Nokia Corporation

Good morning ladies and gentlemen, welcome to Nokia's second quarter 2026 results call. I'm David Mulholland, ladies and gentlemen, welcome to Nokia's second quarter 2026 results call. I'm David Mulholland, headed with Marco Wiren, our CFO, and today with me is Justin Hotard, our president and CEO, along with Marco Wiren, our CFO.

Before we get started, a quick disclaimer.

During this call, we will be making full risks and uncertainties.

Actual results could therefore differ materially from the results we currently expect. Factors that could cause such differences could therefore differ materially from the results we currently expect. Factors that could cause such differences could be with external as well as internal operating factors. which is available on our Investor Relations website.

Within today's presentation, references to growth rates will be available on our Investor Relations website. Within today's presentation, references to growth rates will be available on our Investor Relations website. Please note that our Q2 reported and a presentation of the company's list 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, we'll then move to QA. With that, let me hand over to Justin.

Thanks, David, and hello, everyone.

Our second quarter should continue progress against the strategy we set out in our capital markets day. Our team is focused on maximizing our opportunity in the AI super cycle. Our team is focused on maximizing our opportunity in the AI super cycle.

And that focus is translating into early results. In Q2, net sales grew 9%. In Q2, net sales grew 9%.

We expanded our gross margin by 70 basis points to 9%. Network infrastructure delivered strong growth, led by optical and IP networks. with sales from AI and cloud customers more than double in year-on-year. Mobile infrastructure sales with sales from AI and cloud customers more than double in year-on-year. Mobile infrastructure sales also grew and the business delivered stable profitability largely driven by product mix. Marco will take you through the details of our financial performance in his update in a moment. I want to take a step back and look at how our first half performance demonstrates progress against the strategy we set out in our capital markets day. And I'm pleased by the progress we've already made across each of these areas. Let me touch on a few highlights from Q2. Let me touch on a few highlights from Q2.

Net sales more than doubled year-on-year to 446 million euros.

And order intake grew to 2.8 billion euros.

While we're very pleased with the order growth, it's important to put that number into a bit of context.

While we're very pleased with the order growth, it's important to put that number into a bit of context. Q2 benefited from several significant long-term orders. To provide some reference, our customers looked to secure supply in a constrained environment. is expected to convert to revenue in the next 12 months. and included some of the design wins we mentioned last quarter. This was driven by growing demand for data center interconnect and scale across fabrics from our customer base. The demand primarily shows up in our AI and cloud segment, but we're also seeing emerging signs of growth in telecom customers as they invest to support the increased data traffic driven by the AI and telecom customers. During this quarter, we also secured our first multi-rail ILA super cycle. During this quarter, this is one of the new optical networking products we launched at OFC this past March. Last week, we launched at OFC's first commercial AI RAN platform. Last week, we launched at OFC's first commercial AI RAN platform. Thank you for watching.

Thank you for watching. This gives operators greater flexibility as they evolve their networks.

They can choose the hardware path that works best for them. Adding AI acceleration into their existing Nokia AirScale S for them. Adding AI acceleration into their existing Nokia AirScale infrastructure. Ultimately, this is about delivering more performance, better returns, and faster delivery of new service for our customers. We're on track to enter pilot deployments at the end of this year for our customers. We're on track to enter pilot deployments at the end of this year. And expect to be commercially available in 2027, as we've said previously. Co-innovation is a powerful differentiator for Nokia. When we combine our technology leadership with the expertise and scale of our customers and partners, we accelerate innovation, bring solutions to market faster, resolve increasingly complex challenges together. We're already demonstrating early results from this approach, and I will highlight four examples from Q2. First, we expanded our partnership with Google Cloud, bringing Gemini-powered AI agents into our autonomous networks portfolio. Bringing Gemini-powered AI agents into our autonomous networks portfolio.

Second, with Vodafone Albania, we demonstrated AI-powered network slicing using agents to dynamically optimize network resources.

