Nokia Q1 profit beats expectations, AI data center transformation shows initial results

According to Bloomberg, Nokia's adjusted operating profit for Q1 2026 reached €281 million, exceeding analyst estimates of €244 million by approximately 15%. The veteran Finnish company, previously mired in the mobile network equipment business, is attempting a generational transformation through its AI data center connectivity business. (Previous coverage: Is Nokia launching a Web3 phone? Files patent for digital asset encryption, bullish on blockchain development) (Background: Nvidia earnings report arrives tonight! Polymarket shows a 90% probability of beating expectations, Hyperliquid whales go long on NVDA with 10x leverage) Nokia released its Q1 earnings: adjusted operating profit of €281 million, surpassing the €244 million estimated by analysts, a difference of about 15%. While this figure itself is not spectacular, the story behind it is worth noting. This veteran European company, which has spent two decades spinning its wheels in the mobile communications equipment market while waiting for the 5G upgrade cycle that was slow to arrive, is attempting to redefine itself. Bloomberg points out that Nokia's stock price has nearly doubled over the past year, driven not by any specific quarterly figure, but by the market's collective imagination regarding the "AI infrastructure transformation." Nokia completed a business restructuring late last year. The company split its operations into two core units: 1. Network Infrastructure, focusing on connectivity equipment for AI data centers. 2. Mobile Infrastructure, which handles the traditional mobile network equipment business. Remaining non-core assets were bundled into "Group Common and Other," while the defense business was incubated separately. In short: Nokia is betting its future on "data center connectivity," bundling its past business to maintain it, and focusing on moving forward. The figures for this quarter provide initial validation of this logic. CEO Justin Hotard stated that the company remains within its guidance of €2.0 billion to €2.5 billion in annual adjusted operating profit. During the earnings call, he specifically highlighted AI and cloud customers as the primary sources of growth for the quarter, rather than the traditional mobile equipment business. Nvidia invested $1 billion in Nokia last year and will provide AI computing equipment for the AI-driven upgrade of wireless networks. Customer trials are expected to begin later in 2026, with 10 customers currently confirmed to participate. The logic behind this investment is worth dissecting. Nvidia's moat has long been built on data center GPUs, but as AI inference demand—the computing required for every AI model response to a user request—extends from the cloud to the edge network, wireless infrastructure has become the new battlefield. Nokia's mobile equipment technology, combined with Nvidia's computing power, creates an attempt to "let cell towers run AI." The $1 billion is not a charitable investment; it is Nvidia's play in the next layer of computing infrastructure, and Nokia is part of that entry ticket. Nokia's biggest European competitor, Ericsson, released a different version of the story last week. Bloomberg reported that Ericsson's earnings fell short of analyst expectations, and the company warned that surging chip demand is driving up costs. This contrast is worth a closer look: as the two giants of European mobile equipment, Nokia exceeded expectations this quarter, while Ericsson fell short. The difference between the two is not just execution, but strategic choice. Nokia placed its bets on AI infrastructure connectivity earlier, while Ericsson is struggling with chip cost pressures in its traditional business. Of course, Nokia's transformation has only just entered its first full fiscal quarter. The strong numbers this quarter are an initial signal that "the transformation is promising," rather than a final confirmation of "successful transformation." The fact that sales in the Network Infrastructure division were slightly below estimates serves as a reminder to the market: while the AI data center connectivity business is growing, its scale remains limited in the short term. The question Nokia faces next is how to truly translate the Nvidia partnership into repeatable customer revenue, rather than just a story that excites investors.