Bottom line
Q3 2026 is the quarter the profit leverage showed up, and the cash did not. Comparable operating margin jumped 220 bps to 11.7% on €5.2bn of net sales (+9% cc). Nokia had guided Q3 operating profit roughly flat with Q2, and it delivered €605m. AI & Cloud sales grew 123% and now make up 12% of the group, with €1.5bn of new orders. The price is visible too. Free cash flow was –€99m, FY26 FCF conversion was cut to 35–55%, restructuring charges were raised to €1.1bn, and NI gross margin fell 150 bps as new IP products ramp. Management upgraded its guidance wording to "above the midpoint" but declined to commit to the top end.
AI & Cloud net sales, Y/Y
Executive Summary
Nokia Q3 2026 in eight points
- Profit leverage arrived ahead of plan. Net sales were €5.2bn (+9% cc, +10% reported). Comparable operating profit was €605m and operating margin rose 220 bps to 11.7%. In July, Nokia had guided Q3 operating profit roughly flat with Q2's €434m.
- AI & Cloud is now a real business line. Sales grew 123% and reached 12% of group net sales. Order intake was €1.5bn (+118% YoY), with more than €5bn booked across the first nine months of 2026. Supply, not demand, limits how fast it converts.
- Network Infrastructure drove the growth, at a gross margin cost. NI sales grew 15%: IP +43%, Optical +18%, Fixed –22% on the CPE exit. NI gross margin fell 150 bps to 41.2% as new IP products ramp, which management calls temporary. NI operating margin still rose 230 bps to 10.0%.
- Mobile Infrastructure borrowed from Q4. MI sales grew 5%, with Radio +10% on deliveries pulled forward from Q4. Management says this was not pre-buying. MI operating margin reached 14.5% (+160 bps), but MI's Q4 seasonality will be weaker.
- Cash went the other way. Free cash flow was –€99m after a €270m working-capital build and restructuring payments, and net cash fell to €2.6bn. FY26 FCF conversion was reset to 35–55% from 55–75%, with €400m of extra working capital planned to support 2027 growth.
- Guidance wording improved, the range did not. Comparable operating profit guidance stays at €2.1–2.6bn, now "above the midpoint." Management declined to commit to the top end. Q4 net sales are guided +20–24% QoQ, and capex was trimmed to €750–850m.
- Restructuring is bigger and faster. FY26 charges rose to €1.1bn (from €800m) and cash outflows to €800–900m. China integration is now 12–24 months instead of three years, Infinera's €200m synergies arrive a year early, and the FWA (Inseego) and ECE (AURELIUS) sales advance the portfolio clean-up.
- The 2027 view got bigger again. Optical and IP are expected to grow 25–30% in 2027, the third upgrade since November's Capital Markets Day. Supporting it: AI-RAN live with T-Mobile and Elisa and 19 engaged customers, 800G pluggables up 2.4x QoQ, Fab 2 in San Jose moving to 24/7, and new ICEYE and Google Finland partnerships.
Sec. 01Key Takeaways
Ten things that mattered this quarter
Growth broadens
Net sales were €5.2bn, up 9% cc and 10% reported. Network Infrastructure grew 15% and Mobile Infrastructure 5%.
Now 12% of Nokia
Sales rose 123% to about €625m. Orders were €1.5bn (+118% YoY), and more than €5bn has been booked in the first nine months of 2026.
Operating leverage arrives
Comparable operating margin was 11.7%, up 220 bps, on comparable operating profit of €605m. Gross profit was €2.3bn, up €190m.
The ramp has a cost
Group gross margin was 44.6% (–20 bps). NI fell 150 bps to 41.2% on mix and new IP product ramps. Management calls this temporary.
Negative again
Free cash flow was –€99m, hit by restructuring payments and a €270m working-capital build. FY26 FCF conversion was reset to 35–55%.
"Above the midpoint"
The €2.1–2.6bn comparable operating profit range is unchanged. The wording moved up from "somewhat above," but there is no commitment to the top end.
Optical + IP to grow 25–30%
This is the third upgrade since November's Capital Markets Day. It is based on the current portfolio and existing orders only.