Third, we expanded our relationship with Indosat or U-Hutchinson in Indonesia, supporting network modernization and the rollout of 5G, while providing a seamless upgrade path to AI RAN. And fourth, we entered trials with a U.S. hyperscaler for a new out-of-band management solution. And fourth, we entered trials with a U.S. hyperscaler for a new out-of-band management solution that we deliver in our fixed networks business. Leveraging the passive optical technology that we deliver in our fixed networks business, where we can differentiate and create long-term value. This means we are investing where we see long-term demand and we believe Nokia can be unique winner. And at the same time, reducing exposure to areas where we are less differentiated. In November, we shared that our fixed wireless access customer premise equipment portfolio In November, we shared that our fixed wireless access customer premise equipment portfolio to Insego is not core to the future of our strategy. The sale we announced this past quarter to Insego is an example of our disciplined approach to capital allocation. The sale is on track to close by the end of the year.

The sale is on track to close by the end of the year.

One area of focused investment is scaling for the capacity needed to support our optical growth ambitions. In San Jose, our new Indian phosphide fab is now processing test waivers. As we move closer to product qualification, it remains on track for volume production by the end of the year. In June, we announced a new commitment we are making to scale our Pennsylvania facility. In June, we announced a new commitment we are making to scale our Pennsylvania facility by 10 times. In addition, today we announced the acquisition of a manufacturing site from NXP in Arizona. In addition, today we announced the acquisition of a manufacturing site from NXP in Arizona.

We plan to increase our Indian phosphide fab capacity. This gives us additional capacity to support our own demand. Altogether, these investments continue to strengthen and secure U.S.-based optical manufacturing capacity for the long term.

While Marco will update you on our restructuring project, I wanted to touch on one key area where we are making progress in driving incremental productivity. We believe that to be a relevant technology provider in the AI super cycle, we need to be a leading adopter of AI internally. Last year, we established a team to deploy AI testbeds across multiple functions within NUC. Last year, we established a team to deploy AI testbeds across multiple functions within NUC. We will continue to scale this initiative across every function of the organization. as our test beds yield tangible results. We see this as essential not only to unlock sustainable returns, but also to be a better partner in support of our customers as we help them unlock the full potential of the AI super cycle. So in closing, I want to recognize and thank Team Nokia for a strong first half of the year. So in closing, I want to recognize and thank Team Nokia for a strong first half of the year. I'm pleased to see our efforts are already reflected in our results. We're entering the second half with good momentum and remain on track to deliver somewhat above the midpoint of our operating profit guides. And now I will turn the call over to Marco to dive into our financial performance. And now I will turn the call over to Marco to dive into our financial performance.

Before looking at the quarterly performance, let me start with reporting changes we announced this morning. As we have agreed to sell our fixed-wise access business to Insego, we now consider the sale of fixed-wise access business to Insego. As a result, both businesses are classified as discontinued operations. As a result, both businesses are classified as discontinued operations. We have published recast historical numbers for 2025. In Q2 2026, this reporting changed comparable net sales by 66 million and reduced comparable net sales by 66 million.

It also led to minor adjustments in cost allocations between network infrastructure and mobile infrastructure, turning to performance.

Net sales grew 9% in the quarter and gross margin increased 70 basis points at 46%. The gross margin increase was driven by network infrastructure and particularly optical networks, where we continue the benefit from both strong demand and optical networks, where we continue the benefit from both strong demand and optical networks. and operating margin increased 70 basis points to 9%.

The quarter benefited from some software revenue recognition to 9%.

The quarter benefited from some software revenue recognition would also incur higher stock-based compensation expense, which represented 150 basis points in operating margin, which represented and this was driven by Nokia's share price increase an increase in the program and the issues happening earlier in this year.

Financial income and expenses benefited from a positive venture fund revelation during the quarter which supported both positive venture fund revelation during the quarter.

which supported both debt profit and EPS earnings per share.

And as you know, quarter two is typically the weakest quarter for cash generation.

As employee cash incentives are paid in quarter two, we also saw some increase in working capital during quarter one.

We ended quarter two with an increase in working capital of 2.8 billion, maintaining a strong balance sheet with a net cash position of 2.8 billion,

Let me now turn to network infrastructure. Let me now turn to network infrastructure. Let me now turn to network infrastructure. The stronger order momentum that began in the second half of 2025 is now translating into revenue growth.

Fixed networks declined 2% into revenue growth. Fixed networks declined 2%.

Optical and line terminal sales grew 18% while before and well.

Optical and line terminal sales grew 18% while on higher value points of the portfolio. Cross-margin increased 240 basis points of the portfolio to 42.7%.

Cross-margin increased 240 basis points to 42.7%.

This improvement was driven by three factors.

