Nokia in major pivot from traditional telecom to AI, cloud infrastructure, data center networking and 6G
At its Capital Markets Day 2025 today, Nokia announced a new strategy to position itself to lead in the AI-driven transformation of networks and capture the value of the AI supercycle. Nokia also has new long-term financial targets, strategic KPIs for the business, an evolution of its operating model and changes to its Group Leadership Team. To execute on its new strategic direction, Nokia is simplifying its operational model into two primary operating segments of 1.] Network Infrastructure and 2.] Mobile Infrastructure.
These changes are intended to put Nokia on a stronger path to innovate, serve its customers and create shareholder value. The company now targets to grow its annual comparable operating profit to a range of EUR 2.7 to 3.2 billion by 2028.
The new strategy will focus on the following five strategic priorities:
- Accelerate growth in AI & Cloud
- Lead the next era of mobile connectivity with AI-native networks and 6G
- Grow by co-innovating with customers and partners
- Focus capital where Nokia can differentiate
- Unlock sustainable returns
Nokia will reorganize its business into two primary operating segments to better align to customer needs and accelerate innovation as AI increases demand for advanced connectivity. This reorganization will take effect as of 1 January 2026. “Nokia changed the world once by connecting people — and will again by connecting intelligence,” said Justin Hotard, President and CEO of Nokia. “As the trusted western provider of secure and advanced connectivity, our technology is powering the AI supercycle. From fixed to mobile infrastructure we are developing technology that accelerates value for our customers. I am proud of the work Team Nokia is doing to focus and lead this critical era in connectivity.”
The reorganization recognizes Network Infrastructure as a growth segment, positioned to capitalize on the rapid, global AI and data center build-out while continuing to innovate for its telecommunications customer base. The segment will continue to be led by David Heard and consists of three business units Optical Networks, IP Networks and Fixed Networks.
The new Mobile Infrastructure segment will bring together Nokia’s Core Networks portfolio, Radio Networks portfolio and Technology Standards, formerly Nokia Technologies. It will be positioned for core and radio network technology and services leadership to lead the industry to AI-native networks and 6G. The new segment brings together a portfolio whose value creation is founded on mobile communication technologies based on 3GPP standards with a strong cash flow position underpinned by IP licensing. It will be led by Nokia CEO Justin Hotard on an interim basis and will consist of three business units Core Software, Radio Networks and Technology Standards.
Nokia is announcing additional changes in its leadership team, effective January 1, 2026. Raghav Sahgal will take the position of Nokia’s Chief Customer Officer, and will continue in the Group Leadership Team, driving a seamless customer experience for Nokia’s customers. Patrik Hammarén will continue in the Group Leadership Team as President, Technology Standards, formerly Nokia Technologies, reflecting the significant value technology standards creates for Nokia. In addition, Tommi Uitto will step down from the Group Leadership Team, effective 31 December.
Nokia plans to move the following non-core business units into Portfolio Businesses. Nokia plans to determine the future of these units by the end of 2026, which may include selling them off.
- Fixed Wireless Access CPE (currently in Fixed Networks in Network Infrastructure)
- Site Implementation and Outside Plant (currently in Fixed Networks in Network Infrastructure)
- Enterprise Campus Edge (currently in Cloud and Network Services)
- Microwave Radio (currently in Mobile Networks)
Nokia Defense is being launched as an incubation unit to serve as the central go-to-market and R&D hub for Nokia’s defense portfolio. Building on the strong foundation of Nokia Federal Solutions in the US, the company sees further opportunities in the US, Finland and other allied countries to deliver defense-grade solutions based on Nokia’s core technologies in Network and Mobile infrastructure.
Nokia is introducing a series of strategic Key Performance Indicators (KPIs) which best illustrate the expected outcomes of Nokia’s strategy. These KPIs for the business are not part of the group level financial outlook.
- Net sales growth in Network Infrastructure: Nokia targets 6-8% net sales CAGR during 2025-2028. This includes a 10-12% target for the combined Optical Networks and IP Networks.
- Network Infrastructure operating margin: 13% to 17% by 2028
- Mobile Infrastructure gross margin: 48-50% by 2028
- Mobile Infrastructure operating profit: Grow from a base of EUR 1.5 billion
- Group Common and Other operating expenses: EUR 150 million operating expenses down from the current EUR 350 million run-rate by 2028.
- Free cash flow conversion: Nokia targets to deliver free cash flow conversion from comparable operating profit of between 65% and 75%.
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Comment and Analysis:
The restructure is Nokia’s biggest announcement since October’s news that Nvidia made a $1 billion investment in the the company to develop AI-RAN (Radio Access Network) products and 6G platforms.
Nokia has been making sizable strides into the data center networking, leveraging Hotard’s expertise at Intel where he headed their data center group:
- The Finland headquartered vendor became the primary networking partner for Nscale, the ambitious data center at the center of OpenAI’s Stargate buildout in Europe.