Charges raised to €1.1bn
The prior figure was €800m. Cash outflows are now €800–900m, and China and Europe actions are being accelerated.
Supply, not demand, is the limit
Shortages are broader than in 2021. Nokia is asking customers for 12–18 months of visibility and expects prices to rise.
Q3 borrowed from Q4
Radio deliveries were pulled forward from Q4. Management says this was not pre-buying, but it will dampen MI's usual Q4 seasonality.
Sec. 02Headline Financials
The quarter, at a glance
Every comparable profit line improved year over year except gross margin. Cash went the other way as Nokia funded growth and restructuring at the same time.
| Metric | Q3'26 | Q2'26 | YoY |
|---|---|---|---|
| Net sales | €5.2bn | €4.8bn | +9% cc / +10% rep. |
| Comparable gross profit | €2.3bn | ~€2.2bn | +€190m |
| Comparable gross margin | 44.6% | 46.0% | –20 bps |
| Comparable operating profit | €605m | €434m | ↑ |
| Comparable operating margin | 11.7% | 9.0% | +220 bps |
| Free cash flow | –€99m | –€732m | — |
| Net cash | €2.6bn | €2.8bn | — |
Q2'26 figures are from our Q2 analysis. Profit and margins are on Nokia's comparable basis.
Q3 beat the July outlook
In July, Nokia guided Q3 net sales up 3–7% QoQ and comparable operating profit roughly flat with Q2's €434m. It delivered about €5.2bn in sales and €605m in operating profit. Part of that came from deliveries pulled forward from Q4.
The venture fund helped again
Financial income and expenses benefited from positive revaluations in Nokia's venture fund, which lifted net profit and EPS.
Tracking above the midpoint
Nokia says it is tracking above the midpoint of its full-year comparable operating profit outlook. It describes its €2.6bn net cash as a strong balance sheet with financial flexibility.
Sec. 03The AI & Cloud Engine
Revenue catches up with the order book
Q2 was the order quarter. Q3 is when those orders started turning into sales: AI & Cloud revenue rose about 40% sequentially as Q2's backlog converted.
AI & Cloud net sales by quarter (€m)
AI & Cloud order intake by quarter (€m)
Q3'26 orders (€1.5bn) and growth rates are reported figures. The other values are read from Nokia's results charts and are approximate.
Optical leads, IP gains share
Optical still provides most of AI & Cloud revenue, but IP's share is rising.
Mostly within 12 months
Most orders are for delivery within 12 months. Some extend further, but largely still within 2027. A large backlog is building toward 2027.
Supply-limited, not demand-limited
Management says customers would take more if Nokia could deliver faster.
Accretive, per the CFO
CFO Marco Wirén said the segment adds strongly to gross profit and operating margin and is accretive for shareholders.
Sec. 04Segment Performance
Network Infrastructure accelerates, Mobile pulls forward
Growth engine
Network Infrastructure (NI)
| €m | Q3'26 | Q2'26 | YoY (cc) |
|---|---|---|---|
| Net sales | 2,158 | 2,037 | +15% |
| — Optical Networks | 933 | 868 | +18% |
| — IP Networks | 839 | 679 | +43% |
| — Fixed Networks | 386 | 490 | (22)% |
| Gross margin | 41.2% | 42.7% | (150) bps |
| Operating margin | 10.0% | 8.1% | +230 bps |
- Optical (+18%) was driven by AI and cloud demand, plus healthy telco spending on transport.
- IP (+43%) grew as the strong Q2 orders converted into revenue.
- Fixed (–22%) fell because of portfolio actions to move toward higher-margin products. OLT sales were stable and the underlying business is healthy. The decline was essentially lower CPE volume. Nokia is exiting low-margin CPE, but long-term contracts mean this plays out over the year.
- Gross margin was 41.2%, against about 43% in H1. The causes were product mix and the ramp of new IP products for AI and cloud customers. Management called the dilution temporary and expects improvement in Q4; NI's Q4'25 gross margin was roughly 45–46%. New products take time to reach the right cost base, and IP is scaling from a low base, so operating leverage follows volume.
