Nokia Aktie

Good afternoon, everybody. Thanks for joining us. I'm Sandeep Deshpande, I cover the European technology space. And I like to welcome Justin Hotard, CEO of Nokia. Thank you, Justin, for joining us this afternoon. Thank you all for joining us.

I will just jump into the Q&A and then maybe a few of you could ask a few questions as well. I mean, clearly, the interest, Justin, in Nokia is your exposure in the AI cloud market at this point really. So I want to just -- at OFC, you announced a whole bunch of new products, and that is potentially going to change your outlook in the optical market going into '27. Maybe you can talk through some of those new products that you've announced and how you see that impacting your revenue in the next few years?

Yes, absolutely. And thanks again for having me, Sandeep. So I think if you look at what we announced in Optical at OFC, first was -- the first big shift in this was really the benefit of bringing together Infinera and Nokia. That was number one. Number two was we -- by doing that, we enabled the -- us to build a very differentiated portfolio. So 4 DSPs, 13 unique platforms. And the key thing for us in announcing that was giving us an opportunity to engage early with customers on those products in bringing them to market.

Now we announced that most of those will be in market in '27, obviously, leveraging the DSPs. And each one targets a different unique application across the stack spanning from what we see in scale across all the way to what we see in ultra long-haul networks.

And you see that ramping up from the second half of '27 into '28?

Yes, we'll see volume ramp in second half of '27. So early units in first half and volume ramp in second half of '27.

Understood. Maybe moving on to the Q1 results. I mean, you had this amazing set of results. I have people like myself who have covered Nokia for a long time. I mean this is an amazing set of numbers from Nokia in Q1 given how your orders in AI and cloud were, et cetera. You had this EUR 1 billion in orders in Q1, which is almost 40% of the orders you received all of last year really. So maybe the question I have is what changed in Q1, which caused this huge increase in the order intake?

Yes, I think first of all, if you look back at Q4, we actually had pretty strong order momentum in Q4 as well. I mean the first thing we did -- the big thing that we changed is we actually started to give you visibility into the segment. So that's probably the first step. The second thing is obviously what we're seeing is really strong momentum on the back of the demand we see in 800 gig. So we've had traction in 400 gig.

Just a reminder, we really weren't a player -- no presence in 400-gig pluggables, some presence in 400 gig in terms of ILAs and some of the other systems in that space. But the momentum we're starting to see and the demand we're seeing for 800 gig was really what drove the order forecast in Optical. And then on the IP side, we've had a little bit of traction there largely in routing with AI and cloud. But not in the order book in Q1, but what we also announced during earnings was also that we've got a few design wins getting into IP networks, including on the switching side. And so that's been really encouraging for us in terms of the opportunity that we see.

Yes. Since you raised the IP networks market, I mean, you mentioned that you've got a couple, I think, of design wins in the first quarter. You also clarified that they were not in the orders in Q1.

That's right. That's right.

So you expect to see these in the orders later this year?

Yes.

And I mean, clearly, you're not going to answer this question directly. But in terms of the orders in Q1, would that be the sort of orders you expect for the rest of the year? Or this was a big one-off in terms of this EUR 1 billion in orders?

Yes. I mean I think a few things on the orders as we look ahead. I probably won't give you a direct answer on that, Sandeep. But as you rightly said. But the way I would look at it is there's a couple of things that are happening. One is, I think we're starting to see more orders into '27. If you look at what happened in Q1 and obviously the second half of '25 as well, what we had there was really most of the orders that give us visibility and confidence into the assumption we have on revenue growth for '26. Now we're starting to see things that are maybe a little bit in '26, but much more demand into '27.

What I anticipate is that as we see more orders come in this year, we're going to continue to see some of the time line elongate. We traditionally been a company that's just shared order numbers. Part of that is if you look at our historical business, particularly in telco, but also mission-critical enterprise, we've really not been a business that's had long lead time orders. We typically have got things within a 12-month window. So in telco, we win a frame agreement, for example, but then the orders come in, and they're usually fulfilled in like a 6-month period

What's changing in AI and cloud is that we're now seeing orders, obviously, orders grow and orders increase, but also orders elongate. So one of the things we're going to try to do is we're going to think through how we dimensionalize that for you guys so you can get visibility to how much we see over what duration. And we'll think through that. But whether we give you kind of a 12-month rolling forward, 4 quarter forward forecast or something like that, but just to have a sense of what that is. Because I do think things are going to get lumpier, particularly given the constraints that we see in the supply chain, both in optical and IP.

You talked about lumpier in terms of orders, or lumpier in terms of shipments? Or rather...

Lumpier in terms of orders. The reality is -- I mean the constraints right now are all on supply. So the shipments, I think, will be quite linear, but I think orders will be quite lumpier.

Understood. I mean now coming back to those 2 customers that you've got in the first quarter. I mean, would this be correct to assume that the -- you've announced in the past, you have Microsoft as a customer in this market, as such, really. So is it beyond Microsoft? Or is it essentially more wins at that customer, as such, really?

Yes. I mean I think we've announced that we have a win in the past with Microsoft around SONiC. What I can confirm for you is this is not -- this is a different -- these are different design wins, incremental design wins. In terms of customer details, as you know, we won't disclose that at this time.

Understood. In terms of the wins in the switches, again, I mean, where are you winning? Are you winning inside a data center with top-of-the-rack switches, or spine switches? Or is this scale across switches is where the wins are?

Yes. I mean, I think I'm not going to disclose too much on that front, but I think we're -- let's just say we're pleased with the progress we're making across the portfolio, including inside the data center.

Understood. Now when I do the numbers on this, I mean, I mean, clearly, you again, not going to entirely answer this question, I understand that, Justin, but you had an order intake of EUR 2.4 billion in AI and Cloud last year. You reported only EUR 350 million in revenue in Q1, as such, really which is a very small percentage of those orders that you received last year, or even as a percentage of the orders received in Q1.

How would this order intake now, I mean, translate into sales through this year? Because if you just -- those of us who model, I mean, EUR 350 million, EUR 500 million, EUR 600 million, something like put that through, you would come to even a much bigger growth for your -- rather or you've guided 18% to 20% growth in IP and -- plus Optical businesses. I mean we can come to a number which is much bigger, given that if that EUR 1 billion order number was to be replicated through this year, you should have a run rate of EUR 4 billion in this business next year potentially in revenue. So I mean, any comments on this?

I mean -- I think there's a lot of really good modelers probably in the room and listening. So I think you've dimensionalized it in a good way. I mean, look, I think for us, this is a huge focus. Obviously, the growth that we saw year-over-year was very strong on revenue. And I'm pleased with the progress we're making, but a lot more work to do to continue to scale.

And again, the other thing I'll just reinforce is that if you look at where we are in orders through Q1, we've got visibility to demand through the year. So it's really -- when I think about -- as I think about it, from my perspective, I always think about risks, right, risks and opportunities. But if I look at the assumptions we gave you on growth for the year, what I would think about is that we're basically -- the only risk we really have is on supply chain. And that's not to say that we have risk. It's just that that's where the risk is, it's not on demand.

And maybe to put it another way, if we had additional supply, we could probably fulfill that given the demand that we have.

I was in a meeting just before this with your main competitor in the switches market. And I mean, whole meeting was discussed -- a large part of the meeting was discussing supply. Maybe you can address -- I mean how are you facing -- TSMC is a huge bottleneck for many of your chip suppliers. So how -- where is -- where are you on the supply side?

Yes. I mean I think for us, it's a little bit broader across the business. But obviously, I mean, I think everything you've heard of from an industry perspective around supply lead times tied to leading-edge nodes of fabs, TSMC. Of course, that's a driver for us as well.

The other things we're focused on are in different parts of the business, but important ones are memory. Memory has an effect. There's memory content in routers. There's memory content in some of our consumer premise equipment on fiber -- on fixed networks and fiber networks. There's memory -- there's some memory content in radios. We still have a small business in our core software platform where we resell third-party hardware that are servers, that obviously have memory content, that's a business that we're continuing to deemphasize and want to shift to direct fulfillment. You provided, is the right thing for our customers. So those are places where we have memory dependency.

And then obviously, as you've heard from many of the industry players in Optical and certainly indium phosphide, we're scaling at a tremendous pace as an industry, right. Indium phosphide manufacturing. I think it's -- if you look at it, it's just a massive. It's 100 to 1,000x scale that we're talking about in terms of meeting the demand in the market over the next few years and from where we were just a couple of years ago. So obviously, that drives constraints across that side of the supply chain, and that's one of the things that we need to mature as a -- as an industry but as well as a company playing in that.

So we look across all of that as well as scale for contract manufacturing. Particularly in Optical, we're moving into this volume. It's a very different it's a different problem than it was just a few years ago. So all of that are areas that we think about in terms of constraints, as well as smaller components in different parts of the risk. But I don't think there's anything from our perspective that's unique vis-a-vis where the rest of the industry is.