First, we continued the realized synergies from the revenue acquisition. Second, we saw more the realized synergies from the revenue acquisition. and third, the cross-margin improvement was partially offset by growth investments we are making across optical networks and IP networks as we position ourselves to capture the long-term opportunity in AI infrastructure. And finally, operating margin increased 170 basis points to 8.1%. And finally, operating margin increased 170 basis points to 8.1%.

Corsofer grew 1%, net sales grew 7% in the quarter, and technology standards increased 15%.

and included some catch-up revenue recognition.

Looking at the full year, we continue to expect catch-up revenue recognition.

Looking at the full year, we continue to expect technology standards to deliver a similar level of sales and profitability, 3%, which was somewhat better than we expected entering the quarter. And the main driver was a higher contribution than we expected entering the quarter, and the main driver was the higher contribution from software sense. As some revenue were expected in quarter three, looking ahead, because of the earlier software revenue facing, we currently expect mobile infrastructure cross-margin to be closer to 44 to 46 percent, reflecting lower software contribution to be closer to 44 to 46 percent, reflecting lower software contribution seasonality. Before improving again, an operating profit was stable year-on-year in line with normal seasonality. Looking at sales by customer segment, AI and cloud was again the fastest growing segment with net sales increasing 105% year-on-year.

Growth was with net sales increasing 105% year-on-year.

Telecom Sales Increased 4% while IP AdWords. Telecom Sales Increased 4% while IP AdWords.

And we remain optimistic about the long-term AI and cloud opportunity. And we remain optimistic about the long-term AI and cloud opportunity.

At the same time, our expectations for the telecom market remain enormously unchanged. At the same time, our expectations for the telecom market remain enormously unchanged. First, we are on track to complete our 2023-2026 restructuring program this year and achieve 1.2 billion euros in cost savings. The second area is the integration of our Chinese operations into Nokia's global operating model. After taking full ownership previously at the end of 2025, as we discussed previously, we continue to adjust our operating structure, the Reflect market conditions, and improve competitiveness. As a reminder, the Reflect market condition was expected to achieve 200 million in cost signature. With one-time charges of between 350 and 400 million euros, with one-time charges of between 350 and 400 million euros, we now expect to recognise approximately 350 million of the planned one-time charges by the end of 2026 as we accelerate the integration to complete it within two years. And the third area is set to complete it within two years. and the third area is a set of new efficiency programs mainly impacting Europe. These programs are expected to lead to restructuring charges of 200 million euros in 2026.

These actions are focused on simplifying the organizations

These actions are focused on simplifying the organization without improving strategic priorities. Overall, we expect restructuring charges of approximately 800 million in 2026. Then let's go to cash. With respect to cash flow, the quarter followed the normal seasonality. Then let's go to cash. With respect to cash flow, The quarter followed the normal seasonality we typically see in quarter 2. The largest impact was the payment of annual employee incentives related to 2025 performance. We also saw some working capital build-up during the quarter, reflecting the continuous growth of the business. Despite these seasonal factors, the continuous growth of the cash generation profile remains unchanged. Our overall cash generation profile remains unchanged. And as we make some investments in working capital to prepare for growth, we now expect to track towards the low end of our free cash flow conversion assumption of 55% to 75%. And finally, turning to our outlook, There is no operational change to our comparable operating profit guidance. There is no operational change to our comparable operating profit guidance. The only adjustment is an enterprise campus edge resulting from the move of fixed wireless access and we continue to track somewhere above the midpoint of our operating profit range. Looking at quarter 3 specifically, we can currently assume a sequential increase in net sales of between 3 and 7% similar to quarter 2 due to the facing of software sales similar to quarter 2.

Thank you very much.

Thank you, Justin and Marco. As usual for the Q&A session, as a courtesy to others in the queue, could you please lend yourself to one question and a brief follow-up? Operator, could you please give the instructions?

Ladies and gentlemen, we will now begin the Q&A session.

If you have a question and are using the Zoom app, we ask that you please use the raise hand function at the bottom of your Zoom screen, or by clicking on the three dots on the black bar at the bottom of your Zoom screen. Thank you for watching. Once your name has been announced, you may ask your question and then star six to unmute. Once your name has been announced, you may ask your question or star nine if you have dialed in. I'll now hand the call back to David Mulholland, head of investor relations for the Q&A. Thank you. I'll now hand the call back to David Mulholland, head of investor relations for the Q&A.

