Nokia: ‘Datacenters will be our number one growth target for the coming years’

Finnish telecom equipment supplier Nokia is placing all its cards on datacenter networking demand as it continues to face weak momentum in its traditional core segment of mobile carriers.

“Datacenters will be our number one growth target for the coming years. There will be others as well, but that will be the number one,” CEO Pekka Lundmark told investors in a Q3 earnings call.

Nokia reported 4.33bn euros (US$4.70bn) in net sales in Q3, down 8% year-over-year. Latin America accounted for a 5% slice of the pie, or 222mn euros, down 15%.

The decline in Latin America was mainly driven by mobile networks. Year-to-September, LatAm revenues were 608mn euros, down 16%.

In datacenters, Nokia's goal is to get more and more inside the datacenter "fabric,” said Lundmark.

The company sees the role of optics increasing not only for connections between datacenters but gradually also inside datacenters, for the connection of servers to each other.

According to the executive, the expectation is for a market of “extremely high volumes” both in hyperscaler and smaller datacenters.

Nokia also said it is increasing investments in IP networks to diversify this business towards mission critical networks and into the datacenter space.

The acquisition of US optical vendor Infinera comes as part of that.

Nokia has received antitrust approval in the US for the deal and the nod from Infinera's shareholders. The company expects to close the transaction in 1H25.

“I believe the future combined company will be extremely well positioned for future growth and, importantly, towards new AI-driven datacenter opportunities,” said Lundmark.

PRIVATE NETWORKS

Nokia, like rival Ericsson, is seeing early signs of recovery in the mobile segment despite the sequence of poor results.

Lundmark anticipates a recovery in the overall wireless market next year, in line with market analysts’ expectations and forecasts.

In the meantime, if telcos’ demand is low a silver-lining in mobile networks has been enterprises. 

Nokia reports having nearly 800 customers for private networks on a global basis. 

The company is a global and regional market leader in the field, and in Latin America has projects with Petrobras, Vale, Codelco, Antofagasta Minerals, Las Bambas and Mexico’s Progreso port, among others. 

The vendor is now looking at segments other than energy, mining or infrastructure to continue growing on this front.

“A little bit more longer term, mid to long term… increasingly important will be the defense industry, where we have promising traction,” Lundmark told the call, adding more details would be shared during the company’s Capital Markets Day.

Among mobile carriers, Nokia felt the punch of losing a major AT&T 5G contract to Ericsson in the US.

“After the AT&T decision, which of course was a big negative to us, we have been winning much more than what we have lost,” said the CEO.

In Latin America, the company outbid Ericsson to secure a new long-term contract in Brazil with TIM. 

In its results report, Nokia made reference to that by highlighting Brazil, together with India, Japan, New Zealand and Vietnam, among markets with somewhat "good momentum" in mobile network contract wins.

In Costa Rica, the company was also chosen as the primary 5G vendor for mobile carrier Racsa.