Nokia NYSE: NOK reported fourth-quarter and full-year 2025 results that management said were in line with expectations, citing disciplined execution and progress on strategic repositioning. The company posted fourth-quarter net sales of EUR 6.1 billion, up 3% year-over-year, with operating profit of EUR 1.0 billion and free cash flow of EUR 0.2 billion. For the full year, net sales were EUR 19.9 billion and operating profit totaled EUR 2.0 billion, “slightly above the midpoint” of guidance, according to President and CEO Justin Hotard. Free cash flow conversion for 2025 was 72%, consistent with the company’s guided range.
Network Infrastructure growth led by optical demand tied to AI and cloud
Hotard highlighted Network Infrastructure as a key driver in the quarter, with segment net sales growing 7% and Optical Networks growing 17%. He said order intake was solid across optical and IP networks, with a book-to-bill ratio above 1, supported by particularly strong demand from AI and cloud customers. For the full year 2025, Nokia delivered EUR 2.4 billion in orders from AI and cloud customers.
Nokia said optical networking is becoming increasingly critical to supporting an “AI super cycle,” and the company is investing to capture near-term demand while maintaining a longer-term view of the opportunity. Hotard noted that Nokia’s 800G ZR and ZR+ pluggable products are shipping, with initial units performing well in the field. He said the company has multiple design wins and is supplying into scaled deployments, with a focus on ramping production to meet demand.
In IP Networks, management pointed to progress in data center switching, including the launch of the 7220 IXR H6 switching platform powered by Broadcom’s TH6 and an “Agentic AI” solution for event-driven automation management, which Hotard said reduces network downtime by 96%. Nokia also secured a design win for its next-generation data center switching platform, which management characterized as an encouraging step, while noting that revenue is expected to ramp over time.
Fixed Networks stable as Nokia deprioritizes certain CPE products
In Fixed Networks, Hotard said performance was stable year-over-year in the fourth quarter. He reiterated that Nokia is deprioritizing certain customer premises equipment products where it lacks meaningful differentiation and does not want to dilute margins. Growth in the fiber OLT business (up 16% year-over-year in Q4) was offset by declines in the areas being de-emphasized, resulting in overall flat performance for the segment.
Mobile Infrastructure created; partnerships and contract activity highlighted
Nokia said it combined Core Software, Radio Networks, and Technology Standards into a new Mobile Infrastructure segment, a move announced at its Capital Markets Day. Hotard said the structure is designed to sharpen accountability, improve profitability, and position the business for long-term technology leadership.
Within Core Software, Nokia highlighted a 5G Core deal with Telia and a collaboration with Bharti Airtel on Nokia’s Network as Code API platform. Hotard said the platform now has more than 75 partners, including 43 telecom operators. In Radio Networks, management emphasized continued investment in 5G Advanced and ORAN, as well as longer-term work on 6G and “AI-native networks.” Nokia also announced a partnership with NVIDIA and said it remains on track to begin trials and proofs of concept on AI RAN later in 2026. Hotard cited a market share expansion deal with Telecom Italia and contract extensions with Telefonica Germany and SoftBank.
Technology Standards remained focused on patent monetization. Nokia said it signed several deals in Q4 and maintained a contracted net sales run rate of approximately EUR 1.4 billion.
Defense unit launched; China JV integration to drive synergies
At its Capital Markets Day, Nokia announced the creation of Nokia Defense, an incubation unit intended to serve as a central R&D hub and go-to-market organization for the company’s defense portfolio. Hotard said the priority is to deliver defense-grade solutions based on Nokia’s mobile and network infrastructure technologies for Finland and other NATO countries. The unit includes Nokia Federal Solutions in the U.S. and technology acquired from Phoenix Group in 2024. Management said customer feedback indicates growing demand for 4G and 5G technology in military environments for both national security and tactical applications.
Nokia also closed the transaction to take full ownership of its joint venture in China, Nokia Shanghai Bell, which management said will provide greater operational flexibility and allow alignment with Nokia’s global operating model. Hotard said the integration is expected to deliver approximately EUR 200 million of run-rate cost synergies, with integration costs of roughly EUR 350 million to EUR 400 million over 24 to 36 months.
Financial details, outlook, and key modeling assumptions
CFO Marco Wirén said fourth-quarter gross margin was 48.1%, up 90 basis points, driven by improvements in Mobile Networks and Cloud and Network Services. Operating margin was 17.3%, down 90 basis points year-over-year due primarily to increased investments in growth areas, including the acquisition of Infinera. Nokia generated EUR 226 million of free cash flow in Q4 and ended the quarter with EUR 3.4 billion of net cash.
Wirén said AI and cloud customers accounted for 16% of Network Infrastructure net sales in Q4 and 30% of Optical Networks. He noted Network Infrastructure gross margin declined 80 basis points to 44.6% and said operating margin was impacted by lower gross margin, increased R&D investments, and acquisition-related costs tied to Infinera. Cloud and Network Services net sales declined 4% in Q4 due mainly to revenue recognition timing, though the business delivered 6% net sales growth for full-year 2025. Nokia Technologies net sales fell 17% in Q4, which management attributed to lower catch-up sales versus the prior year; operating profit was impacted by a EUR 20 million impairment charge related to a prior asset purchase deemed to have minimal future value.
Looking to 2026, Nokia guided to operating profit of EUR 2.0 billion to EUR 2.5 billion. Management also provided several modeling assumptions, including:
- For Q1, historic seasonality implies a 24% sequential decline in net sales excluding Nokia Technologies, but Nokia expects Q1 2026 to decline “somewhat more than normal seasonality,” following above-normal seasonality in Q4 2025.
- Comparable financial income and expenses of positive EUR 50 million to EUR 150 million for 2026.
- A comparable tax rate around 26% to 27%, with cash tax outflows of approximately EUR 500 million.
- Capital expenditures of EUR 900 million to EUR 1.0 billion, driven by investment in additional Optical Networks manufacturing capacity and real estate renewal projects.
- Free cash flow conversion of 55% to 75% for 2026.
During Q&A, management said the higher CapEx reflects a long-term view of optical demand supported by near-term strength, and emphasized that optical manufacturing investments do not generate returns immediately. Hotard also acknowledged the presence of supply constraints across the broader AI infrastructure ecosystem and said Nokia is investing both in its own capacity and in supporting the ecosystem. Nokia discussed its indium phosphide manufacturing, noting a new fab is expected to come online later in 2026, with production ramping more meaningfully in 2027.
On capital allocation, management reiterated priorities of investing in internal R&D, strengthening opportunities through M&A, maintaining a recurring dividend, and considering share buybacks if there is excess cash.
About Nokia NYSE: NOK
Nokia Corporation, headquartered in Espoo, Finland, is a global telecommunications and technology company with roots dating back to 1865. Over its long history the company moved from forestry and cable operations into electronics and telecommunications, becoming widely known in the 1990s and 2000s for its mobile phones. In recent years Nokia refocused its business toward network infrastructure, software and technology licensing, and research and development, following the divestiture of its handset manufacturing business and the acquisition of Alcatel‑Lucent in 2016, which brought Bell Labs into its portfolio.
Today Nokia's core activities center on designing, building and supporting communications networks and related software.
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