Thank you. Terence, please go ahead. We'll take our first question today from Terence Tutsui. Thank you very much.

I hope you can hear me okay. I had a question around capacity.

Thank you very much.

I had a question around capacity. So this is actually a big ramp up compared to the previous run rate. Can you give us some milestones? So this is actually a big ramp up compared to the previous run rate.

Sure, Terence. I mean, I think first of all, we talked about these going into customer trial in 27 and then become commercially available towards the end of 27. I think the thing I would just emphasize and remind you of on this is that Nokia and Infinera previously were each building two DSPs individually. So collectively, a total of four DSPs. One of the decisions we made individually, so collectively, a total of four DSPs. One of the decisions we made, and I've talked about this a bit, was to maintain the DSP team as is versus reducing them. And the reason we did that was we felt quite strongly in spending time with our customers. And the reason we did that was we felt quite strongly in spending time with our customers that we could actually deliver more differentiated products to them with Thank you very much.

The amount of investment we're seeing across different layers of optical fabric from the scale to long-haul transport. So across all of that, we think we have a much better portfolio in 2027.

So across all of that, we think we have a much better portfolio in 2027 to address each of the unique evolving solutions than we would have had if we'd only kept two versions.

A real quick follow-up on the comments around the order book potentially being lumpy. A real quick follow-up on the comments around the trajectory over the long term on these levels. Do you still expect the conundrum to trajectory over the long term? Yeah, look, two things about this quarter's order book.

I mean, obviously, if you do the book to bill on this, it's a significant jump up. So I think for me, that's it. I mean, obviously, if you do the book to bill on this, it's a significant jump up. So I think for me, that's it. That's the data point around a little bit of lumpiness.

But the other is the elongation of the order from both those dimensions.

The way I think about orders is I think about orders in a period of time. It's easy to give you a headline number and then say, well, the next question is, is that over a quarter period, a four-quarter period, an eight-quarter, a twelve-quarter, etc.? ? And so for me, that's really where we're focused is not, you know, it's not necessarily on, you know, are we getting big order? And so for me, that's really where we're focused is not consistently, but rather are we seeing the order momentum grow as we look at it over a time period? And right now, you know, what we're seeing is continued growth and continued demand in the market.

And as I said in my comments, it's still largely driven by AI and cloud. Thank you.

We'll take our next question from Simon Leopold from Raymond James. Simon, please go ahead.

Thanks, Terence. We'll take our next question from Simon Leopold from Raymond James. Simon, please go ahead.

Simon, have you unmuted yourself?

There we go.

Can you hear me now, David? Yes, go ahead, Simon.

There we go. Can you hear me now, David?

Sorry. I wanted to see if you could rank order and characterize supply chain risks.

I wanted to see if you could rank order and characterize supply chain risks. And I'm thinking about maybe a particular memory from that latter one, the wafers, given the factory expansion, whether or not you can get the materials. And then I've got a quick follow-up after. Thank you. Sure. Look, I think

If I think about the supply chain risks or the time that we're spending in this, first of all, and memory is significant just given the amount of demand that is in the market. I think this has been talked about quite a bit across So there's clearly, you know, multiple companies and then obviously the parts of this ecosystem, you know, the significant change in pricing driven by that shortage, which again has been talked about very broadly across the tech ecosystem. So that's probably the one that we see again has been talked about very broadly across the tech ecosystem. That's probably the one that we see as most significant now. Our focus is on securing supply. I don't need to repeat what I said last quarter, but maybe briefly. Our focus is on securing supply wherever possible in our designs. Simplifying our designs, looking at where we can reduce scope. Thank you for joining us. and something that we need to team with in that regard. And then as you touch on, there's a broad base across the board. And something that we need to team with in that regard. And then as you touch on, there's a broad base across the board. This new FAFSA question you asked is looking at coming online probably... This new fab is really looking at, if you think about our capacity, we've got earliest to jump up with San Jose coming. If you think about our capacity, we've got manufacturing later this year, volume manufacturing later this year, to 27 at ramps. Then we kind of line up for a 29 ramp in an incremental capacity to 27. Thank you very much. even across the ecosystem.