And I would say we feel pretty good as a systems provider, particularly in optical of having vertical integration, particularly as we ramp pluggables. Because we think that's -- we do think that's an advantage to scale and ramping.

I mean one of the things which came up during this conference, I mean, one of your suppliers, Lumentum, was here yesterday. And at their fireside chat, they mentioned that many of your other competitors placed orders quite early in the supply. And one of the points he made was Nokia is suddenly emerging as a major player in this market.

So the question is whether you placed orders well enough in time to get your supply, because you seem to be a late sudden bloomer in this market. You were not much in the data center market until a year ago, right?

Yes. Well, again, we weren't in the 400-gig transition, right? And so if you think about the transition on pluggables and the early part of the scale across demand, it's all been on 400 gig. But the pluggables side of that and the system ramp has happened, we were smaller. We're now catching -- we believe we're well positioned in catching pretty strong demand trends in 800 gig. But obviously, we're also working on scaling those relationships to support that demand. And Michael and the team are obviously great partners, and we're working closely with them.

And in your own indium phosphide capacity, I mean, you've got your new 6-inch fab ramping up in San Jose later this year. Where are we in that ramp in terms -- because remember, normally, semiconductor fab ramps have problems. Even Lumentum has had problems ramping up its capacity. He was talking about they have choices, whether they will go back to 4-inch or 6 inch.

So the question is, there are issues there in overall in the industry in ramping up. Does -- where does -- how comfortable do you feel with your own ramp-up at this stage? It's clearly early days yet, et cetera.

Yes. I mean we're early. I think we're pleased with the progress. We'll continue to provide updates on our progress, but we still feel good about early ramp at the end of the year and then scale that production volume through next year. It's aligned to the supply that we see.

A key thing for us in this and maybe just one thing to remind everybody of is the majority of the volume that we're building is this, and particularly in that facility, is this photonic integrated circuit for pluggables. So it's a bit different in two dimensions. One, it's a full photonic integrated circuit. So the die size is a little bit bigger. So that creates a different -- those of you that understand semiconductor manufacturing, you understand the yield dynamics of that. But the other side is it's largely one platform. And so as we look at the business, that probably has a little bit of a different dimension than others, right, on both sides.

But so far, we feel pretty good about where we are. And as we make progress there, we'll continue to share that and unpack that for us of visibility.

In terms of that capacity, I mean, I think at some of the previous meetings, you've talked about that you will have as much as 25x capacity by '27, versus what you had in '25. This is quite a lot of additional capacity. Are you going to consume that all yourself? Or are you going to also be a component business selling this externally?

Yes. So today -- I mean, today, when we look at the capacity we've talked about, it's all been in line with selling our own pluggables. And given the demand we see right now, we're largely consuming that demand within forecast. But that's not to say we won't do something different in the future, but right now, that's what we're focused on, and obviously delivering for our customers.

I just want to now touch base on margins in this AI cloud/IP networks, and Optical networks. Optical networks as stand-alone business was -- has been indicated to be double-digit margin post synergies by Nokia by 2028, as such, really. The scale of the revenue growth is much faster than what was expected when you gave that guidance.

Does this change the guidance firstly? But secondly, where are you on that -- those synergies because that is also critical in terms of you achieving that double-digit margin?

Yes. Yes. I think first of all, in terms of guidance or assumptions that we outlined, we set a set of those assumptions out in -- for CMD through '28. Fundamentally, those will hold, those were at the NI level, and we provided some visibility to IP and optical growth underneath that. So those continue to hold, obviously, as we talked about, we're not going to update those every quarter, but we'll give you visibility into what we see going into next year and provide an update on it from that perspective. And we gave you an update, obviously, on what we see this year versus expectations.

In terms of the synergies, I think very clearly, if you go back to the case that I inherited on the acquisition, it was largely a consolidation case. And so if you think about it, it was -- there were sort of 3 elements to the case. One was consolidate two players to become a #1, #2 player, certainly in the western market. But 1 of 3 big players globally. The other part was get increased exposure to the U.S. market, both in AI and cloud, but also in telco. Because we were -- Nokia was relatively less exposed. Infinera was more heavily exposed to those 2 segments. And third was largely around synergies, and it was [ EUR 200 million ] in 3 years. But focused about 2/3 on OpEx and 1/3 on cost of goods sold.

As I came in and we started to see the opportunity and scale across and the relevance of what we're doing in pluggables, and I talk to customers and obviously, part of the decision we made around the leadership and pivot we made was -- we basically made a complete flip on the integration plan. We said we're going to go 2/3 COGS because we see higher revenue than we expected, which led to obviously the updated guidance we shared first at CMD, and we've updated for this year in Q1.

Second thing we said was we're going to still hold to getting the G&A synergies, which is really where 1/3 of the OpEx comes out because more broadly across the company, as we've talked about, we need to continue to be become a leaner, more agile company. And so this was one of the places where we need to make sure we capture the synergies is something that as a company, we haven't done consistently in the past on acquisitions. So the discipline that we have right now is maximizing those two.

What we decided was not to sacrifice R&D. And so instead of cutting R&D, we basically merged the R&D teams together. And the first thing we did was -- first decision we made was to move some of the Nokia engineers to go work on getting the plug -- the 800-gig pluggable out. It feels like that was a pretty good decision in terms of synergies. So we were able to get much more competitive and catch up in that market where we were quite far behind.

Second decision we made was to keep the 2 DSP teams, and that's why you see us building 4 DSPs. Typically, the 2 companies would each have released 2 DSPs that were largely the same. Now we're able to deliver 4 DSPs in the same period. So that's the shift. And so that's really the net-net of what we did from an integration plan to capitalize on the opportunity.

The last thing that happened, and I'll just touch on this is we -- and David alluded to this in CMD, is we basically said we're 9 to 12 months earlier in terms of realizing the synergies. So we've accelerated our commitment against the synergies. And I think -- and obviously, we're in a position where we're delivering far greater growth than we anticipated as you touched on earlier, Sandeep.

When I -- as a tech analyst, we learn that when companies scale up like this in revenues, I mean, the gross margin doesn't necessarily -- because you're outsourcing a lot of the manufacturing, the gross margin doesn't change much. So if you're going to do 42%, 43% gross margin, that might be 45%, but it's not going to become 50% or 60% gross margin, that's that. But because of the gearing in the OpEx, the operating margin goes up a lot.

I mean when you see your guidance at the moment to '28 is 13% to 17%, which is better than where you are today, no doubt, or rather in '25, but it doesn't show any dramatic gearing. So is it that you're going to spend a lot more OpEx in the next few years? Because you seem to see in orders and which will eventually translate into sales. We should see Nokia seeing much better operating margin in the NI business.

Yes. Again, a few things on this. So first of all, I'm going to go back to CMD where we provided the multiyear guidance, right? So -- or the set of assumptions for the multiyear against the operating profit guidance.

First of all there, we had a set of assumptions on growth and performance. We had already assumed that we were investing the R&D -- making the R&D investment on Optical and also reallocating capital to invest in IP networks at that time. So if you think about that, this is important because it's across NI. So if you think about that, that was the assumption then. Since then, we've talked about we're incrementally investing, and that's largely around scaling, manufacturing, scaling capabilities in that -- in Optical, we're continuing, obviously, to maintain the investment in IP.

But also, we haven't -- we're also going through all of the -- the investment, or the efficiencies investment we're making to drive cost out of the company at a corporate level for G&A and driving productivity. We're also -- the other thing we talked about a little bit is we also made a decision around the integration of our joint venture in China to then go ahead and capture synergies on that. So we have quite a few things kind of on the move that touch the business. And so therefore, you don't see this big swing in terms of the operating profit drop for this year.

What we haven't done is come back and said anything about future years right now. And to be honest, my focus, first quarter into the year is not to update 3-year assumptions because I'm not going to do that every year. But I do think this is a year where we've got a lot of work to do to make -- to position the company for longer-term operating leverage and structural growth. And it's not just within the business. It's also across the business, across the company as we drive the efficiencies, drive simplification of systems, modernization of systems, complete systems integrations that, in some cases, go back to the Alcatel acquisition, so that we can build a much cleaner, simpler company.

And of course, in parallel all of that execute the exit and the transition of the portfolio businesses that we outlined at CMD of which we've announced now that we've got a transaction for one of those -- with the FWA business and Inseego.

If there are any questions on NI, maybe we can take a couple of questions before I go to Mobile Infrastructure.

I just had a couple of questions. Just had a couple of questions. The first is, now that the AI boom is ramping up, how do you see the economics of the industry in terms of the split in profits between infrastructure providers such as yourself, and data centers? Is there a risk of commoditization of the infrastructure players?

And the second question is on indium phosphide. You mentioned a boom in indium phosphide demand. Do you see a bottleneck in indium phosphide demand? And you think independent foundries could help you offload some of that demand? Or you're just going to try to do everything yourself? And is it going to be another bottleneck like memory where everything just goes crazy?

