the AI infrastructure build, has been there have been constraints. There’s been power constraints, there’s been connectivity constraints, there’s been computational silicon constraints. You know, there’s news of memory, you know, memory constraints right now. That one of the reasons I think when we look at this, we don’t see the same dynamics of the telco and internet bubble that you saw in the late nineties, is because this infrastructure build has been, you know, consistently constrained.

So what we see is we do see supply constraints, that’s normal, you know, with this kind of scale and build. And obviously, part of our investments is not just in our own capacity, but also in supporting the ecosystem and building its capability and capacity. And again, you know, if you look at optical, optical is not nearly running at the kinds of volumes that you’d see in the microelectronics industry or the traditional computational electronics industry, ’cause it doesn’t have the same consumer volume off the side of it that’s driven a lot of the, you know, the automation and capacity that’s existed. So all of these things need to be invested in.

And again, this is why we think that the market has great long-term potential, given the technology, but also a lot of ongoing investment that we and the entire ecosystem need to cultivate to, you know, to make sure we can deliver on the long-term success. It’s part of why we think we’re favorably positioned with our indium phosphide technology and manufacturing facility.

David Mulholland, Head of Investor Relations, Nokia: Thanks, Artem. We’ll take our next question from Daniel Djurberg, from Handelsbanken. Daniel, please go ahead.

Various Analysts, Analyst, Goldman Sachs, Raymond James, Danske Bank, SEB, Morgan Stanley, Nordea, DNB Carnegie, BNP Paribas, Kepler Cheuvreux: Thank you, operator, and hi, guys. Yeah, on the Mobile Networks was clearly better than expected, and some decrease primarily due to North America. And can you comment a bit on North America? Are we, you know, comparing apples with apples now with regards to AT&T loss, and also do you see any possibility inroads again with AT&T, with the 600 build, for example, with the FirstNet upgrades? Any comments would be grateful. Thanks.

Marco Wirén, CFO, Nokia: Yeah. Thank you, Daniel. Yeah, just like you, you alluded to as well, in twenty-six, we will see some headwinds from North America in the radio access network side, considering the customer losses that we or loss that we had, and that will have an impact. Otherwise, I would say that, in market-wise, we see quite stable market in the radio side. It, it’s where we see growth is AI and cloud in North America is extremely positive trends there right now when it comes to that segment.

Justin Hotard, President and CEO, Nokia: Let me take AT&T. You know, first of all, just to remind everybody, AT&T is a very, very large strategic and important customer for us. They’re a customer for us across core networks, fiber access. So if you think about NI and MI, they’re a very important customer for us and a very strategic one, given the investments that they’re making today in their networks. We’ve talked about a little bit of that in the past as well. Look, from my standpoint, you know, as I think about customer opportunities and market opportunities, we wanna pursue every piece of profitable market share that we can. And you know, if we’re honored to be a part of their network in the future, we’ll absolutely take that opportunity.

Right now, our focus is on delivering on our commitments to them and to all of our customers. As we said, you know, as we said in the restructuring, as you heard from Raghav at CMD, becoming an easier company to deal with from a customer perspective, particularly for our telcos, where we need to do more to be working with them around collaboration, co-innovation, and making sure that, you know, we help them deliver the simplification and the operating leverage they need in their networks to deliver on their strategies.

David Mulholland, Head of Investor Relations, Nokia: Thanks, Daniel. Did you have a thought?

Various Analysts, Analyst, Goldman Sachs, Raymond James, Danske Bank, SEB, Morgan Stanley, Nordea, DNB Carnegie, BNP Paribas, Kepler Cheuvreux: Yeah. Perhaps just a short one on the book-to-bill on Optical and IP Networks being positive still. Can you give some more comments on those on a separate note, i.e., comparing them, the relative magnitude or something?

Justin Hotard, President and CEO, Nokia: Each one is very good. Each one is healthy on the book-to-bill. If you split-

Various Analysts, Analyst, Goldman Sachs, Raymond James, Danske Bank, SEB, Morgan Stanley, Nordea, DNB Carnegie, BNP Paribas, Kepler Cheuvreux: Perfect.