- Nokia also introduced a new family of high-performance 7220 IXR-H6 data center switches, capable of 102.4 Terabits per second throughput with 1.6 Terabit Ethernet interface speeds. These switches are designed to meet the demands of large-scale AI data centers (up to one million XPUs) and are compliant with Ultra Ethernet Consortium (UEC) specifications.
- The company has enhanced its Event-Driven Automation (EDA) platform with new AIOps (AI for IT Operations) features, including a natural language chatbot called “AskEDA” to aid network troubleshooting and automation, which can reduce downtime by up to 96%.
- Acquisition of optical networking equipment vendor Infinera Corp which specializes in data center interconnect.
- Nokia launched an “Autonomous Network Fabric” to accelerate network automation using a library of telco-trained AI models and integrated security.
- Nokia is using AI-powered solutions, such as its MantaRay Energy software and “extreme deep sleep mode” in 5G radios, to optimize energy consumption in mobile networks, aiming for “zero energy use at zero traffic.
The new product strategy, effective January 1, 2026, will center around two primary, simplified operating segments:
1. Network Infrastructure
- Product Focus: Optical Networks, IP Networks, and Fixed Networks.
- Strategic Goal: Accelerate growth in AI & Cloud and drive innovation in data center networking and high-capacity transport solutions. The company aims for 6-8% annual sales growth in this segment from 2025 to 2028.
- Key Initiative: A major $1 billion partnership with Nvidia to enhance network capabilities, highlighting the AI focus.
- Product Focus: Core Software, Radio Networks, and Technology Standards (formerly Nokia Technologies).
- Strategic Goal: Lead the industry toward “AI-native networks” and the development of 6G technology, building on existing and future 3GPP specs and ITU-R IMT 2030 recommendations (standards).
Comment: Since IMT 2030 (6G) RIT/SRITs standards won’t be completed till the end of 2030, there will be a long lead time to revenue and profitability in Nokia’s mobile infrastructure segment. Furthermore, its AI RAN efforts face substantial resistance from wireless telcos who would be the main customers of that niche technology.
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About Nokia:
Nokia is a global leader in connectivity for the AI era. With expertise across fixed, mobile, and transport networks, powered by the innovation of Nokia Bell Labs.
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References:
https://www.datacenterdynamics.com/en/news/nokia-cleans-house-in-full-ai-data-center-pivot/
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Implications – Nokia’s exit signals a broader telco failure to scale enterprise cellular; analysts warn it’s a “last wake-up call” as private 5G continues growth in spite of overhype.
In case there was any doubt, Nokia has jumped on the AI gravy train (which is really a mystery train, and quite possibly an LLM locomotive to la la land), and also unhitched some of its difficult old rail cars in the process. It seems at once entirely logical, and completely mad – and follows on the heels of Nvidia’s $1 billion investment in the firm, which appears (on paper) like a vehicle to combine its twin AI strategies around fibre infrastructure (for hyperscalers et al) and wireless infrastructure (for telcos). So what have we got? At its Capital Markets Day in New York (November 19), Nokia said it will split its business into two operating segments to align with the “AI supercycle”.
At the same time, it has put its private networks business, within its existing ‘enterprise campus edge’ division, on the chopping block, alongside a bunch of other non-priority items. It said it will make a decision on their futures in 2026 – presumably to give it time to find buyers for all of them. And really, Nokia’s broader strategy, to split the business into two main units, looks like a move to carve it all up, and sell it a piece at a time. There have been rumours for some time, of course – related to both the main business, and the private networks piece.
Nokia said its two new priority units, active from January 2026, will deliver ‘network infrastructure’ and ‘mobile infrastructure’, respectively. The first will comprise optical, internet protocol (IP), and fixed networks, and is presented as its “growth segment”; the second will combine its cellular core and radio network portfolios (plus ‘technology standards’, formerly Nokia Technologies), and drive its 6G ramp-up – presumably as a post-2030 ‘growth segment’, while it gambles on AI infrastructure in between times as telcos see out the last days of an underwhelming public-5G investment cycle. Seems fine, right? About in line with every other corporate strategy shift in recent times?
What is mad – bonkers, even – is what it is dumping over the side: including its ‘enterprise campus edge’ solutions (its private 5G unit; part of its soon-to-be-defunct ‘cloud and network services’ division); its fixed-wireless access hardware (part of its existing ‘network infrastructure’ unit); and its microwave radio solutions (currently part of ‘mobile networks’). Clearly, RCR (or maybe just me) has a line here, having written about telco adventures in the Industry 4.0 game for a decade at least. And RCR is following the same path editorially, of course; but there is grief and grievance at the bigger trend, and a whole bunch of head-shaking at Nokia’s move at the same time. And it is not just us.