Okay. So I think those are two questions. Two questions, no problem. So first of all, on the first one, look, I think there's always a place for innovative infrastructure companies to make -- to capture value. I think what you have to be really disciplined on is where is our differentiation and value capture. And that's my focus. Right now, we've got multiple vectors of that across the board. And my message which has been clear across the company is we need to focus our R&D capital where we can differentiate, where we think we can differentiate for the long term. And when we're not differentiated, we need to we need to transition and partner. And in this space, I think we've got multiple vectors for differentiation and how that -- we'll let that play out over time, but we'll continue to stay focused there.

On indium phosphide manufacturing, look, it's not that easy to say. I mean two things. One, it's not that easy for someone to just ramp up in indium phosphide fab. So I think that's number one. So if you -- at a component level, the reality is I think you've got a few scale players in the U.S., you have some manufacturing in China. You don't have much else. And I think the reality is the problem ahead of scaling supply is also one of maturing the manufacturing process. Because we're going from tens of thousands of units to hundreds of thousands to millions to potentially tens of millions in a period that's incredibly accelerated. So I think the key thing for all of us is to figure it out and as an industry to figure it out, right, and solve that problem. I don't think there's other people that will solve it better.

Now are there lessons we can learn from other parts of the industry? Of course. Are we working on learning those lessons? Absolutely. I'm sure that my peers that manufacture indium phosphide would tell you the same thing.

The second part of that, though, is in any situation like this in semi, and you guys know this because it's a long cycle investment for short-cycle demand. When you have this kind of demand spike, you're going to have constraints, right? And that's just the economic reality of the dynamic. It's not solvable. Even if we're scaled as an industry, and we have spikes, we're probably going to see this problem. So I think that's the reality of where we are.

Our focus right now is how do we derisk that ramp as much as possible. How do we scale and mature it and ensure we can deliver on the inherent demand in the market because that's what's most important.

Yes, question on the competitive environment, both in Optical and data center switching, right? How do you look at that? And what gives Nokia right to win?

Yes. First of all, on optical, I think we have a few different elements. One, if you look at the business, we've got a broad business across systems, components, software. The fact that we've got the DSP capability that we have, the engineering resources we have, we're able to build far more tailored products and at the scale that we're talking about. Literally, we think of every application inside of a customer is a product, which, by the way, is exactly how the customers think about it.

If those of you that understand what's happened in storage or compute in the past in AI and Cloud, you know that the hyperscalers look at it that way as well. So I think that's one advantage we have. And the other, I believe, is the vertical integration, particularly as we ramp in pluggables is a competitive advantage for us. It simplifies the design. And for us, it gives us the ability to optimize between the DSP and the photonic integrated circuit.

On the IP switching side, a couple of things there. One, we make our own silicon on routing. That's obviously a core part of the scale across story is routing. So we believe that's an important advantage for us. But also we got -- we think we've got a very competitive and robust system design and software stack, and that's the feedback we get from customers, and the ability to tailor that to specific applications.

Thank you, Justin. I just want to go on to Mobile Infrastructure.

Now we're going to talk about Mobile?

Yes, we need to talk a little bit about Mobile. So on Mobile Infrastructure, you've talked about this new strategy where you're going to go to standard product from an ASIC-based solution. Now clearly, that could be considerably margin accretive to Nokia going forward given the cost of developing ASICs there. My question there would be, can Nokia remain competitive in the Mobile market?

Because if I remember, when Nokia transitioned to 5G, the issue was you did not have an ASIC solution in time and that made you lose share to Ericsson and Huawei and some customers. So how do you see this competitive environment play out in a standard product world -- a standard -- chip world as such?

I think first of all, just for everybody's recollection, Sandeep, and I obviously wasn't there at the time, but my understanding of it is if you go back to the story of what happened at that point, this was -- the company had a misexecution with a third-party partner, right, which was Intel at the time on the ASIC, and it fell back to FPGA, which I think wasn't competitive. But Intel wasn't building a general-purpose product. At the time they were building an ASIC. And this had to do with a fab transition that didn't have to do with the product.

So obviously, I feel pretty good about our partner's ability to execute on their silicon time lines. I'm not worried about risk there. They're excellent at this. Also, we're not on the leading edge compute platform. So if you think about -- our first product is going to be, kind of, at the tail end of what they're building in terms of their silicon time line. So that's more favorable.

But the other fundamental piece, if you look down the road, is the cost of building an ASIC is going up. And so you have to amortize that cost against your volume. And so you have two penalties you got to consider. One is capital -- deploying the capital involved building that unique ASIC. And then the amortization of all of the mask cost and everything else against the volume that you're going to see.

And the reality, when you look at radio is -- and baseband is we're just not going to see that. I mean, there's already a movement underway. There was a movement underway with x86 around general purpose silicon. When we look at what's going to happen into the next generation with leading edge silicon. We can get so much more -- we can get equivalent performance and so much more upside by building on general purpose. And that's before we even start talking about the capabilities we'll see on AI.

So probably later this year, as we trial with customers just see us come out and talk about some of the performance specs and metrics, but we think it's extremely competitive. The shift for us, much like you saw the shift for us in core, is to become much more of a software business on the baseband side. And that's really where we spend most of our investment anyway and where we deliver most of the value for customers.

The other side of that, which I think is really important is we also need to change the arc of the industry's capital deployment. And what I mean by that is today, the way that we invest in this infrastructure is we basically require a customer to build a completely new radio network every time they make any kind of generational shift. I think that's something that has to change in this industry.

I think if you look at one company here that's quite visible on this, albeit not with us is AT&T, who's committed to Open RAN and been a leader in this. And I think to their credit, I think that's the right strategy because we need interoperability at the radio. I mean it's almost like -- the analogy I'll give you, it's almost like if you came into a data center and said, "I'm going to put more power into this data center. Oh, by the way, you got to upgrade all your electrical subsystems and transformers." I mean that's the logic of what we're doing right now.

We're taking something that you should be able to upgrade on a compute cycle on the baseband because it's a computer. And we're saying you need to upgrade that like it's industrial hardware which sits up on an antenna, which is the radio. So unless there's some compelling reason to replace the radio, generational transition, new spectrum, massive reduction in power efficiency which there is, I mean generation to generation, there's power benefits. But unless you're getting some massive benefit forcing the upgrade of the entire system seems very complex. I think this is something the industry needs to change because our customers ultimately aren't returning their cost of capital.

So I think this is where we need to pivot strategically as an industry. I think we're leading this pivot. I think what we're going to be able to deliver based on the early validation and test we've been doing over the last couple of years with NVIDIA and AI RAN is powerful. I think it positions us to be much more software-centric as I've outlined. And candidly, I think this is an industry we also need to ensure is healthy because from everything I see, I don't see Mobile -- Mobile networks going away. In fact, I see them being far more critical in an era where you've got physical AI. You've got dynamic connectivity, and the reliability and the security and the importance that these networks play in economic and national security for countries is only going to increase.

Just quickly, we've got a minute and left. On the potential for Nokia to gain share in Europe because there's quite a lot of Huawei in the network still and European Union is thinking of removing Huawei. Is this a potential in the next couple of years? Or do you think is it still further out?

Look, I think for me, my focus right now is on planning for the market we're in. If there's an accelerated demand increase in Europe because Europe decides that sovereignty extends to their radio networks and that national security on a radio network is very important. I think we'll be well positioned to win a share of it, but it's not something in our base plan.

Understood. And then finally, clearly, I mean, gaining share overall, I mean, not just Huawei, but in the United States, for instance, where Nokia used to be a much bigger player in the mobile network market. Is this somewhere high on your list? Or is this not very high on your list at this point really?

Look, all 3 major operators in the U.S. are very important customers of Nokia's. The two of them are not major radio network customers. But they're very important customers to us, they're important partners. Obviously, we want to grow our market share with them across all parts of our business. That's from -- as the CEO of Nokia, that's my focus. My focus, they're some of the biggest customers in the world. They're very strategic. They're leading in different ways they're innovating, they're leading, and we want to continue to be a great partner for them and grow our business with them.

Thank you so much, Justin.

Thanks, Sandeep. Thank you.

Hello, and welcome to Inseego's conference call to discuss its announced acquisition of Nokia's Fixed Wireless Access business and strategic partnership. Please note that today's event is being recorded. [Operator Instructions]

Before we begin, please note that a slide presentation was posted this morning to the Investor Relations section of the company's website. Participants joining by phone are encouraged to download the presentation to follow along. Those listening via webcast may advance the slides using the controls within the webcast player.

On the call today are Juho Sarvikas, Chief Executive Officer; and Steven Gatoff, Chief Financial Officer.

Please be advised that today's discussion will contain forward-looking statements. These forward-looking statements are not historical facts, but rather are based on the company's current expectations and beliefs. For a discussion on factors that could cause actual results to differ materially from the expectations, please refer to the risk factors described in the company's Form 10-K, 10-Q and other SEC filings, all of which are available on the company's website. Please also refer to the cautionary note regarding forward-looking statements section contained in today's press release and in the slide presentation.