- Operating margin rose 230 bps to 10.0%, driven by operating leverage.
- Fixed Networks is much smaller than Optical and IP, and CPE is smaller still. So the pruning moves group margins less than one might hope. The exited business was dilutive but not loss-making.
Stable profit engine
Mobile Infrastructure (MI)
| €m | Q3'26 | Q2'26 | YoY (cc) |
|---|---|---|---|
| Net sales | 2,902 | 2,680 | +5% |
| — Radio Networks | 1,958 | 1,765 | +10% |
| — Core Software | 519 | 507 | (13)% |
| — Technology Standards | 425 | 407 | +8% |
| Gross margin | 47.5% | 49.3% | +20 bps |
| Operating margin | 14.5% | 11.6% | +160 bps |
- Radio (+10%) was helped by contract deliveries pulled from Q4 into Q3. Management said this was not pre-buying; some projects simply moved faster than expected.
- Core Software (–13%) fell because Nokia is de-emphasizing some applications. Some operators also delayed projects because of supply constraints on server infrastructure.
- Technology Standards (+8%) came from several new licensing deals and some catch-up net sales. Deal signing has been strong year to date, but Q4 should see slower deal activity, so revenue will be lower than in recent quarters.
- Gross margin of 47.5% was largely stable YoY. It benefited from the radio pull-forward, operating efficiency and a higher Technology Standards contribution.
- Operating profit increased on higher gross profit and lower SG&A. This was partly offset by other operating income, because Q3'25 had a positive hedging impact that did not repeat.
Sec. 05Customer Mix
One customer group carries the growth
| Customer type | Growth YoY (cc) | Read |
|---|---|---|
| AI & Cloud | +123% | Fastest-growing segment, now 12% of group net sales |
| Telecom | +0% | Stable. The flat-market view is unchanged, with pockets of IP and optical growth from data center connectivity. |
| Mission Critical Enterprise & Defense | +7% | Back to growth after declining 3% in Q2 |
| Technology Licensees | +8% | New licensing deals plus catch-up sales |
| Group | +9% cc | +10% reported; €4.7bn → €5.2bn |
Sec. 06Margin Drivers
Gross margin dipped, operating margin jumped
The gap between a 20 bps gross margin decline and a 220 bps operating margin gain is operating leverage. Sales grew faster than opex.
- A better gross margin in Mobile Infrastructure was offset by product mix in Network Infrastructure and the cost of ramping new products.
- The operating margin gain came mainly from higher sales and operating leverage across the group.
- Management cautions that operating leverage takes a few quarters to show. Portfolio clean-up in CPE, core and radio partly hides it in the near term.
Sec. 07Cash Flow & Capital Allocation
Funding growth and restructuring at once
| Net cash bridge, Q2'26 → Q3'26 | €m |
|---|---|
| Opening net cash (Q2'26) | ~2,800 |
| Adjusted profit | inflow |
| Receivables | –230 |
| Inventories | –130 |
| Liabilities | +90 |
| Net working capital, total | –270 |
| Dividend | ~–200 |
| Capex, cash taxes, restructuring | outflows |
| Closing net cash (Q3'26) | ~2,600 |
Free cash flow for the quarter was –€99m. Nokia did not disclose the adjusted profit, capex, tax and restructuring lines individually on the bridge slide.
An extra €400m, on purpose
Nokia plans €400m more working-capital investment than it expected at the start of the year. The aim is to support demand and 2027 growth as receivables and inventory rise with accelerating growth.
Reset to 35–55%
This replaces the 55–75% range Nokia gave in July, when it was already tracking the low end. Management will push to raise conversion as working-capital pressure eases.
Reviewed almost weekly
Allocation is reviewed continuously rather than once a year, and investment goes where long-term shareholder value can be created.
NextGComm calculation using the guidance midpoint. Q4 is seasonally Nokia's strongest cash quarter, but this still concentrates the year's cash generation in Q4.
