Good morning, ladies and gentlemen. Welcome to Nokia's fourth quarter and full year 2025 results call.

I'm David Mulholland, Head of Nokia Investor Relations, and today with me is Justin Hotard, our President and CEO, along with Marco Wirén, our CFO. Before we get started, a quick disclaimer.

During this call, we will be making forward-looking statements regarding our future business and financial performance, and these statements are predictions that involve risks and uncertainties. Actual results may therefore differ materially from the results we currently expect.

Factors that could cause such differences can be both external, as well as internal operating factors. We have identified such risks in the risk factor section of our annual report on Form 20-F, which is available on our Investor Relations website.

Within today's presentation, references to growth rates will mostly be on a constant currency and portfolio basis, and other financial items will be based on our comparable reporting. Please note that our Q4 report and a presentation that accompanies this call are published on our website.

The report includes both reported and comparable financial results and reconciliation between the two. In terms of the agenda for today, Justin will go through our key messages from the quarter, then Marco will go through the financial performance, and then we'll move on to Q&A.

With that, let me hand over to Justin.

Hello, everyone, and thank you, David. Overall, our fourth quarter performance was in line with our expectations, reflecting disciplined execution across the business.

Net sales grew 3% in the quarter to €6.1 billion, with operating profit of €1 billion and free cash flow of €0.2 billion. For the full year, net sales were €19.9 billion and operating profit was €2 billion, slightly above the midpoint of our guidance.

Free cash flow conversion of 72% was also consistent with our guidance. Stepping back, 2025 was a foundational year in repositioning Nokia for long-term value creation.

We strengthened our portfolio with the acquisition of Infinera, simplified our operating model, and set a clear strategy at our Capital Markets Day to focus the company on the areas where we see opportunities for differentiation, scale, and sustainable market leadership. Now to give you a bit more detail, let me first turn to Network Infrastructure.

In the fourth quarter, net sales grew 7%, driven by Optical Networks, which grew by 17%. Order intake was solid across both Optical and IP Networks, with a book-to-bill above 1, supported by particularly strong demand from AI and cloud customers.

For the full year 2025, we delivered €2.4 billion in orders from AI and cloud customers. This reinforces our view that optical networking will become an even more critical part of the infrastructure to support the AI supercycle, and we are investing to capture near-term demand while maintaining a long-term perspective on the opportunity.

In Optical, our 800-gig ZR and ZR+ pluggable products are shipping, with initial units performing well in the field. We now have multiple design wins and are supplying into scale deployments.

Our focus is on ramping production to meet the strong demand we see in the market. In IP Networks, we made progress on our expansion into data center switching.

We launched two new products in the quarter: the 7220 IXR-H6 switching platform powered by Broadcom's TH6, and our agentic AI solution for event-driven automation management, which reduces network downtime by 96%. We also secured a design win for our next-generation data center switching platform.

These are encouraging steps, and we continue to believe revenue will ramp over time as we expand our presence in this rapidly growing market. In our mission-critical enterprise customer segment, book-to-bill was well above 1 in Q4, supported by a growing pipeline from both new and existing customers.

Turning to Fixed Networks, performance was stable year-on-year in Q4. As discussed at our Capital Markets Day, we are deprioritizing certain customer premises equipment products where we do not have meaningful differentiation and which dilute margins.

In Q4, our fiber OLT business grew 16% year-over-year, offset by declines in these areas I just referenced that we are deemphasizing. This resulted in overall flat performance for Fixed Networks.

As I announced at our Capital Markets Day on January 1st, we brought together Core Software, Radio Networks, and Technology Standards to form our new Mobile Infrastructure segment. This structure is designed to sharpen accountability, improve profitability, and position the business for long-term technology leadership.

Core Software, formerly a part of Cloud and Network Services, is leveraging our differentiated cloud-native core network stack to grow faster than the market and continue improving profitability. During the quarter, we won a 5G core deal with Telia and announced a collaboration with Bharti Airtel on Nokia's Network as Code API platform.

We now have more than 75 partners using the platform, including 43 telcos. Radio Networks, formerly a part of Mobile Networks, focused on disciplined execution in a largely stable market.

We continue to invest to deliver 5G-Advanced and Open RAN solutions while innovating to establish a longer-term leadership position in 6G and AI-native networks. A key pillar of our strategy is co-innovation, and in Q4, we announced our partnership with NVIDIA.

We continue to remain on track to begin trials and proofs of concept on AI-RAN later this year. We also announced a market share expansion deal with Telecom Italia, along with contract extensions with Telefónica Germany and SoftBank.

Technology Standards remains focused on securing long-term monetization of Nokia's patent assets. We signed several deals in Q4 and continue to maintain a contracted net sales run rate of approximately €1.4 billion.

