Nokia shares fall despite meeting fourth-quarter profit targets

Finnish telecommunications equipment manufacturer Nokia announced Thursday it will recommend Timo Ihamuotila to take over as board chairman from Sari Baldauf, who plans to leave the position she has held for the past five years.

The leadership transition comes as the company met its fourth-quarter profit targets, though investors responded negatively, sending Nokia’s stock down 6% during morning trading in Helsinki. The decline placed Nokia among the poorest performers on the Stoxx 600 index, Europe’s main stock market benchmark.

New chairman brings financial experience

Baldauf first joined Nokia in 1994 and worked there until 2005, a period when the company dominated the global mobile phone industry. She came back to Nokia in 2018 and took on the chairman role in 2020, making her one of the company’s most experienced leaders.

Ihamuotila already sits on Nokia’s board as vice chairman. He previously worked as the company’s chief financial officer from 2009 through 2016. Currently, he holds a position at Swiss industrial group ABB, which he will leave by the end of 2026.

The company’s operating profit for the October-through-December period came in at 1.05 billion euros, or $1.26 billion, representing a 3% drop compared to the same quarter a year earlier. This figure matched the average prediction of 1.01 billion euros from analysts surveyed by LSEG. Sales for the quarter reached 6.12 billion euros, also meeting what market experts had forecast.

Looking ahead to 2026, Nokia said it expects operating profit to land somewhere between 2 billion and 2.5 billion euros. Analysts at Jefferies described this projection as “somewhat conservative” in their assessment of the results. The company also announced it would maintain its dividend payment at up to 14 euro cents for each share, keeping it at the same level as the year before.

Nokia is currently going through one of its largest reorganization efforts since it sold off its once-famous mobile phone division more than ten years ago. The company is betting that growing demand for artificial intelligence technology and data centers will make up for reduced spending and lost contracts in the 5G wireless market.

With a 17% growth, the Optical Networks division performed the best. Demand for cloud computing and artificial intelligence drove this unit’s strong orders, which kept the book-to-bill ratio above one. Nokia intends to invest in this business sector to promote future outcomes since it sees it as crucial for growing AI infrastructure.

Last year, the company brought in Justin Hotard, a former Intel executive, as its new chief executive to accelerate this strategic shift. However, Nokia issued a profit warning related to import taxes in the United States and a declining dollar, which have squeezed profit margins and created pressure for additional cost reductions.

Transatlantic cooperation remains essential

During an interview with Reuters on Thursday, Hotard discussed the relationship between European and American markets. He emphasized that major technology firms cannot survive by operating in just one region.

“Every single one of us cannot subsist on one continent or the other. We need both,” Hotard said. “Particularly in technology, where the window and the right to win is dictated by that technology cycle, it’s really critical that you have as big a market access as possible. Every single one in Europe and the U.S. that is of scale is dependent on the European and U.S. markets for scale. If you just do the analysis, there’s a significant codependence,” he added.

Nokia and Sweden-based competitor Ericsson have both promoted themselves as trustworthy Western providers of network equipment while governments reconsider their relationships with Chinese manufacturers. The United States does not have a major domestic telecom equipment maker, forcing American carriers to depend on Nokia, Ericsson, and South Korea’s Samsung after Chinese companies were blocked due to national security worries.

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