Pablo Tomasi, principal analyst at Omdia, told RCR Wireless: “I was expecting a reduction of interest/investment in the industrial campus area, but this is very extreme. It is accelerating to ride the AI train. I assume it has decided it has no patience for a long-term transformative market such as private networks. The challenge it faced in mobile networks probably did not help as this indirectly put pressure on its previous strategic bets – such as campus – to showcase short-term gains. To me, its new strategy is a retrenchment into its safe space of fixed and mobile connectivity. For the private networks market, it is a tough blow because Nokia has been instrumental in driving it.”
Leo Gergs, principal analyst at ABI Research, reflected: “It is a consequence of wrong actions from the wider industry. It is frustrating to see. Nokia’s pivot to AI infrastructure, sidelining the enterprise edge, is symptomatic of a bigger telco failure: that this industry has fought turf wars – one technology versus another – instead of creating a unified connectivity layer that enterprises could trust… [And] ironically, AI was never part of the story, which backfired. Instead of using AI to make private networks simple and scalable, telcos waited for AI applications to magically appear. That was the mistake. This is not the end of enterprise cellular, but it is the last wake-up call.”
Its new non-essentials will be repurposed as ‘portfolio businesses’, pending a final decision on their “future direction” in 2026; and so they are in limbo. Nokia showed a slide at Capital Markets Day that re-calculated its 12-month 2024/25 run-rate if the new structure was already in place: the new divisions have delivered $7.8 billion (network infrastructure) and $11.6 billion (mobile infrastructure) in sales, respectively, on margins of 43% and 48% (and profit, somehow, of $0.8 billion and $1.5 billion). The rest have delivered a paltry $0.9 billion, at a loss of $0.1 billion. But wait; because the news suggests Nokia is also ready to quit a high-growth business, however niche, where it is king.
https://www.rcrwireless.com/20251120/private-5g/has-nokia-lost-its-mind
From Iain Morris of Light Reading:
From a sales perspective, the biggest component of Mobile Infrastructure is what Nokia currently refers to as the radio unit, which formed the bulk of the now-deceased mobile networks business group. In the last year, it has generated about €7.5 billion (US$8.7 billion) of Nokia’s sales, approximately 40% of company revenues in 2024. Added to that, with annual revenues of about €2.5 billion ($2.9 billion), are Nokia’s core network assets, formerly part of cloud and network services. But most of the profits will come from the third “standards” unit, or what was originally known as Nokia Technologies. A licensor of the company’s intellectual property, it made an operating profit of €1.1 billion ($1.3 billion) on revenues of €1.4 billion ($1.6 billion) in the last year.
The effect of the rejig will be to create a group with beefier margins, compared with the earlier mobile networks business. It would theoretically allow Nokia to fund radio activities with licensing profits, although this would obviously hurt those margins. The restructuring will also obscure the performance and profitability of the radio part. So far this year, mobile networks has not looked pretty, with an operating loss of €64 million ($74 million) on sales of €5.3 billion ($6.1 billion) for the first nine months. The market for 5G radio access network (RAN) products has been in decline, and Nokia has struggled to cover its costs after the loss of important contracts with AT&T and Verizon since 2020 in the lucrative US market.
Hotard’s turnaround strategy for radio is based heavily on Nokia’s recently announced AI-RAN partnership with Nvidia. For a 3% stake, the chips giant has invested $1 billion in the Finnish company, which is using those funds to develop future 5G and 6G products that will run on Nvidia’s graphics processing units (GPUs). That allows Nokia to cut research and development spending on custom silicon and reallocate funds to Nvidia-compatible software.
“Ultimately, what this means for us is we’re moving away from a legacy hardware model to one that is built much more around software,” said Hotard. “What may not be apparent is this also frees capital. We can shift investment into software and ultimately deliver differentiation and value where it matters – and this is the shift from proprietary to general-purpose hardware.”
Yet these AI-RAN products are not expected to be commercially available until 2027, at the earliest. Amid telco concern about the expense and energy efficiency of the hardware, they represent a big gamble by Hotard on the future of radio. “We believe that the GPU-based architecture provides the greatest opportunity not only to deliver the initial capability but to deliver long-term capital efficiency for these customers,” said Hotard in response to a Light Reading question. “Why? Because once they deploy a GPU, I then move into being able to enhance services without the need to upgrade the underlying hardware.”
What’s commonly misunderstood, he added, is that existing customers of Nokia’s AirScale baseband products will be able to install GPUs without replacing the whole unit. “That’s why it’s designed to fit into an AirScale solution and in fact fit into the 1 million units of installed base which we have with AirScale today,” said Hotard.
https://www.lightreading.com/ai-machine-learning/nokia-targets-1b-profit-boost-via-mobile-rejig-and-5-000-more-job-cuts