To The Moon

Management View

• “Team Nokia continues to deliver on our commitments and execute on our strategy. Growth is accelerating in the areas where we have chosen to focus and invest. That growth is also beginning to translate into stronger operating leverage.” (President & CEO Justin Hotard)

• “In AI and cloud, net sales grew 123% year-over-year and represented 12% of total group net sales in the quarter… Order intake was strong again, up 118% year-over-year to EUR 1.5 billion gross.” (President & CEO Hotard)

• “Optical Networks and IP Networks are now on track to grow somewhat above the 18% to 20% assumption we provided for the full year.” (President & CEO Hotard)

• “In optical manufacturing, our new San Jose fab remains on track to start production before the end of the year… We've completed 90% of the process development and the process recipes and expect 24/7 operations to begin by the end of this month.” (President & CEO Hotard)

• “Net sales grew by 9%… Operating profit was EUR 605 million, and operating margin increased 220 basis points to 11.7%… Free cash flow was negative EUR 99 million… We ended quarter 3 with a net cash position of EUR 2.6 billion.” (Chief Financial Officer Marco Wiren)

Outlook

• “For 2027, we now expect these businesses to grow between 25% and 30% on a combined basis, reflecting the strength of the underlying market and our position to capture that demand.” (President & CEO Hotard)

• “There is no change to our comparable operating profit guidance. We continue to track above the midpoint of our comparable operating profit guidance range… Looking at the fourth quarter specifically, we currently assume a sequential increase in net sales of between 20% and 24%.” (CFO Wiren)

• “The strength of the performance we saw in quarter 3 reflected some pull-forward from quarter 4 as we work to improve linearity.” (CFO Wiren)

Financial Results

• “Gross profit was EUR 2.3 billion, and gross margin was largely stable at 44.6%… The improvement in Mobile Infrastructure gross margin was offset by product mix in Network Infrastructure and the costs associated with ramping new products.” (CFO Wiren)

• “Net sales grew 15%… Optical Networks grew 18%… IP Networks grew 43%… Fixed Networks declined 22%, reflecting the portfolio actions we are taking to prioritize higher-margin products.” (CFO Wiren)

• “We currently expect gross margin to improve in the fourth quarter.” (CFO Wiren)

• “Technology Standards grew 8%… In quarter 4, we expect slower deal activity and therefore, a lower revenue level than what we have seen in the last few quarters.” (CFO Wiren)

• “We now expect restructuring charges of approximately EUR 1.1 billion in 2026, and restructuring and associated cash outflows will now be between EUR 800 million and EUR 900 million.” (CFO Wiren)

• “Given the strength of the demand opportunity and the growth we now expect in 2027, we plan to invest an additional EUR 400 million in working capital… we now expect free cash flow conversion for 2026 to be between 35% and 55%.” (CFO Wiren)

Q&A

• “Maybe if you could just give an update around your 6-inch ramp in indium phosphide, how are yields progressing?” (Robert Sanders, Deutsche Bank) — President & CEO Hotard: “Fab 2 is our 6-inch indium phosphide fab… we're very pleased with the ramp… 90% of the process development is done moving into 24/7 operations… the key milestone is seeing us enter production by year-end.”

• “One of your competitors has offered a forecast for the optical business growing on the order of 30% in each of the next 2 years… how do you see this particular market shaping up…?” (Simon Leopold, Raymond James) — President & CEO Hotard: “We're providing a view of IP and optical combined of 25% to 30%… Rest assured, we see a very durable market here.”

• “Do you think that such growth pace would be maintained short term? Or are you already starting to be constrained…?” (Artem Beletski, SEB) — President & CEO Hotard: “On IP Networks, we're starting from a pretty low base… as we think about '27… what we see is Optical contributing a little bit more.”

• “Your Nordic peer commented about gross margin headwinds in '27 based on the constraints and the price increases… Is that your view as well…?” (Daniel Djurberg, Handelsbanken) — CFO Wiren: “There are broad-based constraints when it comes to supply and price increases… that's why we are working on different fields to try to mitigate those impacts.”

• “How material a headwind are you seeing from new products? And what would you be thinking about Q4…?” (Sami Sarkamies, Danske Bank) — CFO Wiren: “We believe that this dilution that we've seen is temporary… in quarter 4, we should see improvement in the gross margin levels.”

• “Could you maybe shed some light on roughly what portion of those orders are for 12-month delivery versus long-term deals?” (Richard Kramer, Arete) — President & CEO Hotard: “The majority of orders we've seen are kind of in a 12-month time frame… still largely within '27.”

• “Are you expanding the number of customers that you have in IP Networks…?” (Sandeep Deshpande, JPMorgan) — President & CEO Hotard: “I don't think about it at a customer-by-customer level… each design win in each customer is like its own product revenue stream and product life cycle.”

Sentiment Analysis

• Analysts were slightly skeptical, pressing on execution risk and durability of demand (fab yields, supply constraints, margin dilution, and order timing), including “how are yields progressing?” and questions on “gross margin headwinds in '27.” (Deutsche Bank; Handelsbanken)

• Management tone was slightly positive in prepared remarks and more measured in Q&A, using confidence language on growth and profitability trajectory, including “we're very pleased with the ramp” and “Rest assured, we see a very durable market here.” (President & CEO Hotard)

• Versus last quarter, the discussion shifted from explaining “lumpy” long-term orders to emphasizing conversion and 2027 growth expectations, while continuing to highlight supply constraints and ramp-related margin effects. (President & CEO Hotard)

Quarter-over-Quarter Comparison

• The AI and cloud segment was described as larger in Q3, with “net sales grew 123% year-over-year and represented 12% of total group net sales,” compared with Q2 describing AI and cloud as “net sales more than doubled year-on-year to EUR 446 million” and emphasizing that “approximately half the order volume received in Q2 is expected to convert to revenue in the next 12 months.” (President & CEO Justin Hotard)

• Guidance language tightened around Optical and IP Networks: Q3 introduced “we now expect these businesses to grow between 25% and 30%” for 2027, while Q2 focused more on the scale-up path and supply constraints rather than a specific combined 2027 growth range. (President & CEO Hotard)

• Cash flow framing became more explicit in Q3, with planned working-capital investment and a revised 2026 conversion range, versus Q2 positioning free cash flow seasonality and tracking “towards the low end” of the prior conversion assumption. (CFO Marco Wiren)

Risks and Concerns

• “We continue to see demand that exceeds supply.” (President & CEO Hotard)

• “There are broad-based constraints when it comes to supply and price increases.” (CFO Wiren)

• “Given the strength of the demand opportunity and the growth we now expect in 2027, we plan to invest an additional EUR 400 million in working capital… While this outcome is partly due to acceleration in growth… we continue to focus strongly on cash flow.” (CFO Wiren)

• “In quarter 4, we expect slower deal activity and therefore, a lower revenue level than what we have seen in the last few quarters.” (CFO Wiren)

Final Takeaway

Management tied Q3’s higher profitability to AI-and-cloud-driven growth and operating leverage, while emphasizing that supply constraints remain the binding factor across Optical and IP Networks. Leadership raised its 2027 growth view for Optical and IP Networks to 25%-30% combined and reiterated it was tracking above the midpoint of full-year operating profit outlook, while also outlining higher 2026 restructuring charges and a larger working-capital build that lowered the free-cash-flow conversion expectation. $Nokia Oyj(NOK)$