At our Capital Markets Day, we also announced the creation of Nokia Defense, a new incubation unit that will serve as the central R&D hub and go-to-market for our defense portfolio. Our priority is to deliver defense-grade solutions based on Nokia's mobile and network infrastructure technologies for Finland and other NATO countries.

Nokia Defense also includes Nokia Federal Solutions in the US, and includes the technology we acquired from Fenix Group in 2024. Based on feedback from customers, we see growing demand for our 4G and 5G technology in military environments, both for national security and tactical applications.

This is an area where we are continuing to invest, and we will share updates as we make further progress. Finally, in Q4, we closed the transaction to take full ownership of our joint venture in China, Nokia Shanghai Bell.

This gives us greater operational flexibility, and we will bring it into full alignment with Nokia's global operating model. As a part of that integration, we expect to deliver approximately €200 million of run-rate cost synergies, with integration costs of approximately €350 to €400 million over a period of 24 to 36 months.

Turning to '26, looking ahead, our focus is on disciplined execution to capture growth in AI and cloud and increase efficiency while we're building a high-performance culture across Team Nokia. We now have fewer, clearer priorities, a simplified operating model, and a strategy we are executing with speed and accountability.

Network Infrastructure remains our primary growth engine, particularly Optical and IP Networks, where we see strong structural demand. In Mobile Infrastructure, our focus is on gross margin and efficiency, while we continue to invest in our portfolio for competitiveness and market share in 5G and to transform the business for long-term success in areas such as AI-native networks and 6G.

From a financial perspective, in 2026, we are targeting an operating profit in the range of €2 billion to €2.5 billion. At our Capital Markets Day, we outlined a series of KPIs to illustrate how our strategic direction translates into financial outcomes.

Let me revisit those and what we expect in 2026. Our first KPI is to deliver 6% to 8% compound annual growth in Network Infrastructure between 2025 and 2028 on a constant currency and portfolio basis, and 10% to 12% in the combined Optical and IP Networks businesses.

In 2026, we expect growth rates in both cases to be in line with these long-term targets. As expected, the product prioritization decisions we have taken will limit growth in Fixed Networks, while we expect growth in our fiber OLT portfolio to continue to occur due to strong underlying demand.

Our second KPI is to expand Network Infrastructure operating margin to 13% to 17% by 2028. This is compared to the 9.5% achieved in 2025.

In 2026, we expect measured margin expansion as we ramp new products and continue investing in the long-term growth opportunity we see in the business. The next two KPIs relate to Mobile Infrastructure gross margin and operating profit.

In 2026, we continue to expect some top-line headwinds from prior contract losses, but otherwise a stable market environment. Our focus is to continue to target at least €1.5 billion in operating profit, consistent with our performance in 2025.

As announced at our CMD on January 1st, we have moved four businesses into a new unit called Portfolio Businesses. This includes our Fixed Wireless Access customer premises equipment and site operations businesses, both from Fixed Networks, our microwave radio business from Mobile Networks, and the Enterprise Campus Edge business from Cloud and Network Services.

In 2025, these businesses generated net sales of €850 million and an operating loss of €97 million. In 2026, our target is to conclude a future direction for each of them.

We currently assume a lower operating loss in 2026 versus 2025. For Group Common, we expect costs of approximately €150 million in 2026, compared with €190 million in 2025.

Overall, we see 2026 as a year where we will make meaningful progress towards our long-term targets. With that, let me turn over to Marco to walk you through the financials in more detail.

Marco.

Thank you, Justin, and hello from my side as well. As Justin mentioned, we delivered a fourth quarter which was in line with our expectations and guidance.

Net sales were €6.1 billion, that's up 3% on the prior year. Gross margin was 48.1%, an improvement of 90 basis points, driven by improvements in Mobile Networks and Cloud and Network Services.

Operating margin was 17.3%, and this is 90 basis points below the prior year, impacted primarily by increased investments in growth areas, including the Infinera acquisition. We generated €226 million of free cash flow and ended the quarter with €3.4 billion of net cash.

Let's turn to the business groups now, and starting with Network Infrastructure, where net sales grew 7%. In quarter four, AI and cloud customers accounted for 16% of our net sales and 30% of Optical Networks.

The book-to-bill for the overall segment was above 1, with strength in IP and Optical Networks. Gross margin declined by 80 basis points to 44.6%.

Operating margin was impacted by lower gross margin, along with the increased growth-related investments in R&D and the costs associated with the acquisition of Infinera. Then let's go to Cloud and Network Services, where we saw a decline by 4% in the quarter, and this was mainly due to a different phasing of revenue recognition this year.

The business delivered 6% of net sales growth for the full year 2025. Gross margin increased 650 basis points, partly as a result of the reversal of a provision of €37 million in the quarter.

Even without this benefit, we would have seen an improvement in gross margin. Operating margin also increased by 470 basis points, with improvement in gross margin supported by reduced operating expenses.