Sec. 08Restructuring, Cost & Portfolio
Accelerating the clean-up: 2023–26 program, China, Europe
| Full year 2026 | Q2 assumption | Q3 updated |
|---|---|---|
| Restructuring and associated charges (cost savings program) | €800m | €1,100m |
| Restructuring and associated cash flows | €700–800m | €800–900m |
Simplify, streamline, consolidate
The accelerated actions cover simplifying processes, streamlining operations and consolidating locations, especially in Europe. Further streamlining opportunities were first announced in Q2.
Three years compressed to 12–24 months
Integration after the buyout of the remaining stake was originally planned to take up to three years. It is now expected to be 90% complete by the end of 2026. Nokia is resizing the business to fit the limited share a Western vendor can win in China.
Top of the range
Savings are expected to reach the top of the €800m–€1.2bn range.
€200m synergies a year early
Integration is largely complete, and the €200m synergy target should be reached by the end of 2026, one year early.
These actions benefit the whole company, not only MI. Alongside customer negotiations and product redesign, they also help offset rising component costs.
Portfolio actions
- The sale of Fixed Wireless Access (FWA) to Inseego is completed.
- The sale of ECE to AURELIUS is announced.
- Nokia is exiting low-margin CPE within Fixed Networks, a move that plays out over the year as long-term contracts run off.
Sec. 09Technology & Product
Where the AI networking demand is landing
Demand is accelerating in three areas: scale-across (mainly optical), front-end networking and data center interconnect (DCI). The last two mix optical and IP. Demand exceeds supply in both Optical and IP.
- Telcos are investing to serve AI and cloud customers, for example east-west traffic, DCI and long-haul. Much of this is in the US, tied to data center locations. It also extends to subsea, where traditional subsea operators are investing.
- Management argues that because compute is constrained, connectivity is a way to make better use of compute. It described demand as "massive and insatiable."
- Distributed inference means more data centers in more places. That needs more optical and IP capacity with low latency, security and locality. Nokia leads in telco edge routing and has a broad optical portfolio.
- Nokia is working with Zayo, a major US internet backbone provider, and NeoCloud partners on a new inference connectivity architecture. This is a blueprint for connecting distributed inference across data centers for multiple partners.
800G pluggables up 2.4x QoQ
Orders come from hyperscalers and major telcos, with 800G ZR/ZR+ design wins at 29 customers. Nokia won a significant line-system deal with a large hyperscaler, an area where it historically had low share. Multi-rail, launched in March, offers 25% higher density than competing products. It has 3 design wins, and the first customer is receiving initial volumes.
Two more hyperscaler design wins
One is a next-generation data center gateway. Nokia also won significant telco deals in edge and core routing, IP aggregation and 5G backhaul across the US, Japan and Europe, as networks modernize for AI traffic. The business is growing from a low base, and order strength from AI and cloud customers is expected to continue.
~45% OLT share, outside China
The strategy is to focus on the more profitable parts of the business and maintain a strong OLT base. Share is per Dell'Oro (xPON OLT ports shipped, 12-month trailing, global excluding China).
Optical: more depth
- Nokia is investing in a next-generation optical roadmap co-developed with hyperscalers.
- Nokia and Infinera were both underpenetrated before. The combined team has improved the portfolio and is building capacity.
- Nokia expects optical penetration to keep rising, because bandwidth and power-efficiency needs touch every part of the network. It is co-innovating with customers earlier, and some products announced at a recent conference will ship in 2027.
- New in-data-center optics (LPO pluggables, external lasers) are not in the 2027 outlook. Nokia sees a broader opportunity there and is designing with customers.
IP: tracked by design win
Nokia tracks progress by design win rather than by customer, because each design win acts as its own product revenue stream and lifecycle. Customers say Nokia's designs are competitive.
Fixed: new data center and Japan openings
- Out-of-band management uses PON technology to give data centers an independent optical lifeline to critical IT if the production network fails. Compared with Ethernet, it uses about 50% less energy, has fewer points of failure and is more resilient. The first design win came last quarter, and Nokia is engaged with more customers.
- Nokia launched an industry-first 16-port line card supporting GPON, 10G, 25G and 50G PON on every port. SoftBank is the launch partner.
- SoftBank completed Japan's first commercial deployment, showing that GPON, XGS-PON and 50G PON can coexist on one fiber. This lets operators upgrade speed without replacing equipment.