Justin Hotard, President and CEO, Nokia: If you put them together, they’re good. If you split them, they’re good. We’re not blending.

Various Analysts, Analyst, Goldman Sachs, Raymond James, Danske Bank, SEB, Morgan Stanley, Nordea, DNB Carnegie, BNP Paribas, Kepler Cheuvreux: Perfect. Thanks.

David Mulholland, Head of Investor Relations, Nokia: Thanks, Daniel. We’ll take our next question from Terence Tsui, from Morgan Stanley. Terence, please go ahead.

Various Analysts, Analyst, Goldman Sachs, Raymond James, Danske Bank, SEB, Morgan Stanley, Nordea, DNB Carnegie, BNP Paribas, Kepler Cheuvreux: Thank you, David. Hi, Justin. Hi, Marco. I had a question around the operating guidance for the full year, please, of EUR 2 billion-EUR 2.5 billion. I would love it if you can provide some color around the EUR 500 million guidance range, please. You noted that 2025 was slightly ahead of the midpoint, so I’m just interested to learn about reasons to be a bit more optimistic and reasons to a bit cautious in your thinking. And then the quick follow-up relates to Q1 guide. What effects are you assuming there? Are you using the spot of 1.2? Thank you.

Justin Hotard, President and CEO, Nokia: Marko, you want to-

Marco Wirén, CFO, Nokia: Yeah. When it comes to the guidance, EUR 2 billion-EUR 2.5 billion, there’s a couple of things that we mentioned also at the Capital Markets Day, that we will have, some new product launches, during this year. And always when you have new product introductions, yeah, there will be an impact on gross margin as well, and, and that’s what we see. But of course, these product introductions are very important for our longer-term journey. And, and we see, very good market opportunities going forward. What comes to, the same opportunities, we, we also, just like we have said earlier, we invest in more in, in, in our, opportunities in AI and cloud, which will have an impact on the OpEx as well.

But we definitely see more opportunities going forward, definitely in the AI cloud market side. And that’s why it’s important that we prepare ourselves for those opportunities. But also, this is a transformational year. We are still doing a lot of changes and securing that we are very lean and mean and efficient machine, and capture those opportunities on the market.

Justin Hotard, President and CEO, Nokia: Yeah, maybe I’ll just add, Terence. I think it’s, when you think about the range, right? Obviously, we want, what we wanna be is disciplined around our guidance and our execution and much more predictable. And I’ve talked about this quite a bit. Marco has talked about it quite a bit. But that, you know, the recognition that we are also in two very different business cycles right now, you know, tremendous growth in AI and cloud, flat market in telco, emerging opportunity in defense and mission-critical enterprise. So recognizing that the businesses are in a different cycle, the markets are in a different cycle, that’s part of the balance of making sure that we’re giving you visibility. And obviously, you know, should we see something that changes our visibility, we’ll update it.

But we wanna give you as much visibility as possible and make sure that when we lay out targets, we’re consistent, we’re predictable, and much like we’ve done for two quarters, we get into a more, you know, consistent habit of that. And I just remind everybody that that hasn’t been our history, but it’s a big part of where I would like to see us go as we go after these growth opportunities, to make sure that we give you the visibility, and we go do what we say we’re gonna do.

Marco Wirén, CFO, Nokia: Yeah, currency rate, we have 1.18 in our estimate.

Justin Hotard, President and CEO, Nokia: Guidance.

Marco Wirén, CFO, Nokia: - and this is based on what we see right now. If there’s any changes in the currency, we will update as well. But remember that we have about at least half of the US revenues, for example, of US flows are hedged for the full year. So if you just look a little bit the sensitivity, before hedging a 2-cent move on the USD versus euro, would imply an operating profit of EUR 50 million change. But as I said, about half of that is hedged.

David Mulholland, Head of Investor Relations, Nokia: Thanks, Terence. We’ll take our next question from Felix Henriksson from Nordea. Felix, please go ahead.

