Nokia Realigns for the AI Supercycle: A Bold Bet on Network Intelligence
The next decade won’t be about connecting people, but connecting intelligence. That’s the core message from Nokia’s Capital Markets Day 2025, where the telecom giant unveiled a sweeping strategy to capitalize on the burgeoning AI supercycle. Nokia isn’t just adapting; it’s betting its future on becoming the leading provider of the secure, high-performance networks that will underpin the AI revolution – and a significant restructuring signals just how serious they are.
The Two-Speed Network: A New Operating Model
Effective January 1, 2026, Nokia will operate with two primary segments: Network Infrastructure and Mobile Infrastructure. This isn’t merely a cosmetic change. It’s a fundamental shift designed to accelerate innovation and better align with customer needs in an era of exponentially increasing demand for advanced connectivity. The move recognizes that different parts of the network are experiencing different growth dynamics. Network Infrastructure, encompassing Optical, IP, and Fixed Networks, is poised for rapid expansion fueled by the AI-driven build-out of data centers and the continued need for robust telecommunications infrastructure.
Meanwhile, the newly formed Mobile Infrastructure segment will consolidate Nokia’s Core Networks, Radio Networks, and Technology Standards. This segment will focus on delivering AI-native networks and paving the way for 6G, leveraging Nokia’s strong intellectual property portfolio and cash flow from IP licensing. This consolidation aims to create a more focused and agile unit capable of leading the industry in mobile technology innovation.
Financial Targets: A €3.2 Billion Ambition
Underpinning this strategic realignment is an ambitious financial target: Nokia aims to grow its annual comparable operating profit to a range of EUR 2.7 to 3.2 billion by 2028, a significant increase from the EUR 2.0 billion generated in the past year. This isn’t just about top-line growth; it’s about improving efficiency and focusing capital on areas where Nokia can truly differentiate itself. Key performance indicators (KPIs) will track progress, including 6-8% net sales CAGR for Network Infrastructure, a 13-17% operating margin for the same segment, and a 48-50% gross margin for Mobile Infrastructure. A reduction in Group Common and Other operating expenses to EUR 150 million by 2028 further demonstrates a commitment to streamlining operations.
Beyond Core Networks: The Rise of Nokia Defense
A less-publicized, but potentially significant, move is the launch of Nokia Defense as an incubation unit. Building on the foundation of Nokia Federal Solutions in the US, this unit will focus on delivering defense-grade solutions based on Nokia’s core network and mobile infrastructure technologies. This signals a strategic diversification into a sector with growing demand for secure and reliable communication systems, particularly in allied countries. The timing is noteworthy, given the increasing geopolitical instability and the need for robust national security infrastructure.
Portfolio Pruning: Focusing on Core Strengths
Nokia isn’t just adding new areas of focus; it’s also shedding non-core businesses. Several units – Fixed Wireless Access CPE, Site Implementation and Outside Plant, Enterprise Campus Edge, and Microwave Radio – are being moved into a dedicated “Portfolio Businesses” segment while the company assesses their future. This demonstrates a disciplined approach to capital allocation, prioritizing investments in areas with the highest growth potential and strategic alignment. While these units generated approximately EUR 0.9 billion in net sales, they operated at a loss of EUR 0.1 billion, highlighting the need for a strategic reassessment.
The AI-Driven Network: A Deeper Dive
The success of Nokia’s strategy hinges on its ability to deliver networks that are not just faster and more reliable, but also intelligent. This means embedding AI and machine learning capabilities throughout the network infrastructure, from the core to the edge. AI will be crucial for automating network operations, optimizing performance, and enhancing security. Nokia is positioning itself to be a key enabler of this transformation, providing the tools and technologies that will allow operators to unlock the full potential of AI. A recent report by Ericsson forecasts that 5G network coverage will reach 95% of the world’s population by 2028, creating a massive opportunity for companies like Nokia to provide the underlying infrastructure.
Implications for the Industry and Beyond
Nokia’s strategic shift has broader implications for the telecommunications industry. It signals a clear recognition that the future of networking is inextricably linked to AI. Other players in the industry will likely follow suit, investing heavily in AI-driven network technologies. This will lead to a wave of innovation, with new applications and services emerging that were previously unimaginable. From autonomous vehicles to smart cities to remote healthcare, the possibilities are endless. The competition will be fierce, but Nokia believes its focus on security, innovation, and a streamlined operating model will give it a competitive edge.
What are your predictions for the role of AI in shaping the future of network infrastructure? Share your thoughts in the comments below!
