Nokia Tumbles 10% Despite Data Center-Driven Profit Beat; Ericsson Slips

A profit beat powered by artificial intelligence (AI) data center demand is causing a sharp selloff at one of Europe’s biggest network equipment makers. Nokia (NYSE:NOK | NOK Price Prediction) stock is at $8.34 in early trading, down 10% after the company’s Q3 2026 results topped estimates, a drop that runs counter to the strength of the report.

The SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is down 1.37% as investors sell AI names across the board, leaving the decline in Nokia stock far worse than the broad market’s. Tech stocks are generally struggling today, as the Technology Select Sector SPDR ETF (NYSE ARCA:XLK) is falling 3%. Meanwhile, Ericsson (NASDAQ:ERIC) stock is at $10.29, down 1%, a much softer slide that puts Nokia’s own report at the center of the selling.

Data Center Orders Power Nokia’s Profit Beat

Comparable operating profit at Nokia climbed 35% year over year to $679.58 million, beating analyst estimates as demand for networking equipment tied to AI infrastructure accelerated. Revenue at the company reached $5.79 billion, comfortably ahead of the $5.07 billion consensus. The upside came partly from delivering a portion of Nokia’s data center equipment backlog, even as the industry contends with constrained supplies and higher prices for components such as memory chips.

AI & Cloud customers, a group that includes hyperscalers, generated $708.79 million in net sales for Nokia, up 123% at constant currency. Chief Executive Justin Hotard declared, “In AI & Cloud, net sales more than doubled year-over-year and we secured EUR 1.5 billion in new orders.” Nokia’s routing sales also surged, with its IP Networks line jumping 45% on demand from AI & Cloud customers building out data center capacity.

Nokia’s Data Center Mix Sets It Apart From Ericsson

Data center operators increasingly buy the optical transport and routing gear Nokia sells alongside its mobile network equipment, a mix that ties a growing share of its business to AI infrastructure budgets (we covered seven suppliers riding this same expansion, from power to networking, in a free report you can grab here). Ericsson, by contrast, sells mainly radio access equipment to wireless carriers, the same operator market served by smaller telecom equipment supplier Ribbon Communications (NASDAQ:RBBN). That split means the softer decline in Ericsson shares shows how much of the selling is specific to Nokia stock.

Executives on Nokia’s earnings call said AI and cloud customers made up 12% of order intake and cited “two additional hyper-scalers” as new wins. Supply remains a swing factor. The call also noted that “some operators delayed due to the supply chain constraints for server infrastructure.” Nokia’s Core Software sales fell 13%, a soft patch inside the carrier-facing business that data center growth has to keep covering.

Several weak spots in the quarter also stand out for Nokia. The company booked $401.01 million in restructuring charges, and its free cash flow fell to negative $111.2 million. Management lowered Nokia’s free cash flow conversion target to 35% to 55% of comparable operating profit, citing an extra 400 million euros of working capital to secure supply and support 2027 growth.

Separately, Nokia raised its restructuring charge outlook to 1,100 million euros. On the brighter side, the company held its full-year comparable operating profit outlook at 2.1 billion to 2.6 billion euros and expects to finish above the midpoint. Those moves leave the profit outlook intact while cash generation falls behind the earnings recovery.

Nokia’s Data Center Push Faces Its Next Test

The next test for Nokia is whether data center orders keep offsetting slower carrier spending. Guidance from Nokia calls for Q4 2026 net sales to rise 20% to 24% from Q3, and the company expects its combined Optical and IP Networks businesses to grow 25% to 30% in 2027. Delivering on that ramp depends on converting more of the data center backlog into shipments while memory chips and other components stay scarce and expensive.

A dividend of $0.0337 per Nokia American depositary receipt goes to holders of record on October 27, with payment set for November 5. Nokia’s Q4 results will show whether that guided ramp holds up as AI stocks face broader selling, and investors should consider keeping their position sizes modest until the selling in Nokia stock subsides.

Contact [email protected] for any questions or corrections.