Then Mobile Networks net sales increased by 6%, and this was driven by growth in Middle East and Africa, Japan, and Indonesia. Full year net sales were stable and consistent with our expectations.

Gross margin was 40.1% due to more favorable mix and lower indirect costs. For the full year, gross margin was 37%.

Operating margin was 11.3% in the quarter, reflecting the higher gross margin as well as the impact of lower operating expenses benefiting from the ongoing cost-saving program. Nokia Technologies net sales declined by 17% in the quarter.

Catch-up sales in this quarter were lower than the previous year, and we signed several new deals in quarter four, and our annual net sales run rate remains at approximately €1.4 billion. Operating profit was impacted by a €20 million impairment charge, and this was related to a prior asset purchase which we deemed to have minimal future value in the context of our broader portfolio.

Now let's look at the net sales by region. As you can see here, in North America, we saw strong growth in Network Infrastructure, whilst Cloud and Network Services and Mobile Networks declined.

In APAC, Japan and Indonesia grew, while we saw declines in India and Greater China. Excluding Nokia Technologies, Europe grew 4% with strength in Network Infrastructure.

Middle East and Africa grew in both Mobile Networks and Network Infrastructure. Then regarding cash, we ended the quarter with a net cash position of €3.4 billion, and the free cash flow was positive €226 million, and ending the year with a conversion rate of 72%, which is within our guided range of 50% to 80%.

In the quarter, cash increased as a result of the NVIDIA equity investment, which was 0.9 billion. We also completed the acquisition of the NSB shares, which impacted cash by half a billion euros.

This equates to 50% of the net cash in the joint venture, which we paid to the other joint venture equity owner, and was consistent with the liability we had already recorded on our balance sheet. We now fully own our operations in China, and that will give us a greater operational flexibility going forward to manage the business, just like Justin mentioned.

Today we have also published a recast financials based on the new operating structure we have implemented at the start of the year. There are a couple of things that I wanted to highlight to help you understand these figures.

You will see some differences in the net sales compared to our prior reporting, reflecting those units being moved into the new Portfolio Business segments, as Justin explained earlier. In Group Common, the recast cost base for '25 is €180 million, as we have reallocated approximately €193 million of the costs to primary operating segments to better reflect the nature of these costs.

As discussed at our Capital Markets Day, the operating segments are expected to drive efficiencies in the organizations to mitigate those costs over time that we have transferred to them. However, this reallocation have a short-term impact on the segment profitability in NI and MI.

Finally, Justin already introduced our new 2026 financial outlook, but I just wanted to share some comments on additional modeling assumptions for this year. For quarter one, historic seasonality would imply a 24% sequential decline in our net sales, excluding Nokia Technologies.

Considering the above-normal seasonality we've seen in quarter four 2025, we currently expect quarter one 2026 net sales to decline somewhat more than normal seasonality would imply. We also assume the operating margin to be only slightly better than the prior year.

Then for the full year of '26, we expect comparable financial income and expenses of between positive €50 to €150 million. We assume a comparable income tax rate of around 26% and 27%, with a slight increase related to the regional mix of profit generation.

Cash tax outflows are expected to be approximately €500 million. We are planning for CapEx of between €900 million and €1 billion as we're investing in additional manufacturing capacity for Optical Networks, along with some real estate renewal projects.

Finally, we expect free cash flow conversion of between 55% to 75%. With that, let me hand it back to David for Q&A.

Thank you, Marco and Justin, for the presentations. Alicia, could you please give the instructions for the Q&A session?

As a reminder and as a courtesy to others in the queue, if you could please limit yourself to one question and a brief follow-up. Alicia, please go ahead with the instructions.

Thank you. We'll take our first question today from Alex Duval from Goldman Sachs.

Alex, please go ahead.

Yes, good morning everyone and thank you for the question. A couple of quick questions.

Firstly, on Optical, it grew 20% in the quarter, but it seems you're saying it will only grow 10% to 12% in full year '26. You reference good order momentum, as well as a solid percentage contribution from AI, I wondered to what degree your guidance for the segment reflects conservatism.

Secondly, as a brief follow-up, you're guiding to a somewhat sub-seasonal trend into the first quarter for the group. I wondered to what degree that's just normalization off a better than seasonal 4Q or whether there are other factors to take into account.

Many thanks.

Sure. Alex, good to hear from you, and let me answer your first question.

You're right. We obviously grew 17% in Q4 on Optical Networks.

When you look at our Optical Networking business, we are being balanced on the 10% to 12% across IP and Optical Networking, as you said. What I would also emphasize is we are still transitioning from a base that was still very telcocentric in '25, 70/30.

If you think about where we were before that, certainly before the Infinera acquisition, significantly telcocentric. We're building off that base.

