Nokia Oyj NYSE:NOK, a Finnish mobile network equipment maker, reported a stronger-than-expected second quarter as growing demand from artificial intelligence data centers supported its expansion beyond traditional telecommunications infrastructure. Adjusted operating income rose to 434 million, or $496 million, exceeding the analyst consensus of approximately 372.3 million compiled by Bloomberg. Quarterly net sales increased 8% year over year to 4.8 billion, in line with forecasts. Nokia shares climbed as much as 6.9% to 9.80 when trading opened in Helsinki before giving back part of the gain, taking the stock's advance this year to more than 70%. Chief Executive Justin Hotard is seeking to capture the AI data-center investment cycle by restructuring Nokia's operations, selling underperforming businesses and targeting double-digit operating income growth in the coming years.
The rapid construction of AI data centers has also created supply constraints and higher prices for important components, particularly memory chips. Ericsson AB, a rival telecommunications equipment supplier, has warned that rising costs associated with fulfilling customer orders could weigh on margins. Hotard said memory is currently the most constrained component and indicated that supply shortages may continue through 2027. Nokia is negotiating longer-term contracts to strengthen its access to memory, while developing equipment that relies less heavily on scarce parts and planning to pass higher input costs on to customers. Investors may view these measures as important to protecting profitability as data-center demand grows, although continued component inflation could remain a pressure point.
Nokia has agreed to acquire a chip fabrication campus in Chandler, Arizona, from NXP Semiconductors NV NASDAQ:NXPI, a Dutch semiconductor company, subject to regulatory approval. The company plans to begin leasing part of the site's capacity in early 2027 before converting the facility to manufacture optical components for chips used in AI data centers, which could help reduce bottlenecks affecting optical networking equipment. Nokia is also cutting jobs in Europe as part of a restructuring program intended to deliver as much as 1.2 billion in cost savings this year, with the European measures expected to result in 200 million of restructuring charges. At the same time, Nokia is working with Nvidia Corp. NASDAQ:NVDA, a chipmaker that invested $1 billion in the Finnish company last year, on technology designed to as much as double the volume of data wireless providers can transmit over existing airwaves. The platforms are scheduled for release next year, and Hotard is seeking to make software subscriptions the primary driver of Nokia's radio-access network business.