Nokia Reorients for AI Era, Targets Significant Profit Growth by 2028
Espoo, Finland — Nokia announced a comprehensive strategic overhaul today at its Capital Markets Day 2025, charting a new course to capitalize on the artificial intelligence (AI) supercycle and position itself as a leader in AI-driven network transformation. The company detailed a simplified operating model, new long-term financial targets, and significant leadership changes, all aimed at accelerating innovation and enhancing shareholder value.
Under the leadership of President and CEO Justin Hotard, Nokia aims to increase its annual comparable operating profit to between EUR 2.7 billion and EUR 3.2 billion by 2028. This represents a substantial increase from the EUR 2.0 billion recorded over the trailing twelve months (Q4 2024–Q3 2025). Hotard emphasized Nokia’s role as a trusted Western provider of secure and advanced connectivity, stating, “Nokia changed the world once by connecting people — and will again by connecting intelligence.”
Strategic Priorities for an AI-Native Future
Nokia’s new strategy is built on five core priorities: accelerating growth in AI and cloud technologies, leading the development of AI-native networks and 6G, fostering co-innovation with customers and partners, strategically allocating capital to areas where Nokia can differentiate, and unlocking sustainable returns. These pillars are designed to streamline operations and focus Nokia’s efforts on high-growth, high-value segments of the market.
The company’s focus on AI aligns with broader industry trends, where major tech players are investing heavily in AI infrastructure and applications. Microsoft, for instance, recently unveiled new data center infrastructure chips designed to accelerate AI operations and improve data security, underscoring the critical role of specialized hardware in the AI ecosystem, as reported by [reuters.com](https://www.reuters.com/technology/artificial-intelligence/microsoft-launches-two-data-center-infrastructure-chips-speed-ai-applications-2024-11-19/). Similarly, Meta has made substantial commitments to becoming a dominant AI player, with its Llama models challenging the dominance of companies like OpenAI, a strategy detailed by [fortune.com](https://fortune.com/2024/11/19/zuckerberg-meta-ai-openai-llama).
Reorganized Operating Model: Network and Mobile Infrastructure
Effective January 1, 2026, Nokia will restructure its operations into two primary segments: Network Infrastructure and Mobile Infrastructure. This reorganization seeks to better align with customer needs and accelerate innovation in response to the growing demand for advanced connectivity driven by the AI supercycle.
The Network Infrastructure segment, led by David Heard, will focus on capitalizing on the global AI and data center build-out. It will encompass Optical Networks, IP Networks, and Fixed Networks. The newly formed Mobile Infrastructure segment will integrate Nokia’s Core Networks portfolio, Radio Networks portfolio, and Technology Standards (formerly Nokia Technologies). This segment, to be led by Justin Hotard on an interim basis, aims for leadership in core and radio network technology, driving the industry towards AI-native networks and 6G. Its value creation will be anchored in 3GPP standards-based mobile communication technologies and its intellectual property licensing.
Accompanying these structural changes are leadership appointments, including Raghav Sahgal as Chief Customer Officer and Patrik Hammarén continuing as President, Technology Standards. Tommi Uitto will step down from the Group Leadership Team at the end of the year.
Divestiture and Incubation for Non-Core Assets
Nokia has also identified several units that, while possessing growth opportunities, are not central to its future strategic direction. These units — including Fixed Wireless Access CPE, Site Implementation and Outside Plant, Enterprise Campus Edge, and Microwave Radio — will be moved into a dedicated “Portfolio Businesses” segment. Nokia plans to assess the best value-creating opportunities for these units throughout 2026. These units collectively generated approximately EUR 0.9 billion in net sales and incurred an operating loss of EUR 0.1 billion over the past twelve months.
In a separate initiative, Nokia is launching Nokia Defense as an incubation unit. This unit will serve as an R&D and go-to-market hub for defense-grade solutions, building on the foundation of Nokia Federal Solutions in the U.S. and exploring opportunities in Finland and other allied countries.
New Financial Targets and Key Performance Indicators
The new long-term financial target of EUR 2.7 billion to EUR 3.2 billion comparable operating profit by 2028 supersedes Nokia’s previous targets. To track progress within its new strategic focus, Nokia is introducing a series of strategic key performance indicators (KPIs) for its businesses:
- Network Infrastructure: Targeting 6-8% net sales CAGR during 2025-2028, with a 10-12% target for combined Optical Networks and IP Networks. The operating margin for this segment is projected at 13% to 17% by 2028.
- Mobile Infrastructure: Aiming for a gross margin of 48-50% by 2028 and growth in operating profit from a base of EUR 1.5 billion.
- Group Common and Other operating expenses: Targeted reduction to EUR 150 million by 2028, down from the current EUR 350 million run-rate.
- Free cash flow conversion: Expecting 65% to 75% conversion from comparable operating profit.
To provide transparency, Nokia has released provisional financial information for its new segment structure, pro forma for the Infinera acquisition, covering Q4 2024 to Q3 2025. This data indicates a total comparable net sales of EUR 20.3 billion, with a gross margin of 45% and an operating profit of EUR 2.0 billion. The company plans to publish recast financials for 2024 and 2025 under the new reporting structure in Q1 2026, with full segment reporting commencing from its Q1 2026 results. Read more on Globally Pulse Technology.
The strategic shift comes as regulatory bodies globally, such as the European Union, are implementing comprehensive frameworks like the EU AI Act to govern the development and deployment of AI technologies. These regulations, which are expected to include centralized enforcement and regulatory tweaks, highlight the increasing scrutiny and policy involvement in the AI sector, as discussed by [mlex.com](https://www.mlex.com/mlex/articles/2408203/planned-eu-ai-act-changes-to-include-centralized-enforcement-regulatory-tweaks) and [mondaq.com](https://www.mondaq.com/canada/new-technology/1548228/the-eu-ai-act-all-you-need-to-know).
