20-F: Nokia Navigates AI Supercycle with Strategic Reorganization

Nokia reports a 3% increase in net sales to EUR 19.89 billion in 2025, driven by the Infinera acquisition, despite a 55% drop in operating profit to EUR 885 million.

Summary

• Net sales increased by 3% to EUR 19,889 million in 2025, up from EUR 19,220 million in 2024.
• Operating profit decreased by 55% to EUR 885 million in 2025, down from EUR 1,970 million in 2024.
• Profit for the year decreased by 49% to EUR 660 million in 2025, compared to EUR 1,284 million in 2024.
• Diluted earnings per share from continuing operations were EUR 0.11 in 2025, a significant decrease from EUR 0.31 in 2024.
• Free cash flow decreased to EUR 1,465 million in 2025 from EUR 2,021 million in 2024.
• The acquisition of Infinera contributed EUR 1,258 million to net sales and EUR 1,273 million to Network Infrastructure net sales.
• Nokia announced a new strategy at its Capital Markets Day in November 2025, focusing on leading the AI-driven transformation of networks.
• The operating model was simplified into two primary segments: Network Infrastructure and Mobile Infrastructure, effective January 1, 2026.
• Nokia Technologies' net sales decreased by 22% to EUR 1,501 million, primarily due to over EUR 400 million in one-time catch-up net sales recognized in 2024.
• Research and development expenses increased by 8% to EUR 4,855 million, reflecting the Infinera acquisition and investments in future growth.
• A strategic partnership with NVIDIA was announced in October 2025, including a $1 billion investment from NVIDIA, to develop AI-native mobile networks.
• The Board of Directors proposes a maximum distribution of EUR 0.14 per share as dividend for the financial year 2025.
• Nokia completed a strategic review of its venture fund investment activities, initiating a process to scale down these investments and reclassifying related gains/losses to financial income.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this as a moderately positive report. While profitability metrics declined significantly year-over-year due to specific factors and strategic investments, the company's revenue growth, strong cash generation, and decisive strategic shifts towards high-growth AI and cloud markets, supported by key acquisitions and partnerships, indicate a clear path for future value creation.

Positives

• Net sales increased by 3% to EUR 19,889 million, demonstrating overall revenue growth.
• The acquisition of Infinera significantly contributed to net sales (EUR 1,258 million) and strengthened Nokia's position in optical networks, particularly with AI & Cloud customers and in North America.
• Network Infrastructure segment net sales increased by 23% to EUR 7,986 million, with organic growth across all three units.
• Cloud and Network Services segment net sales increased by 1% to EUR 2,606 million, with gross margin improving to 49.8% from 44.7%.
• Nokia secured EUR 2.4 billion in orders from AI & Cloud customers across the year, indicating strong momentum in this strategic area.
• The strategic partnership with NVIDIA, including a $1 billion investment, is set to accelerate AI-native mobile networks and AI networking infrastructure development.
• Nokia maintained strong free cash flow of EUR 1,465 million, allowing for balance sheet strengthening, investments, and dividends.
• Nokia achieved 96% renewable electricity across all owned and leased facilities in 2025, demonstrating progress towards sustainability targets.
• The company successfully closed the Infinera acquisition and quickly integrated the business, communicating product portfolio evolution to customers within a month.

Negatives

• Operating profit decreased significantly by 55% to EUR 885 million in 2025, primarily due to lower gross profit and higher R&D and SG&A expenses related to the Infinera acquisition.
• Gross profit decreased by 2% to EUR 8,659 million, with gross margin declining to 43.5% from 46.1% in 2024.
• Nokia Technologies' net sales decreased by 22% to EUR 1,501 million, largely due to the absence of over EUR 400 million in one-time catch-up net sales from 2024.
• Mobile Networks net sales decreased by 4% to EUR 7,806 million, and its operating margin declined to 2.8% from 5.5% in 2024, impacted by one-time factors including a EUR 120 million contract settlement.
• Five subcontractor fatalities occurred within Nokia's control during the year, leading to a 10% downward discretion on the health & safety metric for short-term incentives.
• Financial income and expenses saw a net negative fluctuation of EUR 103 million, mainly due to a EUR 135 million decrease in interest income on financial investments.
• The order backlog slightly declined to EUR 19.5 billion from EUR 20.0 billion, partly due to foreign exchange rate changes.
• Gender diversity metrics (female percentage in workforce and leadership) did not meet targets, resulting in 0% payout for these elements in the STI.