Yeah, I wanted to see if maybe you could offer us your view on the scale across market. Yeah, I wanted to see if maybe you could offer us your view on the scale across market and your ambitions and IP routing. This particular application considering optical and IP routing.

I think there's a lot of Yep, I'm going to be a little technical, but scale across is, I think there's a lot of, I'm going to be a little technical, but scale across is, you know, technically was designed, was talking about data centers within a given campus area that were strung together as an AI factory.

And one of the things I talked about last call was the demand we're seeing in data center interconnect.

So my point in saying that is, some of what we're seeing is just an increased data center interconnect. Now you can call it scale across or

Some of what we're seeing is some folks may want to label it one way or another. To me, they're very different. They're complementary. Some folks may want to label it one way or another. To me, they're very different. They're complementary, which is very important. One is back-end for scale-out, which is the scale across fabric. The other is data-centered, which is the scale across fabric. The other is Data Center Interconnect, both of those have a routing element. Obviously, the Data Center Interconnect has a very significant demand growth in routing. If you look at our opportunity and why we're talking about growth in both IP and optical, it's because we're seeing growth in both of those. Both of those elements, they are complementary and reinforcing. The other thing I'll say is it's not limited to that. We are seeing some traction in some of the back end.

We are seeing some traction without getting into all the market dynamics there. But all of this is encouraging in terms of the market dynamics there. But all of this is, you know, all of this is encouraging in terms of our focus in this area and the traction we're starting to make.

Sami, please go ahead. Thanks, Sami. We'll take our next question from Sami.

My question would be on your supply capability in optical networks. Hi, my question was, are you fully constrained or have you been able to build the first half of the year? It's a good question. There are always pockets. I would say it's a good question.

There are always pockets. In general, I would think of us as being constrained. We talk about lead times. In those areas, we're elongating. In general, I would think of us as being constrained. We talk about lead times. By the way, I don't think we're unique in that. Particularly on the leading edge products. By the way, I don't think we're unique in that. If you look at our ecosystem again, I think you see... Yeah, you see the constraints and you see that across the component suppliers, some of our peers, et cetera.

Obviously, we're working aggressively on that and maximizing the supply. But as I've said as well, if you look at our forecast, what we've included in our forecast, as I've said as well, if you look at our forecast,

What we've included in our forecast is the demand risk because we have line-of-sight to shipping, and we recognize even that has some risk because everything goes perfectly. So when we're thinking about this, we're thinking about it from a constraint perspective aligned to what we have line-of-sight to in supply. So when we're thinking about this, we're thinking about if there was more supply, I think we'd probably generate more revenue. What we have line-of-sight to in supply. But absolutely, if there was more supply, I think we'd probably generate more revenue.

Regarding Radionetworks, Justin, Do you think you are currently gaining share? I think that's a bit more than your main European rival is having.

It was just like timing. Actually, Marco talked about the timing around the software revenue recognition we had in Q2. Actually, Marco talked about the timing around the software revenue recognition we had in Q2, which is tied to our radio software platforms.

I also think looking at market share on a quarterly basis in this industry, So I would call this super challenging to get any kind of good signal. You have to look at it certainly on an annual basis.

It's super challenging to get any kind of good signal. You have to look at it certainly on an annual basis.

Alex Deval from Goldman Sachs. Alex, please go ahead. Thanks, Sammy. Let's take our next question from Alex Deval from Goldman Sachs. Yes, thank you very much.

You talked about further progress in AI RAN. I wondered if you could talk a bit about the timeline of this benefiting industry.

talked about further progress of revenue and competitive position and what your discussions with Telco are suggesting in that area.

And secondly, back to the AI side, can you help us understand the latest thoughts on the progress you make there and when we should expect orders and revenue momentum given the progress you're delivering? Second one first, in terms of Thank you very much.

We're continuing to drive that across a number of customers. We're pleased with the progress we had in Q2. Can you just repeat your first question?

Yeah, I'm just curious how you think about the customer feedback and the timeline for that. I'm just curious how you think about the customer feedback and the timeline for that impacting your revenues.

Yeah, I mean, look, Alex, everything is consistent with what we said. Pilots at the end of 26, commercially available in 27. Obviously, we didn't anticipate more significant volume going into 28.

Thanks, Alex. We'll take our next question from Ulrich Rotha from Bernstein. Ulrich, please go ahead.