Various Analysts, Analyst, Goldman Sachs, Raymond James, Danske Bank, SEB, Morgan Stanley, Nordea, DNB Carnegie, BNP Paribas, Kepler Cheuvreux: Yeah, thanks, David. Partly relating to the previous question on supply shortages. Are you sort of expecting to encounter any headwinds from these rising memory prices on your gross margin? And can you just, you know, provide some color on your cost exposure to this trend? Thanks.

Justin Hotard, President and CEO, Nokia: Yeah, I would just say overall, when you think about our bill of materials at a macro level across the company, this is not a huge part of our bill of materials. It’s an important, you know, it’s a portion, but it’s not a material portion. Second, in terms of supply and, you know, commitments, I think our focus right now is on making sure we, you know, we continue to secure the supply based on the commitments we have, and we do have... This is a place where we have long-term agreements. And then, of course, I think, you know, I think as you’ve heard, you know, in the industry, I think we expect this to be passed through to pricing.

So, from our perspective, this is a market effect. It’s very consistent across the market, and so, you know, we’ll address that. But overall, this isn’t, you know, certainly, if you looked at, you know, looked at our business overall, you’d say this is not a material part of our, of our revenue, but an important one that we manage.

David Mulholland, Head of Investor Relations, Nokia: Did you have a quick follow-up, Felix?

Various Analysts, Analyst, Goldman Sachs, Raymond James, Danske Bank, SEB, Morgan Stanley, Nordea, DNB Carnegie, BNP Paribas, Kepler Cheuvreux: Yeah, just quickly on your balance sheet, the net cash. I think the end of year net cash implies around 17% of last twelve-month net sales, which is slightly above the 10%-15% range that you used to have historically. Are you sort of, you know, happy with those levers, or do you see anything that you would want to do with that setup?

Marco Wirén, CFO, Nokia: Yeah, thank you. When it comes to the capital allocation framework is, is very clear for us. And, and whenever we, we see that we can invest in more in, in R&D, internally, so that’s always our priority number one. And just like we alluded earlier as well, that, that we see opportunities in, in, especially in AI and cloud customer segment, so we are investing more there. The second priority we have is, seeing that how can we strengthen, our, deliveries and our opportunities to capture those, market trends through M&A? And, and the third one is the dividend. So we, we aim for recurring and stable and over, over time, growing dividends. And then the fourth is that if we deem to have excess cash, then we can consider share buybacks.

So this framework is something we follow, and if there’s any news, we will inform you as well.

David Mulholland, Head of Investor Relations, Nokia: Thanks, Felix. We’ll take our next question from Emil Immonen from DNB Carnegie. Emil, please go ahead.

Various Analysts, Analyst, Goldman Sachs, Raymond James, Danske Bank, SEB, Morgan Stanley, Nordea, DNB Carnegie, BNP Paribas, Kepler Cheuvreux: Hi, Marco, and hi, Justin. Thanks for taking my questions. I just had a question on the investment in the CapEx. It’s quite a big step up, and I’m just wondering if, if it’s all about increasing your capacity, how much would you say that of your capacity is already utilized? So are, are you working at full capacity, or how should we think about kind of ramping up production and how you plan for that in overall?

Justin Hotard, President and CEO, Nokia: Sure. Hey, Emil, thanks for, thanks for the question. So if you think about, you know, what we’ve shared so far, we have an existing fab in California, where we’ve been investing in bringing a new fab online. This is something Infinera had started before we acquired them, and we’re continuing to invest. And this was also the place where we got partial funding in the CHIPS Act from the U.S. government. That indium phosphide fab is the one, the next one, is the one we expect to come online later this year. What I would say is that, you know, we’re, we’re certainly, you know, well on track to consume capacity in the existing one, and we, we absolutely need the, the new fab to come online to support the demand that we’re seeing and to meet our, our forecast.