We're excited about the order momentum, and then, of course, in parallel, we're working to scale production. I think as you and I have talked about, we want to be disciplined and in our execution and our predictability, and so therefore, that's why we've guided the way we have.

I continue to be very optimistic about this business and the long-term opportunity for some of the factors like scale-across networking, the demand we're seeing in overall fiber, some of the recent announcements in this area. I think this is a place where absolutely it's a strategic priority for us, absolutely it's a focus of capital allocation, and I believe it's a market that we'll be a significant player in for many years ahead, but balanced on where we are today given the starting point that we had, which is really only three quarters deep in terms of aggressively pursuing the AI and cloud segment.

For the second question, if you look in the past as well when we have had a very strong and higher than normal seasonality in quarter four, we usually see a larger decline as well. This is a little bit based on as well how our telco customers are buying.

This is more, I would say, visible in Mobile Network area, and also the telco customer base that when they have had a lot of purchases in quarter four, then usually the start of the year are a little bit slower. That's why we guide that we see a somewhat lower than what we normally see.

Thank you, Alex. We'll take our next question from Richard Kramer from Arete.

Richard, please go ahead.

Thanks very much. Justin, you're pledging to grow CapEx to really record levels of €900 to a billion euros.

Do you have visibility in your order book of optical or IP orders? Or is leveraging this investment require additional unannounced wins with hyperscalers?

Where are you in that sales cycle? I'll have my follow-up.

Thanks.

Obviously, Richard, when you think about CapEx investments in manufacturing in optical, particularly semiconductor manufacturing, as you're well aware, I'm sure, this is not something you invest in in a year and you start generating return. This is something where we're looking at the long-term trends, and we've got a lot of confidence in the long-term market trend, supported by the near-term demand that we see.

Okay. For Marco, we saw €300 million of restructuring in '25, and you're guiding to another €450 million in cash outflow.

Can investors look forward into a 2027 where you think these very heavy impacts on reported versus comparable earnings drop to immaterial revenue levels?

I think as we announced already in '23 October that we have this cost-cutting program and efficiency program, and there we laid out also the different years until '26 where we have this restructuring cost. We guided by that time that we expect cost savings between €800 to €1.2 billion, and we said that also the costs to generate these savings will be about the same.

Also the cash flow is following that. Usually the cash flow, considering that we have more footprint in the European area, and that's usually there's a delays on acting on those different cost actions that we are doing.

This is the reason why we see that '26 is more heavier in the cash outflow side as well. We are following the plan well according to what we have laid out earlier as well.

Thanks, Richard. We'll take our next question from Simon Leopold from Raymond James.

Simon, please go ahead.

Thank you very much for taking the question. First thing I wanted to ask about is, particularly within the optical space, scale-across projects are a new variant for data center interconnect.

Your peers have discussed these projects. Can you elaborate on Nokia's position and how you envision this opportunity developing over the next few years?

Then I've got a follow-up.

Sure, Simon. Good to hear from you.

Just a couple of things here. One, this is a space that we think is a part of the long-term trend on optics.

If you look at the long-term demand on optics, think of the drive around scale-across right now as being one of the most significant near-term. Obviously then you have speeds, right?

We've gone through the 400 and 800-gig transition very quickly. We're ramping on 800-gig, multiple pluggable wins as we've talked about, a lot of active customer conversations on that space, continued momentum in the market in terms of what we see.

Then we expect that 1.6 and 3.2 will come. When you look at that, scale-across is the tailwind for both the technology transitions and the demand.

Then, of course, over time, we see scale-out increasingly being an opportunity for coherent optics. That's the tailwind we see.

The other thing I would just reference as you think about this is routing for us in particular, scale-across is a tailwind for. Switching is much more about the data center racks, the spine-leaf architecture, but when you think about routing, that's another tailwind.

The key thing for us right now is spending the time doing the work, co-developing, co-innovating with our customers, making sure we're scaling production capacity to take advantage of this opportunity over the long term. Fundamentally, what I see is a much more mature and larger optical market driven by the AI infrastructure build-out than we've seen in the past.

I think a much more mature ecosystem as well. There's a lot of work to do for us as an ecosystem and as an industry, but I think a much bigger market, and that's absolutely why we're investing into it and why you see us leaning in on capital and both in terms of CapEx, but also R&D capital in this space.

Did you have a follow-up, Simon? Simon?

No. I guess we'll move on.

We'll take our next question from Sami Sarkamies from Danske Bank. Sami, please go ahead.

Thanks. You had 5% growth at IP Networks in '25.

What needs to happen for this to step up? Are the bottlenecks related to product offering, customer logos, or design wins?

Then on timing, how much time do you think we need for improvements? Could it happen already this year as you have signed new customers during last year?

Hey, Sami. Thank you for that.

I would just say a couple of things here. We've talked about the fact that, while we were well positioned post the integration of Infinera to go after the optical networking platform, this is a space where we've been even a little further behind.