I think we've lost Ulrich. Thank you. Are you there, Ulrich? Sorry. Take some time for the button. Thank you. Sorry. I wanted to come back to the very strong AI cloud. So I wanted to come back to the very strong AI cloud, as you call it. I was wondering in supply-constrained markets,

I was wondering in supply constraint markets, we often do see double ordering. Are there any specific reasons why this would be an unlikely factor for Nokia?

I think first of all, if you think about the customers, the level of sophistication in the customers that are placing these orders, if you think about the customers, the level of sophistication in the customers that are placing these orders, I've absolutely seen this much like you in supply-constrained markets that I've worked in in the past. And it's particularly prevalent in markets where you're focused on enterprise customers. And it's particularly prevalent in markets where you're focused on enterprise customers. But in this environment, the thing that I would flag is for one of these customers to come in and say, I'm going to double order with you when ultimately that goes back to you to come in and say, I'm going to double order with you when ultimately that goes back to supply of leading edge silicon manufacturing capacity on optical components. The question for them would be, what does it do in terms of incentives?

Thank you very much.

What would you call the normal length of an order book? Is it essentially 100% of the orders within the next 12 months?

Is it essentially 100% of the orders within the next 12 months? Because you highlighted the difference in the half of the revenue.

Is 12 months 100% of the quote-unquote normal within 12 months in our customer base? Again, there's two factors to this. Obviously, one is the growing demand.

Two factors to this, obviously. One is the growing demand. We've had less exposure to this in the past. And then the second thing is obviously the supply constraint. So I think both of those are factors. And then the second thing is obviously the supply constraint. So I think both of those are factors. But if you think about our traditional business in those orders, we may get a win in a contract award, but we would not Thank you very much. Thank you very much. Thank you very much.

We'll take our next question from Jacob Bluestein from BNP Virgo. Jacob, please go ahead.

You're obviously ramping up in terms of AI and cloud revenues. I guess we're not yet seeing it in terms of margins. I guess my question is just when, and I appreciate that's obviously yes, in terms of scale margins, I guess my question is just when, and particularly on the IP side, you're just sort of starting to scale now. But it's been interesting... How long do you think it takes before these revenues become materially accretive?

We're doing a lot of work at the front end of the three-year period to really set the company up to become more efficient and more nimble. By nature, that would be a little bit back-loaded. Now, like I said, I'm very pleased with the progress we're making. By nature, that would be a little bit back-loaded. Now, I'm very pleased with the capital markets. We've got optimism on progress there. We'll continue to improve. On the other side, on the gross margin side, we'll continue to improve. This is an area where I think we're dealing with just a lot of complexity in the mix. I think we're dealing with just a lot of complexity in the mix. This is a little bit of supply chain. This is also us.

Some of those things are just playing through in a business, and you're not quite seeing it drop to the bottom line.

Some of those things are just playing through in the video, so you're not quite seeing it drop to the bottom line yet. But obviously, we're very clear on what we're anticipating in terms of revenue growth.

If I could just ask a quick follow-up, you mentioned you've got several customers coming in on the IP side, as you said. And it's interesting understanding the level of concentration of that customer mix. Would you say you're well represented across the different hyperscaler customers or would you say you're well represented across the different hyperscaler customers? I think we've talked about this a little bit before.

It's fairly concentrated today.

I think we've talked about this a little before.

It's fairly concentrated today. But that's the way that you build partnerships and relationships across many of the AI and cloud players, the hyperscalers. The focus right now is obviously on making sure where we do have demand, that we're delivering and we're continuing to innovate for those customers, and then making sure where we do have demand, that we're We're delivering it and we're continuing to innovate for those customers.

We'll take our next question from Oliver Wong from Bank of America. Oliver, please go ahead. Thank you. Hey guys, thanks for taking my question.

My first question is in terms of the 2.8 trillion AI orders in the quarter, I understand that a significant portion in terms of the 2.8 trillion AI orders in the quarter, I understand that a significant portion, so I think it would be helpful if you could maybe try to quantify or guide us a little bit on the total AI orders this quarter that kind of comprise just so that we can have a better sense of the total AI orders this quarter that kind of comprise just so that we can have a better sense of underlying optical related demand.

It was driven by optical and IP weighted towards optical and that's probably not a surprise given the momentum we're seeing right now in that market.