So, our longer term forecasts, because obviously, as it comes on later this year, it won’t contribute as much to production this year. This is a, you know, this is also critical for us because at the core of our, of our capability and our differentiation is our photonic integrated circuit. It’s one of the key elements of the components of these photonic systems, and it’s a place where we believe we have, differentiation in the, in the product itself. So what we can do, and what’s a little bit different than when you think about a traditional, semiconductor fab or the, the, the higher volume si-- silicon fabs, you know, you might consider in computational silicon or memory or others, is that our capital investment size tends to be much smaller to add additional capacity.

And that’s really just the nature of optical technology and also the nature of indium phosphide. So hopefully that gives you a couple dimensions to think about, but I would think about the investments we’re making really in that new fab supporting 2027 demand, or starting to ramp during 2027, as it’ll—we’ll have some production this year, but mostly in 2027. And then think about the ability to add capacity in that fab or in others as being much smaller chunks. So what I know... ’Cause I realize, well, first of all, while this CapEx is significant for us, at an overall level, it’s still pretty modest in terms of our CapEx, 5% overall for the company.

Secondarily, what I would say is, when you think about this CapEx in terms of the broader semi industry, it’s really nominal in terms of the overall spend and the size, the size of investments that, you know, some of the some of our partners in memory and computational silicon make.

David Mulholland, Head of Investor Relations, Nokia: Did you have a quick follow-up, Emil?

Various Analysts, Analyst, Goldman Sachs, Raymond James, Danske Bank, SEB, Morgan Stanley, Nordea, DNB Carnegie, BNP Paribas, Kepler Cheuvreux: Yeah, maybe, maybe to follow up on how aggressive do you feel you are? So is this, it’s still a nominal amount, yeah, but would you say that you’re aggressive, or is this kind of you’re only investing for the kind of 100% of demand you’re seeing right now, and you’re not wanting to over-invest at this point?

Justin Hotard, President and CEO, Nokia: Yeah, I think this market is moving, Emil, so quickly that we’re. You know, this is a conversation that is ongoing in terms of where we see the long-term market and where we’re investing. And obviously, the other thing here is, you know, right now, if you think about this market, we’re vertically integrated, others are vertically integrated, some are not. You know, you can kind of look at two extremes. Computational silicon is obviously not a vertically integrated game. TSMC, Intel, Global Foundries are largely the leaders in that. So you’ve got, you know, you’ve got a clear segmentation in the value chain. Memory is vertically integrated. So that’s the other strategic question we’ll continue to think about as we go forward. But right now, we see tremendous value in that vertical integration.

The choice that we’re making is to make sure that we have sufficient capacity to meet the demand, recognizing that we’re in a very fast-moving market. Scale-Across is an emerging opportunity, as I touched on earlier, and we also believe that over time, as speeds continue to ramp within the data center, there’ll be more opportunity for coherent optics within the data center.

David Mulholland, Head of Investor Relations, Nokia: Thanks, Emil. We’ll take our next question from Jakob Bluestone from BNP Paribas. Jakob, please go ahead.

Various Analysts, Analyst, Goldman Sachs, Raymond James, Danske Bank, SEB, Morgan Stanley, Nordea, DNB Carnegie, BNP Paribas, Kepler Cheuvreux: Thanks, David. Just a quick one. Can you maybe just give us an update on the H1 versus H2 sort of margin phasing that you flagged at the, the CMD? I don’t know if you can maybe quantify, you know, how big we should think about that, or is it just kind of the normal seasonality of the business, given it all tends to be a bit Q4-weighted anyway?

Marco Wirén, CFO, Nokia: Yeah. Thank you. Yeah, especially as we said, that this is visible in the Network Infrastructure side, considering that we launched new products in the first half, and that’s why we see this margin impact. We haven’t guided exactly per quarter, but of course, we see that the second half we should see improvement in the margins in this field as well. But it’s just that it takes some time before we come over this ramp-up phase. And second half is that why giving a little bit better margin profile than first half.

David Mulholland, Head of Investor Relations, Nokia: Thanks, Jakob. Did you have a quick follow-up?