Risks

• Failure to successfully implement the new strategy, correctly identify and pursue opportunities, or mitigate risks in the AI-driven transformation of networks.
• Dependency on sustained traffic growth in customer networks and data centers, and the introduction of new use cases to drive demand for network intelligence and growth in AI & Cloud.
• Inability to realize the benefits of the new operating model, deliver operational continuity, or avoid unforeseen integration obstacles during reorganization.
• Investments, including business ventures, may not result in commercially successful technologies, products, or services that achieve broad market acceptance or meet customer needs.
• Challenges in acquiring or divesting businesses, integrating acquisitions (like Infinera), or realizing anticipated benefits, synergies, cost savings, or efficiencies.
• Dependency on the performance of partners and success in forming partnering arrangements with third parties.
• Inability to identify and implement appropriate measures to improve operational performance and cost-efficiency, potentially limiting R&D investments in areas like 5G-Advanced, 6G, and AI-native networks.
• Failure to meet sustainability targets, comply with regulatory requirements, or address stakeholder expectations regarding ESG, potentially harming reputation and business.
• General economic and financial market conditions, such as inflation, increased global macroeconomic uncertainty, major currency fluctuations, higher interest rates, and financing costs.
• Intense competition and rapid technological changes, including the acceleration of AI/automation, and the entry of new AI-native companies or existing competitors leveraging AI more effectively.
• Dependency on a limited number of large customers and multi-year agreements, with the risk of losing a single customer or contract, or facing unfavorable contract terms.
• Adverse developments in customer financing or extended payment terms, or the unwillingness of banks to provide guarantees or financing to customers.
• Failure to invest effectively and profitably in new competitive high-quality products, services, upgrades, and technologies, or to bring them to market in a timely manner.
• Inefficiencies, operational incidents, malfunctions, or disruptions of information technology systems and processes, including cybersecurity threats and data breaches.
• Problems or disruptions in manufacturing, service creation, delivery, logistics, or supply chain, including securing availability of resources or components.
• Inability to retain, motivate, develop, reskill, and recruit appropriately skilled employees, particularly in critical technology functions and niche markets like AI.
• Inability to protect innovations and maintain the strength of the intellectual property portfolio, or to monetize intellectual property due to market, regulatory, or legal developments.
• Uncertainty relating to the evolving geopolitical environment, global regulatory and standardization landscape relating to intellectual property.
• Complexity of direct and indirect regulation, and exposure to political developments affecting trade, such as sanctions, tariffs, and export controls.
• Changes in existing regulations or emerging new regulations impacting products, services, or business, including those related to security, privacy, and artificial intelligence.
• Complexity of tax laws and rules, diverse tax authority practices, and interpretations, potentially leading to unexpected payment obligations or inability to utilize tax attributes.
• Inability to maintain investment grade credit ratings, which could adversely affect funding costs and access to capital markets.
• Volatility of the trading price of shares and ADSs due to market factors, speculation, or company-specific fundamentals.

Future Outlook

Nokia targets comparable operating profit of EUR 2.0 to 2.5 billion in 2026, expecting continued strong demand in Network Infrastructure, particularly from AI & Cloud customers, and improved profitability in Fixed Networks. Mobile Infrastructure is anticipated to have a stable market environment with a focus on efficiency and profitability. The company aims to demonstrate clear progress towards its long-term targets set at the Capital Markets Day, including leading in AI-native networks and 6G.

