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.”
- 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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