It's been a big focus for me as I started, and obviously for David as he took over. In fact, we just announced earlier this week that we have a new head of IP Networks, Greg DeRaye, and Vach Kompella, who, for those of you that have been around this industry, know Vach is an industry legend, is retiring.

Part of that in bringing in Vach's successor was looking for someone that had deep data center experience. The net of all of that is, as I said at CMD and even in some of our recent discussions with investors, this is a space where I think it takes a little bit of time to see the growth.

I'm really, really pleased with the design win we had in Q4 that I referenced. I'm pleased with the order backlog.

I think this business needs a little bit of time to ramp. Absolutely a big tailwind as a part of the AI and data center build, and encouraging progress on mission-critical, where we play in select vertical markets that value scale, security, and availability, obviously things we bring from our legacy in this space in telcos.

Did you have a quick follow-up, Sami?

Okay. I'm wondering on the CapEx outlook.

Is this going to be a multi-year undertaking if you think about higher CapEx, or just one-year thing?

I think what we'll continue to do, Sami, on this, and I'll let Marco comment, is we're always going to show investment against the opportunity we see in the market. I would look at this as in line with supporting the guidance we've given you for now, and really in line on optical networking growth as we see it.

Obviously that's in the future, if we saw a different growth potential in optical, we might give you a different view on CapEx. Marco, anything?

No, I just building on what you said, that we definitely see opportunities, and that's why we believe that it's the right timing to invest more to capture those opportunities and secure also that we have manufacturing facilities and capacity that are needed to be able to deliver those demands that we see that, especially in the optical side, are increasing. Still, it's not so that these are huge CapEx investments compared to other data center investments.

These are still quite reasonable investments, and we believe that there's a very good return on those investments as well.

Thanks, Sami. We'll take our next question from Artem Beletski from SEB.

Artem, please go ahead.

Yes, hi, and thank you for taking my questions. I would like to pick your thoughts regarding recent news coming out from Brussels.

What comes to this Cybersecurity Act, Digital Network Act. How do you see those proposals impacting your business outlook what comes to upcoming years?

Look, I think on the Cybersecurity Act, the CSA, and the Digital Networks Act, DNA, look, first of all, we're pleased with this. These are some of the things we've been calling for.

Certainly since I started, I've been very vocal about. I think the key thing on the Cybersecurity Act around trusted networks is seeing a few things.

One is the clarity on replacement schedules. I also think it's important, as we've said, that there's support for network operators.

This kind of replacement is a big lift. Now, from a supplier perspective, this is well within our capacity.

If you think about the pace at which we've deployed networks in India or even in North America in terms of upgrades, the network upgrades that are required in Europe are something well within our scope and capability and manufacturing capacity. It's a complex technology project, we think this is something that we recognize there's complexity and support.

Our view is the urgency is now that we need to continue to move, and certainly for our customers, they need to have clarity because the platforms we're investing in today will be all the things that need to become 6G-ready in the near future. If you think about what we're talking about AI-RAN as an example of that, that is a great example of where if you buy an AirScale platform today, it's going to be upgradeable to AI-RAN as we launch that platform.

That's the kind of opportunity where making the investment decision now and having clarity now as an operator, as you run that project over a two or three-year period, we think is particularly important. That's why it requires support, because obviously it's not in anybody's budgets to run an accelerated CapEx program amongst our customers.

It's also not just radio. We tend to focus on that.

This is actually a really important opportunity for fiber networks and access networks, and just as important, because fixed access networks are critical for consumer, they're critical for business, and then, of course, there's the transport networks and all the underlying infrastructure. This is a pretty significant step.

We're very pleased with it. I also think when you link it to DNA and you look at some of the things around spectrum harmonization, and you look at the opportunity in Europe, and this is something that I've been certainly vocal about, was talking about last week in Davos, is this is an opportunity for Europe to reshape its long-term competitiveness.

It's long-term competitiveness in technology, it's long-term competitiveness in infrastructure and innovation, and ultimately, national security, sovereignty, and economic competitiveness. I think this is really, really important.

You can just look back at the internet supercycle to see where the winners in the internet supercycle came from as a result of significant infrastructure investment. When you think about Europe in AI, Europe is incredibly well positioned.

It's well positioned because you've got great industrial automation technologies, obviously manufacturing industries like automotive, and you've got great talent in Europe. Obviously as it being our largest talent base in the company, we want to see more investment here so we can continue to support the talent here building technology for Europe, to support Europe, and see a broader ecosystem develop.

Did you have a quick follow-up, Artem?

Yes, I would like to ask a follow-up on optical networks. Could you maybe comment whether you see some supply-related constraints what comes to growth?

I recall from CMD so you have been commenting about order growth year-to-date of being more than 40%, and we do understand that the market fundamentals are really robust on that front.