- Several Japanese operators are moving away from legacy EPON, which opens a new market for Nokia.
AI-RAN moves toward commercial deployment
Nokia's goal is to turn the radio network into a platform for physical AI: autonomous mobility, industrial automation, robotics and AR. It sees RAN moving from proprietary silicon to general-purpose computing, as storage and mobile core did before, and it is leading that shift with NVIDIA. Nokia's AI-native RAN software runs on NVIDIA's Aerial RAN computer. It is software-defined, with a software upgrade path to 6G.
Operators shown as engaged include:
The emerging application ecosystem includes DeepSig, ZaiNar and Cohere Technologies. At September's Radio World event, Nokia and partners showed real-time sensing and network-based location using only existing wireless infrastructure. This is a potential new way for telcos to monetize AI.
Sec. 10Strategy, Partnerships & Manufacturing
Five priorities, one quarter's proof points
Accelerate growth in AI & Cloud
- 800G pluggable volumes up 2.4x QoQ
- Two more IP hyperscaler design wins
- Multi-rail shipping, 3 design wins
Lead the next era with AI-native networks and 6G
- 19 customers engaged on AI-RAN
- Live with T-Mobile and Elisa
- Spectral efficiency gains of more than 20%
Grow by co-innovating
- Google's investment in Finnish data centers
- Partnership with ICEYE
- SoftBank on the 16-port multi-PON line card
Focus capital where Nokia can differentiate
- Fab 2 in San Jose moving to 24/7 by end of October
- FWA sale to Inseego completed
- ECE sale to AURELIUS announced
Unlock sustainable returns
- Cost savings commitments on track
- Infinera €200m synergies by end of 2026
- China integration 90% complete by end of 2026
Connecting a €13bn Finnish build-out
Nokia's optical and IP networks support Google's €13bn investment in Finland, connecting AI infrastructure within and between data centers.
Sovereign LEO satcom
Nokia and ICEYE formed a strategic partnership to build secure, sovereign low-Earth-orbit satellite communication systems for governments and defense clients. The initial focus is Europe, upgrading legacy satcom (comparable to 2G/3G) to modern, future-ready capability. Nokia sees satellite as part of meeting physical AI's persistent connectivity demand, which AI-RAN's spectral efficiency also supports.
US indium phosphide manufacturing
| Site | Status | Next |
|---|---|---|
| Fab 2, San Jose (6-inch InP wafers; Fab 1 uses 3-inch) | 90% of process development and recipes complete. 24/7 operations by end of October. | Production before year end, ramping through 2027. Volume and yield are the next milestones, with an update in January. |
| Chandler, Arizona (acquiring from NXP) | Not yet closed | Aimed at around 2029 as flexible capacity, with several ways to monetize InP manufacturing. Milestones will come later; the near-term focus is entirely on Fab 2. |
Sec. 11Guidance & Outlook
FY2026, line by line
| Item | Q3 update | July (Q2) |
|---|---|---|
| Comparable operating profit | €2.1–2.6bn, "above the midpoint" | €2.1–2.6bn, "somewhat above the midpoint" |
| Q4 net sales | +20% to +24% QoQ | — |
| Q4 comparable operating profit | Typically strong QoQ increase | "Meaningful" improvement |
| Comparable financial income and expenses | Positive €300–400m | — |
| Comparable income tax rate | ~26% | — |
| Cash outflows for income taxes | €500m | — |
| Capital expenditure | €750–850m | €800–900m |
| FCF conversion from comparable operating profit | 35–55% | 55–75% (tracking low end) |
| Restructuring charges / cash | €1,100m / €800–900m | €800m / €700–800m |
| Optical + IP growth, 2026 | Somewhat above 18–20% | 18–20% |
| FX assumption | EUR:USD 1.14 for rest of 2026 | EUR:USD 1.14 |
Unpacking "above the midpoint"
NextGComm calculation. For context, Q4'25 comparable operating profit was about €1.07bn, and Q4 net sales of +20–24% QoQ imply roughly €6.2–6.4bn.