With that, I'd like to turn the call over to Juho Sarvikas, Chief Executive Officer. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining us today. Before we get started, we encourage anyone dialed into the conference call to download the slide presentation posted this morning to the Investor Relations section of our website so that you can follow along. For those listening by webcast, please advance the slides by using the toggle button on the webcast player.

As you saw in the press release, Inseego has entered into an agreement to acquire Nokia's global FWA business and establish a strategic partnership with Nokia on go-to-market and next-generation wireless innovation centered around AI and 6G. In addition to the equity-based consideration, Nokia will also make a direct equity investment in Inseego and I'm thrilled to welcome Nokia as a shareholder and a partner.

Turning to Slide 3. We will cover 4 areas today: first, an overview of the acquisition; second, the compelling overall FWA market opportunity; third, a snapshot of the FWA business that we're acquiring; and fourth, the transaction structure and economics.

Diving right into it on Slide 5. I want to start with the core transaction terms and the key value drivers behind the acquisition. The simplest way to think about this transaction is that it is transformative for Inseego. It gives us immediate global scale in revenue and reach, strengthens our product and market position and creates a strategic partnership that includes go-to-market and technology innovation. Specifically, we are acquiring Nokia's approximately $200 million run rate FWA business for $20 million in Inseego equity with Nokia also making an additional $10 million direct investment in Inseego to become an approximately 11% stockholder. There are 3 primary value drivers in this transaction.

First, the acquisition immediately expands our global reach, total addressable market and overall scale. It also effectively doubles our revenue base and positions Inseego as a global wireless broadband leader with strong anchor carrier customers, international reach and a portfolio spanning both enterprise and consumer markets.

Second, the transaction includes a compelling financial construct with profitability backstop. Nokia will provide engineering and development support for the first year, which gives us a clear investment path while maintaining a breakeven EBITDA floor for the acquired business. Steven will cover the structure and financial terms in more detail in a few minutes.

Third, we are establishing a unique technology and go-to-market partnership with Nokia. That partnership creates a framework for joint commercial activity, technology innovation across AI and 6G and aligned ownership to support long-term stockholder value creation.

Turning to Slide 6. At a high level, the strategic rationale is straightforward. This transaction expands Inseego from a U.S.-centric business into a scaled global platform with broader customer exposure, a more diversified revenue base and a stronger foundation for long-term value creation.

On the platform side, we are expanding our global footprint to additional Tier 1 carrier relationships and increasing our relevance across a wider set of use cases as operators continue to invest in 5G monetization. Importantly, the transaction expands our portfolio globally and brings capabilities and products that allow us to address the consumer market, positioning us to participate more fully in the wireless broadband ecosystem.

From a financial perspective, the structure is designed to support the transition while maintaining flexibility. It preserves balance sheet flexibility, aligns incentives between our 2 companies and creates a larger platform that we expect will unlock revenue, cost and operating synergies over time.

Turning to Slide 7. The Nokia FWA asset completes our portfolio, giving us a full range of products across both business and consumer connectivity that we can now take to global markets. FastMile is a key addition on the consumer FWA side with indoor gateways and outdoor receivers designed for in-home broadband deployments across both sub-6 and millimeter wave. What I like about the portfolio is how deployment ready it is, self-install where possible, technician install where needed with integrated WiFi and simple management. These products are already designed for how operators are rolling out FWA at scale.

The acquisition also expands our opportunity set by giving us a global customer base, which includes deeper engagement with our existing carrier customers plus access to new Tier 1 operators in markets where we do not have presence today. We now have a more complete portfolio to serve customers across more environments with solutions aligned with how the market is evolving.

Turning to Slide 8. We have developed a clear execution plan for how we intend to drive value from the acquired FWA business and the broader combination over time. On the revenue side, there are 3 primary levers. First, we will expand our FWA reach and unlock a broader global consumer TAM by driving cross-sell across the combined Inseego and Nokia customer base. Second, we can take Inseego product lines to new global customers, broadening penetration across consumer, enterprise and mobility segments. Third, we can expand SaaS solution attached across the acquired portfolio, creating a growth opportunity for Inseego's SaaS device and network management capabilities over time.

On the profitability side, there are also 3 clear levers to drive incremental value. First, I expect our greater scale to provide more supply chain leverage and purchasing and manufacturing efficiency. Second, we see engineering synergies through technology platform reuse across software, hardware modules and cloud as well as product design reuse. And third, the larger revenue base should improve fixed cost absorption and operating leverage across the combined platform. That's the value creation story, clear operating levers to drive both growth and profitability over time.

Turning to Slide 9. Nokia selected Inseego as its partner at the wireless edge and is becoming a meaningful shareholder, which aligns both companies around long-term value creation. Beyond ownership, we will work together on the technology road map, including AI-driven connectivity, 6G and next-generation wireless broadband. Commercially, it gives us a path to engage jointly with operators and customers and expands our reach into Nokia's broader customer and partner ecosystem. The value here is both immediate and long term, a stronger platform today and a relationship that can create additional technology and go-to-market opportunities over time.

Turning to Slide 11 and the market drivers. The demand profile for networks is changing. Broadband is no longer just about download speed. Operators and enterprises increasingly need more uplink capacity, lower latency and more intelligence closer to the edge. That is being driven by AI workloads, cloud applications, industrial connectivity and mobility use cases that require more distributed network architectures. FWA fits directly into that evolution. It gives operators a faster, more flexible way to add broadband capacity while 5G advanced millimeter wave and eventually 6G expands what wireless networks can support. The scale of the opportunity is significant, and these trends are driving demand towards high-performance wireless broadband, exactly where Inseego is focused.

Turning to Slide 12. The expected growth in 5G fixed wireless shipments reaching roughly 47 million units by 2029 reflects increasing operator adoption globally. What's driving this is straightforward. FWA is winning more and more as a primary connectivity option due to cost, time to market and performance. In addition, it is deployed as a complement to fiber and satellite. It's also important to note that millimeter wave is dramatically increasing the capacity of FWA deployments. The takeaway is that FWA is becoming a core tool for operators to both monetize 5G and expand broadband access.

Turning to Slide 15. I'm excited about the depth of the portfolio that we're bringing in. What stands out is how complementary it is. It expands our capabilities across indoor, outdoor and millimeter wave and broadens the environments and use cases that we can address globally. It also brings a mature device software platform, which is critical for deployment, management and ongoing performance at scale.

Turning to Slide 16. This is a defining moment for Inseego. It is the largest transaction in our company's history, and we believe it materially expands our scale, our market opportunity and our long-term position in wireless broadband. Just as importantly, it validates the strength of our strategy, our technology and our team. Now our job is to execute well, support customers and drive long-term growth and shareholder value.

On a personal note, I spent a significant part of my career at Nokia. I know the quality of the technology, the strength of the customer relationships and most importantly, the caliber of the people behind the business. I'm very excited to welcome them to Inseego, and I want to thank Justin Hotard, Nokia's President and CEO, and his team for the ongoing commitment and partnership.

With that, I'll turn it over to Steven to walk through the transaction structure and financial details.

Thanks, Juho. Good morning, everyone. Jumping right in on Slide 18. There are 3 overarching dynamics in the acquisition: one, the overall transaction structure; two, the EBITDA make-whole that's in place as we invest in the business and integrate it over the first year; and three, our alignment on driving revenue and profitability of the business moving forward as both parties focus on long-term value creation.

On the transaction structure, this is an asset purchase with an aggregate consideration of $20 million. The consideration consists of $15 million in Inseego common stock to be issued to Nokia at closing along with warrants valued at $5 million. In addition, as Juho mentioned, Nokia will be making an additional direct investment of $10 million in Inseego for a combination of common stock and warrants, which will bring Nokia's total stockholdings to approximately 2.7 million shares or an ownership interest in the company of approximately 11%. The issued equity is subject to a lockup in which 50% of the shares and warrants are locked up for 1 year and the remaining 50% is locked up for 2 years.

The second important construct of the acquisition is that it is designed to support the transition of the business to ensure customer continuity and engineering investment with no adverse financial statement impact to Inseego. This includes a support agreement that provides Inseego with quarterly cash payments from Nokia to offset EBITDA losses of the acquired business so that we can drive the product road map and engineering investments of the business and run the business at an EBITDA neutral outcome. This EBITDA make-whole is capped at $38 million in aggregate for the first year following closing, which we see as wholly adequate to cover that 30 years' operations and investments.

The third dynamic in the transaction is the strong and important strategic alignment of Inseego and Nokia. In addition to the AI and 6G innovation and go-to-market work that the 2 companies are looking to do together, there is a profit sharing arrangement in place for year 2 and year 3 following the closing. This will align and provide Nokia with participation in the growth and value creation of the acquired business, where they will receive a portion of the positive EBITDA of the acquired business as a function of how it performs.