Look, it's a great question, Artem. Obviously if you think about this broader ecosystem, the one thing I would remind everybody is the consistent thing in the AI infrastructure build, there have been constraints.

There's been power constraints, there's been connectivity constraints, there's been computational silicon constraints, there's news of memory constraints right now. One of the reasons I think when we look at this, we don't see the same dynamics of the telco and internet bubble that you saw in the late '90s is because this infrastructure build has been consistently constrained.

What we see is we do see supply constraints. That's normal with this kind of scale and build, and obviously part of our investments is not just in our own capacity, but also in supporting the ecosystem and building its capability and capacity.

Again, if you look at optical, optical is not nearly running at the kinds of volumes that you'd see the microelectronics industry or the traditional computational electronics industry, because it doesn't have the same consumer volume off the side of it that's driven a lot of the automation and capacity that's existed. All of these things need to be invested in, and again, this is why we think that the market has great long-term potential given the technology, but also a lot of ongoing investment that we and the entire ecosystem need to cultivate to make sure we can deliver on the long-term success.

It's part of why we think we're favorably positioned with our indium phosphide technology and manufacturing facility.

Thanks, Artem. We'll take our next question from Daniel Djurberg from Handelsbanken.

Daniel, please go ahead.

Thank you, Operator, and hi guys. On the Mobile Networks was clearly better than expected, and some decrease primarily due to North America.

Can you comment a bit on North America? Are we comparing apples with apples now with regards to AT&T loss and also do you see any possibility inroad again with AT&T with a 600 build, for example, with the FirstNet upgrades?

Any comments would be grateful. Thanks.

Thank you, Daniel. Just like you alluded to as well, in '26, we will see some headwinds from North America in the radio access network side considering a loss that we had and that will have an impact.

Otherwise, I would say that in market-wise, we see quite stable market in the radio side. It's where we see growth is AI and cloud in North America is extremely positive trends there right now what comes to that segment.

Let me take AT&T. Just to remind everybody, AT&T is a very, very large strategic and important customer for us.

They're a customer for us across core networks, fiber access. If you think about NI and MI, they're a very important customer for us and a very strategic one given the investments that they're making today in their networks.

We've talked about a little bit of that in the past as well. Look, from my standpoint, as I think about customer opportunities and market opportunities, we want to pursue every piece of profitable market share that we can.

If we're honored to be a part of their network in the future, we'll absolutely take that opportunity. Right now, our focus is on delivering on our commitments to them and to all of our customers.

As we said in the restructuring, as you heard from Raghav at CMD, becoming an easier company to deal with from a customer perspective, particularly for our telcos, where we need to do more to be working with them around collaboration, co-innovation, and making sure that we help them deliver the simplification and the operating leverage they need in their networks to deliver on their strategies.

Thanks, Daniel. Did you have a follow-up?

Perhaps just a short one on the book-to-bill on Optical and IP Networks being positive still. Can you give some more comments on those on a separate note, i.e., comparing them relative magnitude or something?

Each one is good. Each one is healthy on the book-to-bill.

You put them together, they're good. If you split them, they're good.

We're not blending.

Perfect, thanks.

Thanks, Daniel. We'll take our next question from Terence Tsui from Morgan Stanley.

Terence, please go ahead.

Thank you, David. Hi, Justin.

Hi, Marco. I had a question around the operating guidance for the full year, please, of €2 to €2.5 billion.

I would love it if you could provide some color around the €500 million guidance range, please. You noted that 2025 was slightly ahead the midpoint, I'm just interested to learn about reasons to be a bit more optimistic and reasons to be a bit cautious in your thinking.

Then the quick follow-up relates to Q1 guide. What FX are you assuming there?

Are you using the spot of 1.2? Thank you.

Marco, you want to

take that? What comes to the guidance, €2 to €2.5 billion, there's a couple of things that we mentioned also at the Capital Markets Day that we will have some new product launches during this year, and always when you have new product introductions, there will be an impact on gross margin as well.

That's what we see. Of course, these product introductions are very important for our longer-term journey, and we see very good market opportunities going forward.

What comes to the same opportunities, we also, just like we have said earlier, we invest in more in our opportunities in AI and cloud, which will have an impact on the OpEx as well. We definitely see more opportunities going forward, definitely in the AI cloud market side, and that's why it's important that we prepare ourselves for those opportunities.

Also this is a transformational year. We are still doing a lot of changes and securing that we are very lean and mean and efficient machine and capture those opportunities on the market.

Maybe I'll just add, Terence, I think when you think about the range, right, obviously what we want to be is disciplined around our guidance and our execution and much more predictable. I've talked about this quite a bit, Marco has talked about it quite a bit, but that the recognition that we are also in two very different business cycles right now, tremendous growth in AI and cloud, flat market in telco, emerging opportunity in defense and mission-critical enterprise.