Management Comments

• "Overall, our performance was solid and in line with expectations. We grew net sales by 3%, delivered approximately EUR 2 billion in comparable operating profit in line with guidance, and generated free cash flow of EUR 1.5 billion."
• "2025 was about setting the strategy for where we see the business going, and aligning the company accordingly. During the year, we repositioned Nokia to sharpen execution and focus on where we see the greatest long-term opportunities."
• "Our collaboration with NVIDIA to build AI-native networks starting with AI-RAN reflects our approach: focus our innovation where we differentiate, and partner with best-of-breed leaders elsewhere."
• "AI & Cloud customers are increasingly driving the leading edge of network technology. That positions us to innovate at the forefront and extend those capabilities across telecommunications and enterprise markets."
• "Our capital allocation principles remain consistent: invest organically where returns are highest, complemented by disciplined M&A and targeted minority investments."
• "Our new strategy outlines five strategic priorities: accelerating growth in AI & Cloud; leading in AI-native networks and 6G; growing through co-innovation; deploying capital where we differentiate; and unlocking sustainable returns."
• "In financial terms, we target EUR 2.0 to 2.5 billion of comparable operating profit in 2026. We expect continued strong demand trends in Network Infrastructure as we ramp new products expanding our presence in AI & Cloud and invest for long-term growth."
• "Nokia changed the world once by connecting people. Now we can change it again by connecting intelligence."

Industry Context

StockSavvy.ai notes that Nokia's strategic pivot towards AI & Cloud and AI-native networks aligns with the broader industry trend of increasing demand for high-performance, secure connectivity driven by the AI supercycle. The acquisition of Infinera and partnership with NVIDIA position Nokia to compete more effectively with hyperscalers and other technology leaders in this evolving landscape. While traditional telecom provider spending remains stable or moderately growing, the accelerated investment in data centers and AI infrastructure represents a significant growth opportunity that Nokia is actively pursuing. The simplification of the operating model is a common industry response to enhance agility and focus in a rapidly changing technological environment.

Comparison to Industry Standards

• Nokia holds the number two global market position in Optical Networks, strengthened by the Infinera acquisition.
• Nokia maintains the number one global position in IP edge routing.
• Nokia holds the global number one position in xPON OLT for the sixth consecutive year and is number one in 10G (XGS PON) ONT/OLT.
• Nokia's technology is present in 65% of telecommunication providers' 5G SA networks, and Omdia ranked Nokia number one in portfolio competitiveness, Core SaaS, cloud-native readiness, automation, and 5G deals.
• Nokia is ranked number one in both AI Ops and Cross-Domain Service Orchestration and number two in Network Automation Software by Appledore.
• Nokia is ranked number one in Automated Assurance and a leader in Service Assurance by Analysys Mason.
• Nokia is an innovation leader in Telco Extended Detection and Response (XDR) security by GigaOm and a Leader and Top Innovator for Telco API platforms by ABI Research.
• Nokia is ranked third in global Mobile RAN market share for the first three quarters by DellOro and Omdia.
• Nokia delivers the fastest 5G in 15 of the 20 fastest 5G countries.

Management Changes

Corporate Governance

Legal Proceedings

• Nokia is defending against approximately 250 asbestos-related matters in the United States, based on premises liability, products liability, and contractor liability, involving various diseases.
• Nokia is defending against a number of labor claims in various Brazilian labor courts from former employees whose contracts were terminated after Nokia exited certain managed services contracts.
• In March 2025, Nokia signed a patent agreement with Amazon, resolving all pending patent litigation between the parties related to video-related technologies.

Related Party Transactions

• Nokia has transactions with its subsidiaries, associated companies, joint ventures, and pension funds, as well as management and the Board of Directors.
• Sales to associated companies and joint ventures amounted to EUR 33 million in 2025 (EUR 36 million in 2024).
• Purchases from associated companies and joint ventures amounted to EUR 154 million in 2025 (EUR 147 million in 2024).
• Nokia holds a 20% shareholding in Alcatel Submarine Networks (ASN) as an investment in an associate, following its sale to the French State in 2024.
• Nokia holds a 51% ownership interest in TD Tech Holding Limited (TD Tech HK), accounted for as an investment in an associated company, and is in the process of exiting this shareholding.
• Nokia has an amended licensing agreement with HMD Global Oy (HMD) for Nokia branded mobile phones and tablets, with HMD's exclusive license for Nokia branded devices expiring by March 2026, except for feature phones extended until March 2029 for limited countries.
• Nokia has borrowings of EUR 34 million from its German pension fund, bearing 6% annual interest and terminable with 90-day notice.

