Nokia bets on AI with new strategy, targets up to 60% profit rise

Core Strategy - Nokia unveiled a new strategy focused on artificial intelligence, aiming to simplify its business and boost annual core profit by up to 60% over the next three years [1] - The company plans to reorganize into two primary businesses: network infrastructure dedicated to AI and data centers, and mobile infrastructure focused on core telecom activities [1] Financial Targets - Nokia is targeting an annual comparable operating profit of €2.7 billion to €3.2 billion ($3.1 billion to $3.7 billion) by 2028, compared to €2 billion last year [2] Growth Initiatives - The growth plan comes amid a slowdown in 5G investments, with Nokia acquiring U.S. optical networking firm Infinera to tap into the AI boom [3] - The acquisition has boosted sales and was followed by a $1 billion equity investment from Nvidia, which acquired a 2.9% stake in Nokia [3] - Demand from major cloud providers is increasing, with nine out of the ten largest cloud providers now utilizing Nokia's technology [4] Cost Management - Nokia plans to establish a new defense incubation unit to provide secure connectivity to Western countries [4] - The company aims to reduce group operating expenses to €150 million by 2028, down from €350 million [4] Market Reaction - The strategy announcement negatively impacted investor sentiment, causing Nokia shares to fall as much as 6%, although they remain up 25% year-to-date [5] - Analysts noted that market expectations were high following a strong share price increase [5] Analyst Insights - Some analysts believe the new strategy is not a radical departure from the current focus, but there are concerns regarding the substantial investment in AI and the uncertainty of returns [6]