We believe these 3 elements of the transaction structure provide a compelling and disciplined framework for Inseego stockholders, one that supports the transition, preserves financial flexibility and creates an attractive risk-adjusted path to long-term value creation. As noted at the bottom of the slide, we currently expect the transaction to close in Q4 2026, subject to customary work and closing conditions.

Turning to Slide 19. We wanted to share some perspective on the financial profile of the soon-to-be combined business and why we think adding this FWA business to Inseego is compelling from both the scale and structure standpoint. Starting with scale, the Nokia FWA business is on approximately a $200 million revenue run rate based on their Q1 2026 results. On a combined aggregate basis, that brings Inseego to generate roughly $400 million in revenue annually. The product portfolio, customer base and geographical operations of the acquired business all drive the scale of the FWA business and the attractive nature of the acquisition.

In terms of the combined company profitability, the EBITDA breakeven backstop, that I mentioned on the previous slide, for the first year post close gives us stability during the transition while supporting the upside from the broader synergy opportunity thereafter.

Finally, on Slide 20, we wrap up with a few key takeaways. When you put this all together, we see a combination that materially increases Inseego's scale, meaningfully expands the TAM of our FWA business and does so in a way that is structured to be disciplined, supportive of customers and employees through the transition and is very attractive from a risk-reward standpoint. The acquisition creates a scaled global wireless broadband platform spanning both FWA and mobile. It broadens Inseego's product portfolio and engineering capabilities further across indoor and outdoor and adds millimeter wave solutions to the portfolio. As we talked about, Nokia is an amazing company, and the acquisition establishes a compelling and long-term strategic partnership with them on both go-to-market collaboration and joint technology innovation.

And finally, the acquisition is structured to support the business financially and create a clear opportunity to unlock revenue, cost and operating synergies over time as we move forward together. We see this as a highly complementary business that expands Inseego's scale, broadens our global reach and creates a disciplined framework for stockholder value creation. We look forward to providing more info as we move forward to close the transaction in the back part of the year.

And with that, we appreciate your time and support, and we'd, of course, be happy to open the call for questions. Operator?

And the first question will come from Scott Searle with ROTH Capital.

Congrats on the deal. It's incredibly transformative in terms of what you guys were able to pull off. Maybe quickly just to dive in a little more financial color in terms of the Nokia asset, can you give us an idea about if there are top 10% customers' geographic mix? I know it's international, so it broadens the footprint, but maybe a little bit more color on that front. And Steven, maybe as well a little bit in terms of how you're thinking about the gross margin profile? And then I had a couple of follow-ups.

Yes, sure. I think, Scott, we'll look to do more of the financial details as we close the transaction insofar as how that comes together, owning the asset now and just announcing the transaction. But we -- as Juho talked about, the customer base really is centered around Asia Pac and Middle East and Europe really are in that order insofar as customer concentration and presence of the business. The gross margin is -- the business has a nice consumer structure to it. And so that gross margin profile is more consistent than that -- with that than enterprise. We'll definitely be providing more info on the numbers as we get closer.

Yes. Maybe to add there that across EMEA and APAC, like Steven was saying, is a set of diversified anchor customers that will be a great platform for us to drive further global growth.

Fair enough. And maybe if I could, just to follow up on the cost side of the equation. It sounds like right now, currently, that business is negative EBITDA, but you've got that $38 million backstop in the first 12 months. Steven, I think you indicated that, that should be more than enough to get you to profitability on that business. I'm wondering if you could flesh that out a little bit as well as the comments around the profit share for year 2 and year 3, is -- are you referring that just from stock ownership in the company? Or is that more there is a split profit sharing ratio that we're going to see going forward on that business for the first couple of years?

Yes, awesome. So I'll do the last one first, very straightforward. The alignment around the business, the profit sharing in year 2 and year 3 is based on the revenue performance of the acquired business. So you buy a business with a belief, a forecast or view on what it's going to do. And as the business hits those numbers, Nokia is able to participate in the profitability that's generated. So that's very straightforward and aligned around hitting numbers and hitting growth numbers for year 2, year 3.

And then the first question on the make-whole was, yes, we structured that with Nokia as a very good partnership discussion with them around the investments that are going to be made, the spend in year 1, which is a big transition and engineering investment. And so to your point that you flagged, we feel really comfortable with managing the business within that cap so that we expect it to be EBITDA breakeven 0 for the first year.

So we have between now and close to work on the integration planning and then -- like Steven was saying, that gives us 1 year to materialize the revenue expansion as well as synergies for the business.

Got you. And just to clarify, it sounds like then as we get post year 1 that you're expecting this business then to be profitable if you're able to manage it with those integration, those investment issues in the first 12 months of operation. Is that correct?

That's exactly right.

I think the easiest way to look at that is that we'll come out of year 1 with one combined most comprehensive portfolio in the industry and one team executing on it with one technology asset.

Got you. And one last one, if I could, and then I'll get back in the queue. And this is probably not fair as probably any growth questions might be at this point in time, given the newness of the announcement. But looking at the core Inseego business today in terms of mobile hotspots, how big of an opportunity is that for cross-sell within that base? Have you started to explore some of that with your initial due diligence with some of the customers?

Thanks, Scott. Great question. And I think we've been -- we've had this discussion before as well, like the mobile or the hotspot market, very attractive also outside of North America, which is exclusively our focus today.

The other thing I would point out that if you look at this FWA, particularly the consumer segment, which operates under the exact same laws of Vuzix, Vuzix as mobile, where it's large carrier, large RFP based, we definitely will leverage this new global, let's call it, infrastructure to take our mobile portfolio to the global markets as well.

The next question will come from Christian Schwab with Craig-Hallum Capital Group.

I guess I'd like to echo Scott's comments. Congrats on the deal. The commentary regarding sharing and success in year 2 and year 3 with Nokia, I guess, it sounds like that's more revenue based. Is there any minimal profitability or EBITDA expectations in those payments to make sure that the profitability of the business is there despite revenue? I guess I wasn't clear what that meant.

Yes. The metric, the trigger is revenue performance of the business. And then based on that, it's driven off of profitability. So it's a percentage of EBITDA for that business, Christian. And so obviously, the incentive for us is to maximize profitability of the business. And so we're meaningfully focused on that and on growing revenue together, right? Without the revenue, you can't cut your way to growth. And so we're pretty well aligned with them on driving the revenue as a key metric for the business and then managing the cost structure so that it's profitable.

Okay. Great. And those exact details will be released at closing, I assume then?

Yes. We plan to file an 8-K today, and that will have the asset purchase agreement with terms in it. So this is all transparent and will be filed.

Perfect. We can stop talking about that then. I guess my last question, and thanks for all the detail in the presentation. Does this change, Steven, any of your previous investment plans to broaden your own portfolio beyond servicing enterprise-class customers and trying to go into the distribution channel and kind of expand your presence there? Will you be making any changes to your previous spending plans to expand that now that you will have a very broad-based distribution and consumer product portfolio in the not-too-distant future?

Christian, great question. Thank you. So obviously, we'll have a much broader now global set of opportunities competing for the same investment dollars. So I think that's kind of a fair statement to say and why you're asking the question.

The key thing to note about the U.S. market, a part of our success with the 3 large carriers here in enterprise FWA is the fact that they can draw a broader portfolio or draw value-added services from the channel. So we view that as a meaningful stand-alone investment itself for driving stand-alone top line growth from the channel, but it's also very critical and instrumental complementary as a differentiator for our carrier-focused enterprise FWA. Some of the global markets operate on different dynamics, but this is a success formula for us here in the U.S. that we will maintain.

The next question will come from Tyler Burmeister with Lake Street Capital Markets.

Congrats on the significant announcement here. Maybe first, obviously, early with the deal not expected to close until Q4, but wondering if you could give any color on your early thoughts of unlocking the revenue as well as cost synergies. If you don't want to quantify them at this point, maybe just what's some of the lowest hanging fruit to be addressed there?

Yes. We'll tag team on it as usual. Tyler, it's a good question. Yes, we're in the process of forming our integration plans and implementation plans on both sides. Obviously, there's some arm's length that needs to be maintained there until we actually close and own the asset. But as you would suspect and as Juho just said and mentioned earlier, there's a lot of synergy opportunity and how the business is run with a product management organization that's horizontal and global. So this is not a bolt-on of the business and similarly with engineering. Some of the G&A aspects of this are a bit greenfield insofar as how we approach the servicing and support of that business, but more so on the operating side.

I think the big thing for me, just from a technology platform standpoint of view. And when I say technology platform, I mean that in a broader sense, whether it's the connectivity module that today, both of us create independently or the device OS, which, again, we both create independently. Like you know, 5G advances in releases. As this next mode of generation comes about, we intend to pull the whole global portfolio across consumer and enterprise, mobile and fixed on a single technology platform. So that point in time is a very critical element for us and that's actually from a timing standpoint, we're going to work excellent.

