Story
Nokia Q2 Profit Jumps 18% on Surging AI Data Center Demand
Summary
Nokia reported a stronger-than-expected 18% rise in second-quarter operating profit, driven by a doubling of sales to AI and cloud customers for its fibre optic equipment. The results come amid industry-wide concerns over rising component costs.
Nokia (HE:NOKIA) on Thursday reported a significant beat on its second-quarter profit, as a strategic pivot toward supplying equipment for artificial intelligence (AI) data centers fueled a surge in demand from cloud customers. The Finnish telecom equipment maker's results offered a positive signal amid industry-wide concerns over rising component costs.
Earnings Beat Expectations
The Espoo-based company announced its comparable operating profit for the second quarter jumped 18% to €434 million ($496.1 million). This figure comfortably exceeded the average analyst estimate of €382 million, according to a poll by LSEG.
Comparable net sales for the period reached €4.82 billion, also coming in above market expectations. The strong performance highlights the success of Nokia's shift in focus.
AI and Cloud Demand Drives Growth
Nokia's growth was primarily driven by its increasing business selling fibre optic cables and other gear to large technology companies building out AI and cloud infrastructure. Net sales from AI and cloud customers doubled in the quarter to €446 million.
AdThe company underscored the robust outlook in this segment, noting that it booked €2.8 billion in new orders from these clients.
Navigating Industry Headwinds
Despite the strong performance, Nokia acknowledged it was not immune to a sudden increase in memory chip prices, a trend driven by intense competition for components from the AI sector. This issue has impacted telecom equipment makers across the industry.
"Demand remains strong, while supply continues to be the main industry constraint, prompting our customers to place longer-term orders," CEO Justin Hotard said in a statement. The comment suggests a challenging but manageable supply environment.
Nokia's results stand in contrast to a recent warning from Swedish rival Ericsson (ST:ERICb), which cautioned last week that rising memory chip costs were pressuring its margins, fanning investor worries and sending its shares lower.
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