Recognizing that the businesses are in a different cycle, the markets are in a different cycle, that's part of the balance of making sure that we're giving you visibility. Obviously, should we see something that changes our visibility, we'll update it, but we want to give you as much visibility as possible and make sure that when we lay out targets, we're consistent, we're predictable, and much like we've done for two quarters, we get into a more consistent habit of that.

I just remind everybody that that hasn't been our history, but it's a big part of where I would like to see us go as we go after these growth opportunities to make sure that we give you the visibility and we go do what we say we're going to do.

The currency rate, we have 1.18 in our estimate, and this is based on what we see right now. If there's any changes in currency, we will update as well.

Remember that we have about at least half of the US revenues, for example, or US flows are hedged for the full year. If we just look a little bit the sensitivity, before hedging, a $0.02 move on the USD versus euro would imply an operating profit of €50 million change, but as I said, about half of that is hedged.

Thanks, Terence. We'll take our next question from Felix Henriksson from Nordea.

Felix, please go ahead.

Thanks, David. Partly relating to the previous question on supply shortages, are you sort of expecting to encounter any headwinds from these rising memory prices on your gross margin?

Can you just provide some color on your cost exposure to this trend? Thanks.

I would just say overall, when you think about our bill of materials at a macro level across the company, this is not a huge part of our bill of materials. It's an important portion, but it's not a material portion.

Second, in terms of supply and commitments, I think our focus right now is on making sure we continue to secure the supply based on the commitments we have. This is a place where we have long-term agreements.

Then, of course, I think as you've heard in the industry, I think we expect this to be passed through to pricing. From our perspective, this is a market effect.

It's very consistent across the market, and so we'll address that. Overall, certainly if you looked at our business overall, you'd say this is not a material part of our revenue, but an important one that we manage.

Did you have a quick follow-up, Felix?

Just quickly on your balance sheet and net cash. I think the year-end net cash implies around 17% of last 12-month net sales, which is slightly above the 10% to 15% range that you used to have historically.

Are you sort of happy with those levels or do you see anything that you want to do with that setup?

Thank you. What comes to the capital allocation framework is very clear for us, and whenever we see that we can invest more in R&D internally, so that's always our priority number one.

Just like we alluded earlier as well, that we see opportunities especially in AI and cloud customer segment, we are investing more there. The second priority we have is seeing that how can we strengthen our deliveries and our opportunities to capture those market trends through M&A.

Third one is the dividend, we aim for recurring and stable and over time growing dividends. Then the fourth is that if we deem to have excess cash, then we can consider share buybacks.

This framework is something we follow, and if there's any news, we will inform you as well.

Thanks, Felix. We'll take our next question from Emil Immonen from DNB Carnegie.

Emil, please go ahead.

Hi, Marco, and hi, Justin. Thanks for taking my questions.

I just had a question on the CapEx. It's quite a big step up, and I'm just wondering if it's all about increasing your capacity.

How much would you say of your capacity is already utilized or are you working at full capacity or how should we think about kind of ramping up production and how you plan for that overall?

Sure. Hey, Emil.

Thanks for the question. If you think about what we've shared so far, we have an existing fab in California.

We've been investing and bringing a new fab online. This is something Infinera had started before we acquired them, and we're continuing to invest.

This was also the place where we got partial funding in the CHIPS Act from the US government. That indium phosphide fab, the next one is the one we expect to come online later this year.

What I would say is that we're certainly well on track to consume capacity in the existing one, and we absolutely need the new fab to come online to support the demand that we're seeing and to meet our longer-term forecast, because obviously as it comes on later this year, it won't contribute as much to production this year. This is also critical for us because at the core of our capability and our differentiation is our photonic integrated circuit.

It's one of the key elements of the components of these photonic systems, and it's a place where we believe we have differentiation in the product itself. What we can do, and what's a little bit different than when you think about a traditional semiconductor fab or the higher-volume silicon fabs you might consider in computational silicon or memory or others, is that our capital investment size tends to be much smaller to add additional capacity.

That's really just the nature of optical technology and also the nature of indium phosphide. Hopefully that gives you a couple dimensions to think about, but I would think about the investments we're making really in that new fab supporting '27 demand starting to ramp during '27.

We'll have some production this year, but mostly in '27. Then think about the ability to add capacity in that fab or in others as being much smaller chunks.

Because I realize, well, first of all, while this CapEx is significant for us at an overall level, it's still pretty modest in terms of our CapEx, 5% overall for the company. Secondarily, what I would say is when you think about this CapEx in terms of the broader semi industry, it's really nominal in terms of the overall spend and the size of the investments that some of our partners in memory and computational silicon make.

Did you have a quick follow-up, Emil?