The other thing is then the -- from a revenue synergy standpoint of view, cross-sell would be the first thing that comes to mind. So once the deal is closed, you will see us engage the North American market with the acquired assets from Nokia and vice versa with Inseego and the global markets.

Great. Great. Maybe just last one for me. As an asset purchase, what kind of headcount are you thinking about bringing over? And what kind of OpEx expenses are roughly attributed to this business?

Well, Tyler, I mean, the OpEx profile is kind of what you expect across R&D and sales and marketing and G&A that we're putting together. And so as I mentioned earlier, there's an existing business that's coming over on the engineering and product side and the G&A side will be more of a greenfield investment and synergy with the existing business. And we'll definitely be going into that as we move through and get to closing and have some time to work on the transition with the team. So we'll definitely provide more color on how that starts to come together.

The next question will come from Jonnathan Navarrete with TD Cowen.

What would you say are the key milestones over the first 12 months once the deal closes that would give confidence in the acquired business can sustain at least breakeven EBITDA once the support rolls off?

Jonnathan, I apologize. It could be us...

On the key milestones between now and integration accomplishing.

Yes. The -- I mean the integration begins now as an independent company, right? There are all sorts of requirements about not directing each other's business. So that's a regulatory construct. But as we plan ahead, Juho mentioned this, the most important dynamic is probably at least 3, right, on the customer go-to-market integration, there's some really compelling aspects of that.

And then the big synergy drivers, the big of how you run one global horizontal company come on engineering and dev and on product management. The G&A tends to be a little bit more business-centric, regional, geographically centric with operations overseas that are additive. But the big milestone is how we bring them together and then how we start seeing how the operations become more efficient over time on the engineering side and on the product management side over the first year.

The other thing I would add there, I think it's a great answer is scale in supply chain. So if you just look at the manufacturing value add, the volume of units that we'll be producing and what leverage that gives us is, quite frankly, huge and direct. We do command good volume, but we're operating in the enterprise and mobile segments only today.

The second part will be our relevance to the key component vendors in the industry. So we will be able to drive also procurement synergies. So that one integrated team, integrated process and purchasing power across the supply chain is very important.

Got it. And an expanded global footprint increases exposure to cross-border hardware supply chains. Do you expect any tariff or political challenges you'll have to maneuver given just how sensitive networking equipment is?

I'm sorry, we're going to have to ask again, repeat the question.

Sorry, Jon, our speaker is a little scratchy. It's tough to hear on and I apologize for that.

Just because how sensitive networking equipment is? Do you expect any tariff or political challenges once the asset is acquired in the fourth quarter?

Yes. If you look at the U.S. specific question, obviously, what would be the implications of this asset and bringing this asset to U.S., the category in itself is tariff exempt. So just like our product line today is the same will apply also on the new acquired lines of business. The other thing to note is that we have a very diversified set of countries of order chain. Like you know, many of our customers require TAA compliance. So we have good flexibility on that side.

Then if you look at the international market, I'm not sure if you're familiar, but Europe actually has very similar considerations on cybersecurity as you've seen emerge here in U.S. So that's something that could possibly be a tailwind, given that we're a Western player and the Europe market presents a great opportunity for the category.

The next question is a follow-up from Scott Searle of ROTH Capital.

Juho, I wanted to dive in a little bit in terms of 6G and AI development with Nokia. Does that mean they're going to have some committed resources on that front, either engineering, NRE or otherwise? Also on the SaaS front, given that they're more consumer-oriented, I'm wondering if you could flesh out maybe where you see some of those hidden opportunities. And I'm not sure if this is a fair question given that you're reporting first quarter earnings next week. But I'm just kind of wondering if you could give us a quick update in terms of what you're seeing in the memory market and how you guys are contemplating dealing with that.

Yes, excellent. So I'll start with the partnership part of the question. So we will, of course, resource and partially acquire a global go-to-market team across sales, technical presales, customer engineering, operations, everything that you need to run the business globally. But I also acknowledge that there's a massive opportunity in partnering with Nokia on their very large global sales infrastructure or sales teams. And if you look at the end customer here, and one of the key considerations for Nokia right out of the gate was the customer continuity and the customer experience because we will be selling to the same customers that are the biggest and most important one for Nokia now as they focus on the infrastructure.

So what you should expect to see is a joint sales process, pipeline management, all of that. We're also looking at Inseego incentivizing the Nokia sales team to make sure that -- to incentivize and train to make sure that we have business continuity for the customers also in terms of how they're used to interacting with the broader end-to-end that Nokia offers. The latest advancements on the edge with 5G Advanced, 6G or millimeter wave right now, which has been a key focus area for the assets that we're acquiring, they pull network equipment. So there's also a natural benefit for both parties to showing up together. So that's how I -- that's how I look at the go-to-market.

When it comes to AI and 6G or pilots with key customers on prospect deployments for that matter, we're looking at co-locating Inseego resource together with Nokia so that we can work as one on these key initiatives and push the boundaries of wireless broadband at the edge. That's how I think about the partnership, the resource and the commitment and what we're looking at building together.

On the memory market side, I'll -- maybe we'll talk about that more next week, but everything that we've stated in terms of how we plan for this eventuality and prepare remains true. So I don't really have anything new to share on the memory side.

And Scott, I believe you also had a question on consumer. Would you mind repeating that?

Yes. Sorry, Juho, just in terms of expanding some of the SaaS opportunities within the Nokia base, given it's more consumer-centric, how do you see that unfolding?

Yes. So first of all, consumers also need manageability or if you're doing a large deployment for consumers, you need manageability. And there are carriers who have built their own. There are existing solutions out there. But what we can bring together is one unified pane of glass with the -- all of the investments that we put to API, et cetera. So I look forward to developing our portfolio towards a direction where in addition to the amazing capabilities and ease of use that we have for enterprise deployment, the same platform deployable also for consumers. So I think there's a lot to be said in terms of how we could do even more on the cloud and the ARR side with these new large customers and the existing ones for that matter.

This concludes our question-and-answer session. I'd like to turn the call back over to Juho for closing remarks.

Thank you for the thoughtful questions. Today marks a truly transformational step in Inseego's business and long-term trajectory, and we're excited about the opportunity ahead. We look forward to talking with you again next week on our Q1 earnings call on May 7.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good morning, ladies and gentlemen. Welcome to Nokia's First Quarter 2026 Results Call. I'm David Mulholland, Head of Nokia Investor Relations. 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 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 Factors 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 relating to our comparable reporting. Please note that our Q1 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 for the quarter. Marco will then go through the financial performance, and we'll then move to Q&A. With that, let me hand over to Justin.

Thank you, David, and good morning, everyone. Our first quarter gave us a solid start to 2026. Net sales grew 4% to EUR 4.5 billion with an operating margin of 6.2%, and we delivered a free cash flow of EUR 629 million in the quarter. Gross profit was EUR 2 billion and gross margin expanded 320 basis points, supported in part by the absence of a onetime charge in mobile infrastructure in the prior year. It also benefited from strong performance in Optical Networks as we began to see the synergy benefits from the Infinera acquisition.

Operating profit was EUR 281 million, with operating margin expanding 200 basis points. We saw strong momentum with AI and cloud customers. Net sales grew 49%, and we received EUR 1 billion in new orders, particularly driven by Optical Networks. At the group level, book-to-bill was above 1. And in Network Infrastructure, it was well above 1. I'm proud of Team Nokia's execution in Q1. The focus now is on delivering through the year and maximizing the growth opportunity in front of us.

At our Capital Markets Day last November, we outlined our view of the AI super cycle and the market opportunity for Nokia. Since then, demand has accelerated. At the time, expectations were for the largest hyperscalers to spend around $540 billion in CapEx in 2026. Now, those expectations have increased to over $700 billion. This reflects the pace at which our customers are scaling infrastructure for AI.

Today, AI-driven traffic is estimated at around 20% of total network traffic, which is roughly 80 exabytes per month and is still primarily human to machine. As we move deeper into agentic AI adoption and ultimately physical AI adoption, machine-to-machine traffic will become the primary driver of traffic, and that will lead to a step change in network traffic. We already see this demand in AI factories, both in data center interconnect and inside the data center in routing and switching. Increasingly, this is also driving demand in transport networks across metro and long haul, and we believe this is a structural shift in the market, which will sustain for multiple years.

We now expect our AI and cloud addressable market to grow at a 27% CAGR between 2025 and 2028, up from the 16% we shared in November. This implies the addressable market for network infrastructure growing at a 14% CAGR compared to 9% that we shared in November. This is already benefiting Nokia in orders and in revenue. In March, we introduced several new products at OFC. These launches reflect our focus on accelerating innovation following the Infinera acquisition.

The industry is scaling from hundreds to thousands of fibers between data centers. To address this demand, we introduced our next-generation hyperscale multi-rail solution, which will begin shipping later this year. It scales fiber capacity without expanding physical infrastructure, delivers an 8x increase in density and is 25% more dense than competing products announced recently. In addition, we also shared that we're evolving how we bring optical solutions to market.

