Nokia beats Q2 profit estimates, raises outlook on AI demand
Nokia exceeded second-quarter profit expectations and lifted its full-year guidance, signaling that its pivot to AI data centre infrastructure is offsetting broader telecom weakness and rising chip costs.
Nokia posted a comparable operating profit of €434 million for the second quarter, an 18% year-on-year increase that comfortably surpassed analyst estimates of €382 million. Comparable net sales reached €4.82 billion, also topping market expectations. Buoyed by the strong performance, the company raised its full-year comparable operating profit guidance to a range of €2.1 billion to €2.6 billion, up from a previous forecast of €2.0 billion to €2.5 billion.
The results validate a strategic shift driven by Chief Executive Justin Hotard, who joined from Intel's Data Center & AI Group last year. Nokia has been aggressively expanding beyond its traditional telecom infrastructure base to supply fibre-optic networking equipment to hyperscale cloud providers building AI data centres. A core component of this strategy is a billion-dollar partnership with chipmaker Nvidia.
This AI-focused pivot is proving crucial as the broader telecom sector experiences mixed capital spending. Enterprise and cloud customers continue to invest heavily in AI infrastructure, effectively shielding Nokia from the slowdown affecting standard network deployments.
However, the surge in AI infrastructure is not without costs. The entire telecom equipment sector is grappling with elevated memory chip prices as AI demand tightens global supply. Swedish rival Ericsson recently warned that these soaring chip costs could pressure profit margins, sparking broader investor anxiety about the industry's cost outlook.
Nokia's upgraded guidance provides a notable counterpoint to Ericsson's caution. Rather than retreating, Nokia indicated that customer demand remains resilient. The company noted that current supply constraints have actually encouraged major technology customers to make longer-term purchasing commitments, which helps mitigate the immediate impact of higher component costs.
For market participants, the quarter demonstrates that Nokia's targeted push into AI data centres is generating tangible financial returns. The raised forecast suggests management is confident that cloud and AI investments will continue to drive earnings growth, even as the industry navigates a challenging component supply environment.
