Nokia to Slash More Jobs in Europe as AI Drives Sales Growth

“We determined that we wanted to invest a little bit incrementally in the restructuring above what we had committed to – to take advantage of some additional savings opportunities,” said Hotard on a call with reporters earlier today. “We won’t get into the headcount detail in terms of what that means, but we see this as a good investment in terms of delivering additional productivity benefits for us across the organization.”

It is expected to cost about €200 million ($228 million), which would be roughly a quarter of what Nokia previously reckoned it would have to spend on implementing Lundmark’s much bigger program. The objective there was to shrink the workforce by somewhere between 9,000 and 14,000 employees (it has turned out to mean 14,000). A rudimentary extrapolation is that further cuts could amount to more than 2,000 European jobs.

On top of this, Nokia expects to recognize charges of about €350 million ($399 million) this year on a restructuring in China, a market from which Hotard thinks Nokia may ultimately be ejected. At the end of 2025, it took full ownership of Nokia Shanghai Bell, previously a joint venture with state-backed China Huaxin. By integrating the China business with its global operations, Hotard hopes to realize cost savings of about €200 million.

Chasing profits
Delivering profitability for its shareholders has been a struggle for Nokia’s bosses ever since the company’s €15.6 billion ($17.8 billion) takeover of rival Alcatel-Lucent in 2016. Second-quarter results out today point to healthy improvement in “comparable” results, with net profit up 64% year-over-year, to €414 million ($473 million). Nokia’s comparable gross margin for the quarter also grew by 0.7 percentage points, to 46%, while its operating margin gained the same amount, hitting 9%.

But “comparable,” Nokia’s preferred set of metrics, masks numerous expense items whose impact is shown in the less impressive “reported” results section of Nokia’s earnings report. On that basis, its net profit fell 95%, to just €5 million ($5.7 million), and it suffered an operating loss of €50 million ($57 million), compared with a profit of €147 million ($168 million) the year before.

Shareholders, nevertheless, have plenty of other reasons to be happy with Hotard. Nokia’s second-quarter sales rose 8% year-over-year (9% on a constant-currency basis), to more than €4.8 billion ($5.5 billion), thanks largely to demand from AI data centers and telcos for the vendor’s range of Internet Protocol and optical network products.

High-speed connectivity is needed within and between the data centers training AI’s large language models, and Nokia is one of the few western companies that can provide it. At its network infrastructure (NI) business group, housing those IP and optical assets, revenues grew 12%, to more than €2 billion ($2.3 billion).

The long-running concern is that AI looks frothy. The bubble may eventually burst, hurting Nokia and other companies profiting from that market. Nokia’s share price surged from €5.52 at the start of the year to €14.81 in June following a tie-up in late 2025 with Nvidia, which has invested €1 billion ($1.1 billion) in the Finnish vendor, and Hotard’s decision to prioritize the optical part of his business. Since then, however, it has tumbled to €9.35.

Component shortages and costs are a further worry. Rampant AI demand has, especially, forced up the price of memory chips used in network products and resulted in lengthy queues for components. “Customers are placing orders earlier,” said Hotard. “Being a little bit more proactive on inventory than certainly we were a year ago or two years ago is a natural effect of the supply constraints.”

The positive aspect is that quarterly sales to AI and cloud customers have doubled, to €446 million ($509 million), compared with the same period of 2025. Nokia also booked €2.8 billion ($3.2 billion) worth of new IP and optical orders as customers reacted quickly to “secure supply,” revealed Hotard. “One key point here is that we see about half of those orders converting in the next 12 months.”

Nokia is also channeling investment into this part of its business. In San Jose, California, it is opening a new fab dedicated to indium phosphide, a critical ingredient in optical network products. In Pennsylvania, where it does optical testing and packaging, it has upped capacity tenfold. It has also just acquired a site in Arizona from NXP of the Netherlands to further expand its indium phosphide manufacturing footprint. NXP previously used the facility to produce gallium nitride-based power amplifiers for 5G networks, but it was shuttered last year, with NXP blaming that decision on weak 5G demand.

Mobile malaise
The Finnish vendor would know all about conditions in that 5G market. Of the three units that make up NI and the three that were recently joined to create a mobile infrastructure (MI) business group, the biggest by sales remains radio networks, formerly the main part of Nokia’s mobile networks group.

For the second quarter, it accounted for 37% of Nokia’s headline sales. But it has been dented by market share losses that occurred before Hotard’s tenure and a slump in 5G spending. Overall market sales of radio access network (RAN) products have fallen from $45 billion in 2022 to $35 billion last year, according to Omdia, a Light Reading sister company. It does not anticipate a recovery.

Somewhat surprisingly, though, MI reported second-quarter revenue growth of 6% (7% on a constant-currency basis), to nearly €2.7 billion ($3.1 billion). And within that, the radio networks unit enjoyed the same rates of growth, all while Ericsson saw a constant-currency sales decline of 4% at its equivalent unit for the second quarter.

The relatively strong Nokia performance was partly due to the earlier-than-usual recognition this year of RAN software revenues, which normally show up in the third quarter, explained Hotard. But he also observes customers responding positively to Nokia’s big move on AI-RAN – its decision to build 5G and 6G network products based on Nvidia’s graphics processing units, the chips normally associated with AI data centers. “There continues to be a lot of excitement about the potential of AI-RAN,” said Hotard.

Even so, profitability has been elusive within Nokia’s mobile parts, where the company has most aggressively cut jobs. Despite the sales improvement, its second-quarter operating margin slid from 12.2% a year earlier to 11.6%. The figure of €310 million ($354 million) in operating profit is also significantly less than the €407 million ($465 million) that Nokia generated in revenues at the unit of MI responsible for “technology standards,” which carries minimal expenses.

Cost cutting is certainly not unique to Nokia. Ericsson finished June with precisely 86,536 employees, down from more than 105,500 in 2022. Similarly affected by higher component prices, it has warned investors of further remedial steps, indicating that the gross margin at its networks business could feel some pressure this quarter. If AI persuades network customers to open their wallets, so much the better for both Nordic players.

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