Our road map moves to a building block architecture with 4 optical engines that are embedded in multiple form factors compared to the 2 engines per generation previously. The architecture allows us to bring 13 application-optimized solutions to market. For customers, this means simplified deployment and a reduced total cost of ownership of up to 70%. These products will begin sampling in the first half of 2027 and will ship in volume in the second half.

In Q1, we also saw strong growth in our IP networks pipeline as we build deeper engagements with our AI and cloud customers on switching and routing. We were awarded new design wins and continue to build a strong pipeline of further opportunities. We expect this to translate into new orders over the coming quarters. We've also increased our investment in optical networks and our new indium phosphide manufacturing facility in San Jose, California is on track to begin ramping production later this year. As a result, we are increasing our growth assumptions for network infrastructure in 2026. We now expect growth between 12% to 14%, up from the 6% to 8% we communicated in January. For Optical and IP networks combined, we expect growth of 18% to 20%, up from 10% to 12%.

Turning now to Mobile Infrastructure. This new segment began operating in January, and the team is focused on aligning our road map to customer needs, streamlining the integrated business to improve productivity and delivering on the KPIs we outlined at our Capital Markets Day. Core software had another strong quarter, growing 5% and gaining market share.

In the quarter, we delivered 6 competitive swaps. Our customers are modernizing their platforms with cloud-native solutions, adopting new security features and driving end-to-end automation with a focus on reducing operating expenses. Radio networks also delivered on our expectations. We signed several deals in the quarter, including with Virgin Media O2. At Mobile World Congress, we introduced a new generation of radios that are AI RAN ready. Our Doksuri remote radio heads deliver a 30% improvement in power efficiency and up to a 25% reduction in weight.

In addition, we continue to make good progress on AI RAN in partnership with NVIDIA, and we are on track to begin field trials by the end of the year. Technology standards continue to perform well across its markets. The business continues to deliver stability, and we expect largely flat net sales for the full year with improved profit generation year-over-year. With that, I'll hand over to Marco.

Thank you, Justin, and hello from my side as well. As Justin mentioned, we had a solid start to the year with EUR 4.5 billion in sales, growing 4% with growth in both operating segments. Gross profit was just over EUR 2 billion with a gross margin of 45.5%, a 320 basis points improvement on year-on-year.

Operating profit was EUR 281 million, with an operating margin of 6.2%, and this is up 200 basis points compared to the previous year. Free cash flow was EUR 629 million, and the quarter ended with a net cash of EUR 3.8 billion. Network Infrastructure sales grew 6% in quarter 1. Optical Networks had another strong quarter with 20% net sales growth, and this is mainly driven by AI and cloud customers.

We also grew in telecom as operators invest to meet increasing demands on transport networks. IP Network sales grew 3% with growth in AI and cloud, offset by softness in other customer segments during the quarter. We expect growth in IP Networks to start to accelerate in quarter 2 as we ramp shipments tied to new design wins with AI and cloud customers.

Fixed Networks declined by 13%, reflecting our portfolio strategy to focus on higher-margin products. Sales of our optical line terminal products were largely stable in the quarter. And looking ahead, we expect the sales trend to improve as the year progresses. We see a supportive demand environment, especially in the U.S. with fiber deployments remaining a key investment focus for Tier 1 operators.

Gross margin in Network Infrastructure was 43.4%, increasing 150 basis points. The increase was driven by a higher gross margin in Optical Networks, benefiting mainly from Infinera integration synergies and scale. We continue to expect some gross margin headwinds through the year as a result of product mix. Operating margin was 6.7%, a 30 basis points below the previous year as we had a full quarter of Infinera expenses compared to 1 month last year.

For the full year, we do expect to slightly increase the Network Infrastructure operating margin. However, our focus this year is on investing to capture the long-term growth opportunity in the market. In Mobile Infrastructure, net sales grew by 3%. Core software sales grew 5%, while Radio Networks sales were flat. Technology Standards sales grew by 10% as a result of signing several deals in consumer electronics and multimedia, which contributed catch-up sales in the quarter.

Gross margin increased by 430 basis points to 48.5%, in line with our long-term target for mobile infrastructure gross margins. The increase was mainly related to EUR 120 million contract settlement, which negatively impacted the previous year. We expect Mobile Infrastructure gross margins in the second and third quarters to be somewhat weaker and then much stronger in quarter 4. And this is consistent with the typical seasonality in the business.

Operating margin was 8.9% in the quarter, an increase of 380 basis points, reflecting the settlement impact and lower operating expenses supported by the ongoing cost-saving program. If we then turn to look at our sales growth by customer segment, AI and Cloud grew 49%, mainly driven by Optical Networks. Mission-critical Enterprise and Defense grew 19% and Technology licensing grew 10%. These growing markets offset a 2% decline in telecom to deliver 4% growth for the group. The decline among telecom customers was partly related to some of the portfolio decisions we are taking in Fixed Networks. Overall, we continue to see the telecom market as relatively flat.

The quarter 1 was a strong quarter for free cash flow generation, which amounted to EUR 629 million. We saw the typical working capital unwind in the first quarter related to the receivables buildup at the end of '25 from a strong quarter 4 sales seasonality. For your models, remember that quarter 2 is typically a seasonally low period for cash as we pay employee cash incentives in that quarter. Finally, to our '26 guidance assumptions.

Our group level financial outlook remains unchanged, and we are currently tracking somewhat above the midpoint of the range for comparable operating profit, which is between EUR 2 billion and EUR 2.5 billion. Justin has already mentioned the 2 key assumptions for the full year that have changed. We now target to grow faster in Network Infrastructure this year with 12% to 14% growth, up from the previous assumption of 6% to 8%.

And specifically in Optical and IP Networks, we now target 18% to 20% growth, up from the previous 10% to 12% growth. Then regarding quarter 2, we currently assume a 5% to 9% sequential increase in net sales. For operating profit, we expect quarter 2 to account for between 12% and 16% of the full year based on the comment I already made that we are tracking somewhat above the midpoint of the full year range. This would equate to H1 being between 24% and 28% of the full year operating profit, consistent with 2025. And this is mainly due to the growth-related investments we are making to support the long-term opportunities in the business. And with that, let me hand back to David for Q&A.

Thank you, Justin and Marco. As usual, for the Q&A session, as a courtesy to others in the queue, could you please limit yourself to 1 question and a brief follow-up. Sherry, could you please give the instructions?

Yes, sir. Thank you. We will now begin the question and answer session. [Operator Instructions] I will now hand it back to you, Mr. David Mulholland.

Thanks, Sherry. We'll take our first question today from Fredrik Lithell from Handelsbanken.

Congrats, a great report. I would like to step into the world of Optical Networks and ask you your raised assumption for the year. Is that based on that you see more positively on getting better traction on sort of production capacity throughout the year, so earlier than you anticipated before? Or is there something else in there that gives you the opportunity to raise that guidance?

Yes. Thanks, Fredrik. So I think 2 things I would touch on. I think one is a little bit more confidence on supply. And obviously, the fab is one component. There's also the other -- the components of the optical subsystems, the DSPs, obviously, that's in pluggables. Obviously, as you think about our larger systems, there's multiple different elements to that. So it's a bit more supply confidence on optical from -- obviously, as we said, demand is strong -- demand continues to be strong on optical.

And then it's also related to some of the traction we're starting to see in IP networking. And as we've talked about in the past, the IP networking business has been a little bit lumpy as we drive the growth, but we're starting to see more visibility for the year, and that's a part of what's driving the growth.

Did you have a follow-up, Fredrik?

I'm fine with that.

Thanks Fredrik. We'll take our next question from Janardan Menon from Jefferies. Janardan, please go ahead.

Just wanted to dive into the design wins and the EUR 1 billion that you've reported saying most of that or the bigger portion of that is from Optical. Are these still on the 800 gig side? You had put out a very impressive portfolio of products at the 1.6T, 2.4T, 3.2T at OFC, which you said would be starting to come through by late 2027. So are you already seeing some order intake on those? Or is it too early for those kind of more leading-edge products to be -- or next-generation products we're seeing orders right now? And I have a small followup.

Yes. First of all, thanks, Janardan. So I think if you look at the demand that we're seeing -- the demand that we're fulfilling, I should say, for this year, I really see that momentum on the back of our 800-gig pluggable and then the associated line systems and the platforms that we have available and shipping today. A key thing that I maybe didn't touch on in my comments, I'll just emphasize is that the road map we launched at OFC, I touched on the fact that it's largely oriented towards 2027. But a key note there is that road map was designed with a real focus on AI and cloud customers and designed in collaboration with some of those customers.

