AI data center business becomes a new growth engine, Nokia Oyj Sponsored ADR(NOK.US) Q2 profits greatly exceed expectations.

Nokia Oyj Sponsored ADR (NOK.US) significantly exceeded market expectations in the second quarter, with the Finnish communication equipment manufacturer focusing on expanding its data center hardware business, driving sales growth. Nokia Oyj Sponsored ADR announced on Thursday that net sales in the second quarter increased by 8% year-on-year to 4.8 billion euros, meeting analyst expectations; adjusted operating profit increased by 18% year-on-year to 434 million euros (approximately 496 million US dollars), higher than the analyst average expectation of 372.3 million euros. Data shows that, based on fixed exchange rates, sales in the network infrastructure division covering AI data center connectivity business increased by 12% year-on-year to 2.037 billion euros in the second quarter. Sales in the optical network business increased by 20%, and sales in the IP network business increased by 16%. Net sales for AI and cloud customers grew by 105%. Sales in the mobile infrastructure division, which covers traditional mobile device business, increased by 7% year-on-year to 2.68 billion euros. AI Infrastructure Boom: Nokia Oyj Sponsored ADR continues to advance its strategic transformation Nokia Oyj Sponsored ADR CEO Pekka Lundmark is pushing for business diversification to reduce reliance on traditional telecommunications network equipment business and tap into the opportunities presented by the artificial intelligence (AI) trend in data center construction. He announced this transformation plan last year, along with a plan to restructure the organization, divest from loss-making business units, and committed to achieving double-digit growth in operating profit in the coming years. The company's stock price has risen by 66% so far this year. Lundmark stated in the second-quarter financial report, "In the second quarter, our AI and cloud business orders amounted to 2.8 billion euros, with sales more than doubling year-on-year. The company's growth momentum is fully unleashed, with long-term orders secured for optical networks and IP network businesses. We expect that around half of these orders will convert into actual revenue in the next 12 months. Market demand remains strong, but supply chain shortages remain a key constraint for the entire industry, prompting customers to increase long-term orders." While the AI trend opens up new growth opportunities, the surge in the construction of new data centers and expansion of computational resources by global enterprises has led to shortages of core components such as storage chips, continuous increase in raw material costs. Competitor Telefonaktiebolaget LM Ericsson Sponsored ADR Class B warned last week that rising costs would harm profit margins, making it more expensive to fulfill new customer orders. Nokia Oyj Sponsored ADR has stated that it has agreed to acquire a chip manufacturing facility in Chandler, Arizona, from NXP Semiconductors NV in the Netherlands, but the transaction is subject to regulatory approval. Starting in early 2027, Nokia Oyj Sponsored ADR will lease part of the capacity, and will subsequently reconfigure the production lines to specifically focus on producing AI data center chips and optical communication components. In recent years, the Finnish company has continued to expand its manufacturing capacity in the United States, focusing on high-value-added telecommunications components and semiconductor products. This strategy has helped the company secure federal funding support under the U.S. "chips act" and enhance the resilience of its supply chain. As part of a large-scale cost-saving restructuring plan, Nokia Oyj Sponsored ADR is laying off employees in Europe to save up to 1.2 billion euros this year. The company disclosed that the European layoffs will result in a restructuring cost of 200 million euros. Nokia Oyj Sponsored ADR is also using AI technology to enhance equipment efficiency. Last week, the company jointly released a new technology with chip giant NVIDIA Corporation that is expected to double the data transmission capacity on the same wireless radio band for wireless operators. The platform is scheduled to be launched next year and is compatible with existing 4G and 5G networks; when the next generation 6G standard is established, the equipment can be adapted to the new standard through software upgrades. This means that cost-sensitive telecommunications companies can upgrade their networks virtually without the need to replace expensive hardware. Lundmark stated that he hopes the software subscription model will become the main driver for the company's wireless access network business in the future. Last year, NVIDIA Corporation invested $1 billion in Nokia Oyj Sponsored ADR.