Maybe to follow up on how aggressive do you feel you are. It's still a nominal amount, but would you say that you're aggressive or is this kind of you're only investing for the kind of 100% of demand you're seeing right now and you're not wanting to over-invest at this point?

I think this market is moving, Emil, quickly that this is a conversation that is ongoing in terms of where we see the long-term market and where we're investing. Obviously the other thing here is, right now if you think about this market, we're vertically integrated, others are vertically integrated, some are not.

You can kind of look at two extremes. Computational silicon is obviously not a vertically integrated game.

TSMC, Intel, GlobalFoundries are largely the leaders in that, you've got a clear segmentation of the value chain. Memory is vertically integrated.

That's the other strategic question we'll continue to think about as we go forward. Right now, we see tremendous value in that vertical integration, and the choice that we're making is to make sure that we have sufficient capacity to meet the demand, recognizing that we're in a very fast-moving market.

Scale-across is an emerging opportunity, as I touched on earlier, and we also believe that over time as speeds continue to ramp within the data center, there'll be more opportunity for coherent optics within the data center.

Thanks, Emil. We'll take our next question from Jakob Bluestone from BNP Paribas.

Jakob, please go ahead.

Thanks, David. Just a quick one.

Can you maybe just give us an update on the H1 versus H2 sort of margin phasing that you flagged at the CMD? I don't know if you can maybe quantify how big we should think about that, or is it just kind of the normal seasonality of the business given it also tends to be a bit Q4-weighted anyway?

Thank you. Especially as we said that this is visible in Network Infrastructure side, considering that we launch new products in the first half, and that's why we see this margin impact.

We haven't guided exactly per quarter, but, of course, we see that the second half we should see improvement in the margins in this field as well, but it's just that it takes some time before we come over this ramp-up phase. Second half is that's why giving a little bit on the better margin profile than first half.

Thanks, Jakob. Did you have a quick follow-up?

Just a quick one, just on the memory pricing comments. You mentioned that you have long-term contracts.

Given it looks like you'll probably have elevated pricing for at least beyond this year, could you maybe just give us a sense, are those contracts multi-year?

I would think of these as multi-year contracts, and obviously that the supply agreements are multi-year, and then pricing varies depending on the contract term.

Thanks, Jakob. We'll take our next question from Sébastien Sztabowicz from Kepler Cheuvreux.

Sébastien, please go ahead.

Hello everyone and thanks for taking my question. On Mobile Infrastructure, you don't provide any guidance notably for sales, maybe given a more limited visibility.

The RAN market is now stabilizing. Do you see any specific downside or upside to your market share in mobile in 2026 beyond the known contract loss at AT&T?

The second one is on cost savings. Where have you finally ended 2025 in terms of cost savings, and what do you expect for '26?

Do you plan to accelerate a little bit further the cost-cutting actions beyond 2026, or you will be more on normal OpEx run rate going forward? Thank you.

I can start. What comes to mobile markets, as we said earlier, we see that the market is quite stable in '26, and there's some regional variations here.

We can see that we could expect some recovering in India, and then there's some other pressures in like LatAm and other areas. Of course, our aim, as we have guided in already in Capital Markets Day, is that in the Mobile Infrastructure side, our aim is that we will improve the profitability, we guide gross margin and operating profit levels.

Gross margin, we have said that we aim to 48% to 50% gross margins, and we've said that we will grow from the €1.5 billion levels going forward towards 2028. Of course, our ambition is that whenever there's opportunities to gain market share, we will capture those opportunities in the mobile side as well.

What comes to cost savings, I don't know if

I would just add two things. I think one, obviously there's some mix, as you said.

I think for us, as we talked about, is we're not chasing revenue for revenue's sake, I think what I would think about is the reason we gave you the guides on gross margin and profit is those are really the two things we're focused on, and maximizing gross margin and profit, recognizing there's some inherent scale we need to maintain in the business, but working with those customers we value and delivering those services where they value our technology platforms and associated services. Those are the ways I would think about the dimension of the approach that Marco is talking about.

You want to talk about cost reduction?

Thanks. What comes to cost reductions, we have the program now, which is running until end of '26, and we believe that we're going to deliver according to those premises what we have said earlier as well.

Beyond that, we don't have any cost-cutting programs. What we've said also is that what we do continuously is to secure that we focus on the efficiency, operational leverage, and secure that we are doing things in the most efficient way continuously.

This is something that we try to get into everyone's DNA that is the way of working in Nokia.

Thank you all, and apologies to those still in the queue, but we've run out of time. This concludes today's call.

I'd like to remind you that during the call we have made a number of forward-looking statements that involve risks and uncertainties. Actual results may therefore differ materially from the results we currently expect.

Factors that could cause such differences can be both external, as well as internal operating factors. We have identified such risks in the risk factor section of our annual report on Form 20-F, which is available on our Investor Relations website.

Thank you all for joining us.