In terms of within Optical, you mentioned a quick follow-up. In terms of within Optical, you mentioned you discussed briefly about the scale cross versus regular DCI. I was just wondering what the composition of demand is right now between the two.

Yeah, I don't think we're breaking that out right now. I just want to highlight that I think there's a significant amount of demand in DCI as well as it's underappreciated.

I think that's certainly where for us we're seeing traction on both.

But that's certainly where for us we're seeing traction on both. Thanks, Oliver. Thanks, Justin.

My first question for you is

On the AI RAN transition, your customer installed base runs on Nokia proprietary silicon. On the AI RAN transition, your customer installed base runs on that proprietary silicon base set of solutions. And what are the implications for away from that proprietary silicon base set of solutions? And what are the implications for that transition? Thanks. Hey, Richard, so a couple things on this. First of all, I

I've talked about this pretty openly. So I think we're at a point where the industry has to transition. I've talked about this pretty openly. I think we're at a point where the industry has to transition. We'll have special efficiency on our existing hardware. We'll have some improvements in software. Thank you for joining us. In my mind, this is a very clear industry shift that has to happen on the base band. And that is a shift to the AI RAN solution. And of course, there are other players out there with general purpose launching the AI RAN solution. There are other players out there with general purpose. So I don't think we're alone in this move. Fundamentally, as we think about these R&D in this space, this is the other thing I've touched on. Thank you for joining us.

Thank you for joining us.

Thank you for joining us. This is a single software stack. And the final point I'll make is as we've talked about in the software stack, this is a single software stack. So we've got capabilities to optimize it for different hardware, including our legacy stack and, of course, the NVIDIA GPUs.

But it's a single software stack. So we're getting a tremendous amount of leverage out of that stack.

So this is right on that path. But it's a single software stack. So we're getting a tremendous amount of leverage out of that stack. So this is right on that path.

Your comments about being above the

especially given the cash outflows for restructuring capex working capital, etc.

Thanks for restructuring capex working capital, etc.

that we're seeing now and can expect in the second half. Thanks.

Yeah, thank you. I would say that if you look specifically on the telecom customer base side, it's usually very... specifically on the telecom delivery customer base side. And that's why we've seen in the past years as well that Q4 delivery is part of the industry and that's why we've seen in the past years as well that part of the industry usually generates the biggest profits and sales as well. Now in addition to that we see also an increase in the seasonality of our operations and also profit generation of our operations and also profit generation. The program that we announced in 2023 and we expect that we will get those 1.2 billion accumulated across 1.2 billion as well. and cross-border savings, just like we said as well, and the synergy program that we mentioned earlier when it comes to actually accelerate the China, the synergy program that we took over 100%, the China company that we took over 100%. and there is cost saving and then also we had some additional and those will take this year's wallet but altogether if you look our cash position and those will take this year's wallet but altogether if you look our cash position We have a very strong position. Now we had a 2.8 billion net cash increase in quarter two. We had some inventory to secure also deliveries going forward in quarter two. And then, of course, we can't secure also deliveries going forward, sales pattern as well. But we believe also by the end of the year we have a very good financial position, sales pattern as well.

I don't see any issues there.

Thanks, Richard. We'll take our next question from Sandeep Deshmanda from J.P. Morgan. Sandeep, go ahead. Thanks, Richard. We'll take our next question from Sandeep Deshmanda from J.P. Morgan. Sandeep, go ahead.

Sandeep, we're really struggling to hear you, Sandeep. How much of this is going on in your orders? How much of this is going on in your orders? Sure.

So on the first one, I think we've broken it out for you that what we saw in the next 12 months and I'm not going to break it out any further in terms of what's beyond that. And then in terms of the mix, I think I touched on this, what's in the

Thank you for joining us.

Very good, you know, continued growth forecast from the AI and cloud segment. No, I'm fine. Thank you.

Thanks. We'll take our next question from Sebastian Stubovitz from Kepler. Sebastian, please go ahead. We'll take our next question from Sebastian Stubovitz from Kepler.

On Air RAN coming back, have you seen a specific commercial traction over the past few months? Have you seen a specific commercial traction over the past few months? Have you seen a specific commercial traction over the past few months? Have you seen a specific commercial traction over the past few months? Have you seen a specific commercial traction over the past few months? Have you seen a specific commercial traction over the past few months? What about the total cost of ownership of this solution and next to the baseband, do you plan to partner with NVIDIA on GPU for reduce or to be mostly produced on the baseband? Thank you.

