Nokia's AI and Cloud Business Just Doubled

Nokia reported Q2 2026 results on July 23, 2026, and the AI and Cloud segment which barely existed in Nokia's product mix two years ago delivered a 105% year-over-year increase in net sales to 508 million dollars. 

Order intake for the same segment reached 3.18 billion dollars, driven by demand for data center interconnect and scale-across fabrics as hyperscalers build out AI factory infrastructure at speed, according to the report.

CEO Justin Hotard told analysts that, "Order patterns in this market can be lumpy and we should not expect this level of intake every quarter."

Approximately half of Q2's intake is expected to convert to revenue within the next 12 months, with the rest reflecting customers securing supply on longer timelines in a constrained market. 

Nokia is capacity-constrained on leading-edge optical components, and customers are elongating orders to secure allocation. "We're seeing growth in both IP and optical elements," Hotard said, "as customers build out AI factories."

The AI RAN Announcement

The week before the earnings call, Nokia made the announcement with the most long-term structural significance in its recent history. 

On July 15, Nokia launched what it described as the industry's first commercial AI RAN platform, a partnership with NVIDIA that replaces purpose-built silicon in radio base stations with general-purpose GPU-based compute running a software-defined stack.

Hotard described the platform as representing "a fundamental shift from a hardware-defined radio network to software-defined platforms." 

The platform is expected to deliver more than 100% spectral efficiency gains by 2028, doubling the capacity operators can extract from their existing spectrum through software rather than hardware upgrades, according to the report. It also provides a software upgrade path to 6G without additional hardware investment.

Ten public customers have been announced. Pilot deployments are expected at the end of 2026. Commercial availability is targeted for 2027, with more significant volume anticipated in 2028. T-Mobile has also been confirmed as Nokia's lead AI RAN pilot partner in the US.

Internal AI and the Google Cloud Expansion

Hotard disclosed that AI adoption has reached nearly 100% across Nokia's software developer base, generating what he described as significant productivity returns that are supporting efficiency targets and accelerating product roadmap deliverables. 

He framed this as essential to Nokia's position in the AI infrastructure market: "To be a relevant technology provider in the AI super cycle, we need to be a leading adopter of AI internally."

On the partner front, Nokia expanded its collaboration with Google Cloud to integrate Gemini-powered AI agents into its autonomous networks portfolio for network optimization, and separately demonstrated AI-powered network slicing with Vodafone Albania, using agents to dynamically allocate network resources in real time.

Nokia's broader Q2 performance reflected the AI tailwind across the business. Net sales grew 9%, gross margin expanded 70 basis points to 46%, and operating margin increased 70 basis points to 9%, according to the report. 

The company is investing heavily in US-based indium phosphide semiconductor manufacturing, 10x increase at its Pennsylvania facility and a new Arizona site acquired from NXP, to build the optical component supply that AI infrastructure demand requires.