- The wording moved to "above midpoint," which management called a step up from last quarter. The range itself is unchanged, and management declined to commit to the top end.
- Q3 included some pull-forward from Q4 as part of improving linearity. That will dampen MI's normal Q4 seasonality.
Optical + IP to grow 25–30%
This assumes only the current portfolio and existing orders. Optical is likely to contribute more of the growth, though there may be further upside in IP. Management called the market durable "well beyond 2027." This is the third upgrade to the growth assumption since the November Capital Markets Day.
Supply chain and pricing
- Shortages are broad: leading-edge nodes, memory, PCBs and source materials. This is wider than the 2021 shortage and includes structural cost increases.
- Nokia is responding with commercial discipline and asks customers for 12–18 months of forward visibility. Lead times used to be about six months under a hand-to-mouth ordering pattern.
- Some customers take any available supply, while others share longer forecasts.
- There is no imminent mobile investment cycle, and the RAN market is expected to be flat. Pricing is expected to rise because of cost inflation, and telcos are increasingly aware of slipping lead times and rising prices.
Sec. 12Q&A Analysis
Five themes from the call
1. Was Q3 borrowed from Q4?
2. Why not guide to the top end?
3. When does NI gross margin recover?
4. How real is the AI & Cloud backlog?
5. How bad is the component squeeze?
Sec. 13Nokia Since Q2
A dated newsflow timeline
- 23 Jul 2026
Q2 2026 results
AI & Cloud orders of €2.8bn. Guidance of "somewhat above the midpoint." FCF conversion tracking the low end of 55–75%.
- Sep 2026
Radio World event
Nokia, DeepSig and other partners demonstrated real-time sensing and network-based location using existing wireless infrastructure.
- Q3 2026
Portfolio and partnership moves
The FWA sale to Inseego closed and the ECE sale to AURELIUS was announced. Nokia Defense partnered with ICEYE. SoftBank launched the 16-port multi-PON line card.
- 22 Oct 2026
Q3 2026 results
Comparable operating margin of 11.7%. Guidance raised to "above the midpoint." FCF conversion reset to 35–55%. Restructuring charges raised to €1.1bn.
- End Oct 2026
Fab 2 to 24/7 operations
Production is due to start before year end.
- Jan 2027
Fab 2 volume and yield update
This is planned alongside Q4 results.
Sec. 14The Trajectory
Three quarters in context
The pattern is consistent. Each quarter has moved the AI & Cloud story from promise toward the P&L. Each quarter has also raised the bill for getting there in working capital, restructuring and capacity.
Sec. 15Key Risks & Hurdles
What to watch
Cash conversion reset lower
FY26 FCF conversion is now 35–55%. Nine-month FCF is negative, so Q4 has to deliver most of the year's cash.
Q4 already partly spent
The radio pull-forward flatters Q3 and dampens MI's Q4 seasonality just as Nokia needs a strong Q4.
Supply, not demand
Broad shortages of nodes, memory, PCBs and materials cap how fast the AI & Cloud backlog converts.
NI gross margin dilution
IP ramp costs took 150 bps off. The recovery promised for Q4 still has to show up.
Restructuring execution
Charges are up to €1.1bn, with China compressed into 12–24 months and Europe accelerated at the same time.
Fab 2 ramp
Volume and yield milestones are still ahead, with an update due in January.
Flat RAN and telecom markets
There is no mobile investment cycle in sight. Core Software declined, and Technology Standards revenue is expected to slow in Q4.
Order lumpiness
AI & Cloud orders fell from about €2.8bn in Q2 to €1.5bn in Q3. That is still up 118% YoY, but quarterly bookings are uneven.
Sources: Nokia Q3 2026 Financial Results presentation (22 October 2026) and earnings call. Q2'26 comparisons are from NextGComm's Nokia Q2 2026 Earnings Analysis.
All net sales changes are year over year at constant currency unless stated otherwise. Profit and margins are on Nokia's comparable basis, which excludes items such as restructuring charges and intangible amortization. Values marked ~ are read from Nokia's charts. Implied Q4 figures are NextGComm calculations. This is not investment advice.
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