Thank you for joining us.

I think the math speaks for itself. And then in terms of the pilot deployments, we've announced 10 public customers.

And then in terms of the pilot deployments, we've announced 10 public customers on track for later this year.

There's many conversations going on about this. We expect to start the deployment at the 27th. And obviously, as we make progress, we should continue to share information. Thank you very much. And this allows some new capabilities, which we think are going to be pretty attractive to a number of operators, which we think are going to be pretty attractive to a number of operators, things like sensing and other applications.

Thanks, Sebastian. We'll take our next question from Rob Sanders from Deutsche Bank. Rob, please go ahead.

My first question would just be about the Indian phosphide fab ramp. Do you have line of sight to hitting vesting class 6-inch yield next year? And clearly, the second question would just be around AIRAN. If you look at the top three US operators, how many do you think would just be around AIRAN? If you look at the top three U.S. operators, how many do you think internally have already gone past the go, no-go decision on whether to deploy AIRAN?

Thank you. Obviously, we have one operator today in the U.S.

So on AIRAN, we have one operator in the U.S. Obviously, we have one operator today in the U.S. On AIRAN, we have one operator in the U.S. They're going to be our lead partner on the pilot. So obviously we're working closely with them. I would assume that that would lead us to conclude that they're probably not past the go-to deployment path. On the others, I think it's a discussion that obviously we'll leave for them to assess, but my view here is that

The GPU performance is compelling, and it's particularly compelling in a business case where the spectral efficiency matters, which is going to be more dense operations. But in a business case where the spectral efficiency matters, which is going to be more dense operations.

And then on the Indian phosphide ramp, what I would say is we've got yield targets that we've focused on, you know, both ramp, what I would say is we've got yield targets that we've focused on, you know, both yield and volume targets we've focused on, you know, you write 2027 on the fab, and it's not just the tea you mentioned, but also the Chinese manufacturers in this space.

I also believe this is a place where we're going to go through significant amount of maturity and learning as we scale. I also believe this is a place where we're going to go through a significant amount of maturity and learning and scale your reach. And that's what I'm focused on with the team versus a specific target or a competitor reach. I think this is more about us learning and scaling and making sure we can deliver on our volume plans and obviously our cost point.

Thanks Rob.

Yes, good afternoon and thank you for taking my question. Relating to AI, could you maybe comment... Yes, good afternoon and thank you for taking my question.

Thank you Arkem, just like we mentioned earlier as well that we had a good order intake and sales development in also non-EI cloud customer base, where we are investing more. This is also driving telcos because of their need to invest in their networks to secure AI cloud and AI in general development. and AI in general. Most likely this will happen development. Broadly, more broadly going forward as well. Because we believe that AI demand will continue. The underlying demand will continue for a longer period of time. And without very good secure networks, it is very difficult to provide those improvements that secure networks actually provide. It is very difficult to provide those improvements that

Yeah, I would say the only thing I would say, Artem, is if you looked at NI specifically, the only headwind we talked about last quarter is obviously on the customer premise equipment side of fixed networks where we're getting much more discipline on margin. That creates a bit of a headwind when you look at NI as a whole. Underneath that is the momentum that markets talk about when you look at NI as a whole. Underneath that is the momentum that markets talk about when you look at NI as a whole. We'll squeeze one last question in from Felix Hendrickson from Nordea. Felix, please go ahead. Go ahead, Felix. Go ahead, Felix. Can you hear me now? Yes, go ahead.

Perfect. Yeah, thanks for squeezing me in. Can you hear me now? Yes, go ahead. Perfect. Yeah, thanks for squeezing me in. I think this is largely tied to what we said at the CMD. We'd see some gross margin headwinds as we ramp products in this space, and this is what we're seeing.

What I'm focused on is ultimately to our operating margins and then as we talked about earlier in one of the questions, making sure we're streamlining and then as we talked about earlier in one of the questions, making sure we're streamlining and obviously we've got to show that. We're Marco and I are focused. Obviously we've got to show that. And I think you'll see the margin as we mature in this space right now. And I think you'll see the margin You'll see the margin as we mature in this space.

This concludes today's call. Thank you everyone for joining. You may now disconnect. This concludes today's call. Thank you everyone for joining. You may now disconnect.