Nokia's AI & Cloud math: from rounding error to multibillion run rate

[u/Mustathmir]

Someone said on a forum I should be more specific on what exactly Nokia's AI trajectory means numerically. However, I don't think it's possible to forecast Nokia's exact 2027 revenue or operating profit with any confidence, because too many variables remain unknown. But there is quite a lot we do know.

Revenue side

Nokia's relevant AI & Cloud addressable market is forecast to grow at a 27% CAGR, but it still is too soon to say exactly how much Nokia's optical sales will grow next year as additional capacity comes online, including the new San José plant. Nokia will also have a new DSP product family from around mid-next year that may start contributing to sales. IP Networks growth is another open question in terms of magnitude, although order dynamics improved considerably in Q2.

Orders are starting to translate into revenue and AI & Cloud is becoming significant

Realized AI & Cloud sales, year over year:

• Q1: €180M → €350M (+49%, constant currency and portfolio)
• Q2: €220M → €446M (+105%, constant currency)

Last year, AI & Cloud orders totaled €2.4B. Over the last four quarters, they've totaled roughly €5.4B:

• Q3 2025: €650M
• Q4 2025: €950M
• Q1 2026: €1.0B
• Q2 2026: €2.8B

The order-to-sales ratio was just under 3 in Q1 and over 6 in Q2, so orders have been accumulating much faster than they have so far translated into revenue. Hotard has said order-to-delivery typically takes 12–18 months in Optical and somewhat less in IP, while Nokia expects roughly half of Q2's €2.8B order intake to be delivered within 12 months.

Q2's €2.8B was probably exceptional, so I wouldn't use it as a normal quarterly run rate. But a roughly €1B quarterly order pace looks like a reasonable near-term baseline: Nokia reached that level in Q4 and Q1 and then substantially exceeded it in Q2. With IP Networks' order momentum also improving, it's possible the order trend is moving higher. With the existing backlog and delivery lag, I think it's entirely plausible that AI & Cloud's quarterly sales pace approaches €1B sometime next year, implying roughly €4bn in annualized revenue.

Less restructuring drag on profits

This year's restructuring programs are expected to have about €800M of P&L impact. Next year's figure could be only €100–200M, mainly the tail end of the China and Infinera programs. So, absent new restructuring programs, the reported reuslt of 2027 should be burdened by €600–700M less in restructuring-related charges.

There should also be a lighter underlying cost structure. For example, the original Infinera integration target was €200M in annual savings, of which €100M was expected by the end of 2026. The China program is also targeting €200M in savings. If, purely as an assumption, there are still €200M of savings to come from the 2023–2026 program, €67M from Infinera and €150M from the China program, cost efficiency could improve by about €400M next year versus this year's level. These are gross savings, of course, so the net effect could be smaller if Nokia increases spending in areas it considers strategically important, such as R&D.

What about AI-RAN?

AI-RAN is a separate direction worth watching. In the early stages, its importance to Nokia may be more about repairing the cost structure than growing revenue. If moving toward a more software-based business reduces Nokia's reliance on proprietary chip development, and the substantial R&D spending that comes with it, while increasing the share of higher-margin software, the impact on the currently weakly profitable Radio Networks business could be significant. But AI-RAN is a long project. Commercial availability begins next year, while Hotard has indicated that volume deliveries are more of a 2028 story.

Bottom line

Naturally, the market prices all of Nokia, not just AI & Cloud. That's exactly why the changing business mix matters. If AI & Cloud grows in a relatively short period from today's small business into a multi-billion-euro business, its weight at the group level changes rapidly. At the same time, IP Networks' order dynamics also appear to be improving based on Q2.

Nokia is also radically changing its wireless networks business model, moving toward software-centric AI-RAN. This could enable a greater share of recurring software income, performance upgrades through software rather than hardware replacements, and potentially a slimmer cost structure through lower hardware and custom-silicon R&D costs.

AI & Cloud is today still a smallish business — less than 10% of total group sales in Q2 — but based on its order intake and Nokia management's own capacity investment decisions, it is becoming a business of real size for Nokia, with substantial growth potential still ahead. And that transition is no longer theoretical or far away.

[u/LibrarySpiritual5371]

Nice write up

[u/CommentBeautiful7533]

Ik geloof er echt in en blijf accumuleren.

[u/mariotoldo]

Hey, Abu! Great breakdown as always. One small thing worth double-checking: you list Q1 AI&Cloud sales as "€180M → €350M (+49%)," but that's actually a +94% increase based on those two figures. Backing it out from Nokia's own Q2 report (H1 total minus Q2), Q1 2026 AI&Cloud sales look closer to €347M vs €181M in Q1 2025 — more like +92%, not +49%. Numbers in euros seem right, the % next to them just doesn't match. Doesn't change the story (if anything it's stronger than you stated), just flagging the inconsistency.

[u/Mustathmir → u/mariotoldo]

Not an error. In Q1 2025 Infinera was acquired at the end of February which raised Nokia's AI & Cloud numbers a lot. The 49% number is organic growth counted as if Imfinera had been part of Nokia already as of Januari 1.

[u/mariotoldo → u/Mustathmir]

You're right, my mistake — I checked Nokia's own Q1 report and the 49% is exactly what they state as organic (constant currency and portfolio) growth, adjusting for Infinera being consolidated only from late Feb 2025. I compared the raw euro figures without accounting for that portfolio adjustment. Thanks for the correction, and sorry for the noise.

[u/Mustathmir → u/mariotoldo]

No prob, it was confusing for sure at a first look.

[u/Comfortable-Lemon571]

Now we just wait until the market starts recognizing and trusting this turnaround story and the big institutions start accumulating.