Various Analysts, Analyst, Goldman Sachs, Raymond James, Danske Bank, SEB, Morgan Stanley, Nordea, DNB Carnegie, BNP Paribas, Kepler Cheuvreux: ... Yeah, just a quick one, just on the memory pricing comments. You mentioned that you have long-term contracts. I mean, given it looks like you probably have elevated pricing for at least beyond this year, can you maybe just give us a sense? Are those contracts multi-year?

Justin Hotard, President and CEO, Nokia: Yeah, I mean, I would think of these as multi-year contracts, and obviously, you know, obviously, that the supply agreements are multi-year, and then pricing varies depending on the contract term.

David Mulholland, Head of Investor Relations, Nokia: Thanks, Jakob. We’ll take our next question from Sébastien Sztabowicz from Kepler Cheuvreux. Sébastien, please go ahead.

Various Analysts, Analyst, Goldman Sachs, Raymond James, Danske Bank, SEB, Morgan Stanley, Nordea, DNB Carnegie, BNP Paribas, Kepler Cheuvreux: Yeah, hello, everyone, and thank you for taking my question. On mobile infrastructure, you don’t provide any guidance and until before sales, maybe given a more limited visibility. The RAN market is now stabilizing. Do you see any specific, downside or upside to your market share in mobile in 2026 beyond, the known contract loss at AT&T? And the second one is on the cost savings. Where have you finally ended 2025 in terms of cost savings, and what do you expect for 2026? Do you plan to accelerate a little bit further the cost-cutting actions beyond 2026, or you will be more on the normal, OpEx run rate going forward? Thank you.

Marco Wirén, CFO, Nokia: I can, I can start, when it comes to mobile markets, as we said earlier, we see that, the market is quite stable, in 2026. And, there’s some regional variations here. We can see that, that we, we could expect some recovery in India. And, and then there’s some, some other pressures in, in, like, LatAm and, and other areas. Of course, our aim, as we had guided in, in all the recent Capital Markets Days, that in the Mobile Infrastructure side, our aim is that we will, improve the profitability, so we guide, gross margin and operating profit levels. So gross margin, we have said that we aim to 48%-50% gross margins, and we’ve said that we will grow from the EUR 1.5 billion levels going forward towards 2028.

And, of course, our ambition is that whenever there’s opportunities to gain market share, we will capture those opportunities, in the mobile side as well. When it comes to cost savings, I don’t know if-

Justin Hotard, President and CEO, Nokia: I would just, I would just add two things. I think, one, you know, one, obviously there’s some, some mix, as you said. The other thing for us, as we talked about, is we’re not chasing revenue for revenue’s sake. So I think what you, what I would think about is, the reason we gave you the guides on gross margin and profit, is those are really the two things we’re focused on, on maximizing gross margin and profit. Recognizing there’s some inherent scale we need to maintain in the business, but working with those customers we value and delivering those services where they value our, our technology platforms and, and associated services. So, so those are the, those are the ways I would think about the dimension, the dimension of the approach that Marco’s talking about.

Marco Wirén, CFO, Nokia: Yeah.

Justin Hotard, President and CEO, Nokia: You wanna talk about cost reduction?

Marco Wirén, CFO, Nokia: Yeah, thanks. When it comes to cost reductions, we have the program now, which is running until end of 2026, and we believe that we’re gonna deliver according to those promises, what we have said earlier as well. And beyond that, we don’t have any cost-cutting programs. What we’ve said also is that what we do continuously is to secure that we are focused on the efficiency, operational leverage, and secure that we are doing things in the most efficient way, continuously. This is something that we are getting into everyone’s DNA, that this is the way of working in Nokia.

David Mulholland, Head of Investor Relations, Nokia: Thank you, all. And apologies to those still in the queue, but we’ve run out of time. This concludes today’s call. I’d like to remind you that during the call, we have made a number of forward-looking statements that involve risks and uncertainties. Actual results may therefore differ materially from the results we currently expect. Factors that could cause such differences can be both external, as well as internal operating factors. We have identified such risks in the Risk Factors section of our annual report on Form 20-F, which is available on our investor relations website. Thank you all for joining us.

Conference Operator: The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.