Stakeholder Impact

• **Shareholders**: Potential for long-term value creation through strategic focus on AI & Cloud, 6G, and operational efficiency. Proposed stable dividend of EUR 0.14 per share. Share buyback programs aim to offset dilution and return excess cash. However, significant decline in operating profit and EPS in 2025 may concern some investors.
• **Employees**: Strategic reorganization and cost savings program are expected to lead to a reduction in workforce (72,000-77,000 employees compared to 86,000). Changes may cause 'change fatigue' and impact morale. New CEO and GLT appointments aim to strengthen execution and align with strategic priorities. Emphasis on 'Team Nokia' culture, continuous learning, and agility.
• **Customers (Telecom Providers, AI & Cloud, Mission Critical Enterprise & Defense, Technology Licensees)**: Enhanced product offerings and innovation, particularly in optical and IP networks, AI-native networks, and 6G, to meet increasing demand for advanced connectivity. Stronger competitive position with hyperscalers due to Infinera acquisition and NVIDIA partnership. Co-innovation efforts aim to deliver tailored solutions. Potential for reduced demand from telecom providers due to cost containment and network sharing models.
• **Suppliers**: Continued focus on risk and cost management, building resilience in the supply chain, and sustainability enablement. Expectation for suppliers to follow Nokia's Third-party Code of Conduct and meet sustainability criteria. Geographically dispersed manufacturing network and in-house semiconductor capabilities (Infinera) aim to derisk critical supply chain elements.
• **Creditors**: Maintenance of investment-grade credit ratings (BBBby Fitch and S&P Global, Ba1 by Moody's) provides access to capital markets. Sufficient liquidity with EUR 6.79 billion in total cash and interest-bearing financial investments and undrawn revolving credit facilities.

Next Steps

• Execute the new strategy to lead in the AI-driven transformation of networks and capture value from the AI supercycle.
• Accelerate growth in AI & Cloud, including ramping up new products and expanding presence with AI & Cloud customers.
• Lead the next era of mobile connectivity with AI-native networks and 6G.
• Grow through co-innovation with customers and partners.
• Focus capital where Nokia can differentiate and unlock sustainable returns.
• Improve profitability in Fixed Networks.
• Improve gross margin, segment operating profit, and cash flow in Mobile Infrastructure.
• Drive efficiency and productivity across the company through disciplined cost management, continuous improvement, and internal AI investments.
• Assess the best value-creating opportunities for units moved into the new Portfolio Businesses segment during 2026.
• Continue to monitor and address sustainability-related risks and opportunities, including progress towards net-zero GHG emissions by 2040.
• The Board of Directors will make separate resolutions on the amount and timing of four dividend installments during the authorization period for 2025 earnings.

Key Dates

Recommendation

Nokia's 2025 results present a mixed picture: while net sales saw modest growth, operating profit and EPS declined significantly. The strategic reorganization and increased investments in AI and cloud infrastructure, coupled with the Infinera acquisition and NVIDIA partnership, are forward-looking moves aimed at long-term growth. However, the immediate financial impact of these transitions, including higher R&D and SG&A, and the one-time charges, weigh on current profitability. The stock is a 'hold' as the company navigates this transformation, with potential upside from successful strategy execution in high-growth areas, but also risks associated with intense competition and the inherent uncertainties of such a large-scale pivot. Investors should monitor the execution of the new strategy and the realization of anticipated synergies and cost savings.

Keywords

Nokia, 20-F, Annual Report, Telecommunications, Network Infrastructure, Mobile Networks, Cloud and Network Services, Nokia Technologies, AI, Artificial Intelligence, 5G, 6G, Infinera, NVIDIA, Optical Networks, IP Networks, Fixed Networks, Patent Licensing, Financial Results, Operating Profit, Net Sales, Free Cash Flow, Capital Markets Day, Strategic Reorganization, Corporate Governance, Risk Factors, Sustainability, ESG, Cybersecurity, Share Buyback, Dividend