Nokia Beats Revenue, Misses Earnings as AI Bet Costs Profits

Nokia reported Q4 2025 results that beat revenue expectations but underperformed on earnings and issued conservative guidance. The company’s revenue rose 2.4% year-over-year to $6.13 billion, while net income fell 33.1% to $544 million. Management outlined a 2026 operating profit target of €2–2.5 billion, below analyst expectations, amid strategic shifts toward AI and cloud infrastructure.

Revenue

Nokia’s total revenue increased by 2.4% to $6.13 billion in Q4 2025, driven by strong performance in its Networks business. The Networks segment contributed $5.75 billion, with Network Infrastructure leading at $2.41 billion, reflecting 19% year-over-year growth. Mobile Networks revenue stood at $2.50 billion, while Cloud and Network Services added $837 million. Nokia Technologies generated $384 million, and Group Common and Other segments totaled $6 million. Eliminations and unallocated items reduced the figure by $11 million, with the Nokia Group reporting $6.13 billion in total revenue.

Earnings/Net Income

Nokia’s EPS declined 33.3% to $0.10 in Q4 2025 from $0.15 in Q4 2024, while net income fell 33.1% to $544 million from $813 million. The earnings performance reflects margin compression amid strategic investments in AI and optical networking, underscoring the company’s focus on long-term growth over near-term profitability.

Price Action

The stock price of Nokia has edged down 0.79% during the latest trading day, has dropped 3.23% during the most recent full trading week, and has dropped 4.98% month-to-date.

Post-Earnings Price Action Review

The strategy of buying NOK when earnings beat and holding for 30 days delivered moderate returns but underperformed the benchmark. The strategy achieved a 38.52% return, while the benchmark returned 85.89%, resulting in an excess return of -47.38%. The Sharpe ratio was 0.21, indicating good risk-adjusted returns, but the maximum drawdown was 54.18%, highlighting the strategy's vulnerability during market downturns.

CEO Commentary

Justin Hotard, President, CEO & Interim President of Mobile Infrastructure, highlighted Nokia’s Q4 2025 performance, noting net sales of EUR 6.1 billion and operating profit of EUR 1 billion, driven by disciplined execution. He emphasized AI and cloud demand as growth drivers, with EUR 2.4 billion in orders for 2025, and optimism about optical networking’s role in the AI “super cycle.” Strategic priorities include scaling optical and IP networks, co-innovation (e.g., NVIDIA partnership), and restructuring Mobile Infrastructure for long-term leadership in 6G and AI-native networks. Hotard acknowledged challenges in Mobile Infrastructure, citing headwinds from prior contract losses but expressed confidence in maintaining EUR 1.5 billion+ operating profit. His tone was cautiously optimistic, balancing near-term execution with long-term bets on AI and defense technology.

Guidance

Nokia guided to 2026 operating profit of EUR 2 billion–2.5 billion, with Network Infrastructure growth targeting 6%–8% CAGR (10%–12% for combined optical and IP networks). The company expects EUR 900 million–1 billion in CapEx for optical manufacturing expansion, free cash flow conversion of 65%–75%, and tax outflows of EUR 500 million. Mobile Infrastructure aims for gross margin stability and EUR 1.5 billion+ operating profit, while Portfolio Businesses seek reduced operating losses. Currency assumptions include USD 1.18, with half of U.S. revenue hedged.

Additional News

Nokia announced a strategic partnership with NVIDIA, including a $1 billion investment by NVIDIA in newly issued shares, to co-develop AI-driven networking solutions. The company also reorganized its operations into two segments—Mobile Infrastructure and Network Infrastructure—to streamline its focus on AI and cloud growth. Additionally, Nokia’s board proposed a €0.14 per share dividend for 2025, reflecting confidence in its financial stability despite the earnings miss.