So we talk a lot about that customer collaboration. I talked about it at CMD a little bit. We talk about it quite a bit internally, and that's a good example. And then as I would just kind of give you macro broad brush orders, I think what we see in orders generally is some elongation in orders in terms of a desire for a longer-term commitment on orders. And that's, of course -- that's also something we're seeing in terms of our demand back into the supply chain, providing longer-term commitments. And I think that's very normal with the kind of demand expansion we're seeing in the lead times. And I think if you look at other -- our peers or other players in our ecosystem in this space, they're all saying similar things. So I would say that, that's very consistent for us as well.

Understood. And I know you don't want to talk about growth in Networks and Optical separately, but it's been quite a big increase in -- it's quite a big increase in your guidance from 10% to 12% to 18% to 20%. Is most of that from Optical? Or are you going to see a meaningful acceleration in your IP side from Q2 onwards, which could, say, take you towards the double-digit 10% kind of growth rates there by the end of the year?

Yes. I would say that the optimism we have on the 18% to 20% is across both sides of the business right now.

We'll take our next question from Artem Beletski from SEB. Artem, please go ahead.

I would like to ask on AI and cloud-related orders. So I think book-to-bill was around 3 in the quarter. And when do you actually expect some catch-up to be seen in terms of deliveries? And could you maybe talk still about some potential delivery constraints what you have in this area?

Yes. I think, Artem, first of all, I'd say right now, I'm focused on maximizing the opportunity that we see. And I don't see the book-to-bill is something I need -- we need to catch up to. Our focus right now is on just maximizing the demand. As I said as well, we are starting to see some elongation of the order cycle, which is normal in these.

And then in terms of constraints, I mean, I won't get into too much detail, but I think it's -- generally, it's -- there's a fair amount of constraint in the semiconductor ecosystem in general. We don't talk about it, but if you think about the kinds of lead times you hear across the semiconductor manufacturers, the leading players, I think that gives you a pretty good indication of what lead times are, and then obviously, in other areas, at the scale that we're building indium phosphide as an industry, obviously, that's driving demand back into the supply chain that we need to build capacity for.

And so we're working on that as well. And that gets a little bit to the point on investment. As you think about investment, I would think about it in optical in a few ways, right? One is investing and scaling the capability and capacity. We're obviously bringing on the second fab, but it's scaling production capability into the supply chain. And then, of course, continuing to invest in the product portfolio to make sure we're maximizing the coverage of the portfolio against the market demand that we see.

Thanks Artem. Did you have a quick follow-up?

Yes, I had actually. So just relating to fixed networks. So you do highlight some headwind coming from consumer premise fiber business that is not seen strategic. Is it something that should be prevailing throughout this year or how we should think about it?

Yes. I think it's something that is going to -- we're going to continue to be disciplined throughout the year. And there's probably two things to consider here. One is the macro market on fiber, particularly with what's happening in the U.S., we talked about some of this last year with the CapEx builds of the Tier 1 and Tier 2 operators, obviously, beat us some tailwind. So we feel good about the underlying business, but we want to make sure that we're focused on the right type of business for us long term.

And so we expect that we'll have -- continue to have some headwind on the CPE side as we become more disciplined in that space and focus on the areas where it's valued. We also think this is a business that has good long-term prospects in data center. And we launched at OFC. I didn't touch on it, but at OFC, we launched an out-of-band management solution oriented towards data center. So we really like this business and we realized it was a bit of a tough quarter. It's just a situation where we're going through what I think is a very intentional transition to making sure the business has a long-term sustainable growth profile, not just in top line, but more importantly, in gross margin and operating profit.

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

Thank you, David. So the first thing I wanted to touch on was, in the past, you've floated this idea of growing the switching business by on the order of EUR 1 billion into hyperscale opportunities. I'm wondering with -- given sort of the commentary today and the wins you've had, could you update us on really the current opportunities in the sales funnel and longer-term prospects for this business unit?

Yes. I don't -- Simon, I'm not sure there's much more that we'll say than what we described, but maybe just to kind of break it down a little bit. Good design wins in Q1. Those don't show up meaningfully in orders. They're in pipeline, but they're not in orders in Q1. So we expect to see some of that start to flow in, in Q2. And as you likely know, these businesses are more design win driven.

And what I mean by that is it's not a procurement event where you kind of -- you have a procurement, and then if you're awarded that, you win that procurement, then you go to the next procurement. It's more about getting designed into a specific use case and application. And so that means that the sales cycle is a little bit longer, but encouraged by the progress that we're making here, and we'll continue to update you as we see the longer-term forecast. But I'm really pleased with the work that the team is doing and the progress we're making.

And then as a quick follow-up here. It does seem as if the press release cadence in the mobility business has stepped up a bit. And you didn't talk that much about it today, but I just want to get a better feeling. You mentioned the field trial for the AI RAN. Wondering if there's any movement change in your view on how this particular business unit in mobility RAN might be trending, particularly relative to how you talked about it last quarter.

Yes. I think, first of all, Simon, a couple of things. One is, and we touched on this a little bit in our -- well our segment performance shows it, and I think we touched on it. Overall, the telecom market is flat. I think what we realize is that strategically, this is a market where we need to find new sources of value, and those can come either from enabling new services for the telcos to monetize or a business that's less CapEx intensive.

And I think we fundamentally believe that the future is much more of an evolution and is software-driven. We've talked about that in a number of forums. What I'm very pleased about right now is that the AI-RAN trials and the engagement around a model that will fundamentally be different for the baseband because we'll start to detach software innovation. And what I mean by that is not just features, but actual performance enhancements from the underlying hardware, just like you see model performance gets better in AI with GPUs, but you continue to see model performance improve even over the life of the same GPU. It's one of the benefits of that architecture.

We see that same thing coming in this part of the business. And so I'm really pleased that we're seeing such strong interest from the industry. And I think this is a business as we -- as I said at CMD, our focus is not on making the business necessarily a growth business because the underlying market is not growing, but to make it one that's much more profitable and delivers an attractive return on invested capital. And that's our focus. I'm very pleased with the start the team has coming together in MI. Obviously, a lot more work to do and a big milestone later this year with NVIDIA.

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

Maybe just a question around profitability in optical. I think originally with the Infinera deal, you were looking at double-digit operating margin. But clearly, you're stepping up your investment. So I was just wondering if you're still sort of on track to hit that target maybe by next year? The second question would just be around hiring and OpEx. Given the opportunity is clearly growing, what is your view around OpEx growth this year?

Do you want to take those?

Yes. When it comes to the Optical, just like when we announced the deal in Infinera deal, we said that we aim for double-digit operating margins, and this is something we are still believing in. We've seen a very good synergy work that the teams have been doing, and we are on track or actually ahead of our targets when it comes to synergy captures. So we're very pleased with that work. And also when it comes to -- if you look the combination of these 2 companies, how well they actually complemented each other. And this has been extremely successful among our customers as well.

So we have had very good design wins. We were very fast to decide on the road map. And this is one reason why we've seen these good wins on the Optical side. So there's a lot of positive things that we've seen, thanks to that integration and acquisition. Yes. And when it comes to OpEx, we've just said that we invest in capturing these opportunities in Optical side. And just like Justin mentioned earlier, supply is constrained. So we are investing in securing that we get the supply that is needed. So we focus on that. Otherwise, we don't guide any specific OpEx numbers.

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

I have 2 questions. The first one would be, so you're maintaining the group EBIT outlook with this higher growth in Optical, IP and you're explaining that you want to secure growth with higher investments. Could you talk a little bit more about the mix of these costs? Is this more R&D? Is it more sales and marketing? Is it more into production? Just more color on that cost increase would be helpful. That would be my first one.

I think, first of all, Ulrich, and I'll let Marco add if he needs to. But just to remind you, we always provide a range, and we give you some direction on the range, right? So we're not changing our guidance, which is the range. What we -- and we said we're slightly above -- we're guiding somewhat above the midpoint, right? So the key thing here for us is as we look at the business, we're making investments, and you touched on a number of them. It's R&D, obviously, sales and marketing and production.

And Marco just touched on some of that, right? It's -- there's obviously -- there's CapEx with the work that we're doing around the fab. But there's also investment in OpEx and scaling capability and manufacturing. And if you just think about what's happening in this part of the business, particularly around Optical, we're also going through a massive step function in volume as an industry. And so that means that we actually have to do work to mature the supply chain, mature the production capability as an industry, and we're not immune to that. So we're investing to make sure that we're successful in that and that we can capture the fullness of the opportunity around us.

I think this is pretty much the same actually, if you look also the whole industry in Optical side. So the whole supply chain is doing the same as well to secure that we actually can capture those demand opportunities. But still, there's more demand than supply. So that's why it's important that we invest in capturing these opportunities.

Did you have a follow-up, Ulrich.

Yes, a quick follow-up maybe. On this guidance upgrades and for the Optical growth, there still seems to be a relative dearth of customer announcements with hyperscalers. Could you talk about the reasons? You talked in the past about that you don't actually care that much, you'd rather care about the business. But is there possibly a hesitation on the side of the hyperscalers to talk about Nokia given Nokia is not a U.S. company? Or are there any other specific reasons why you wouldn't have sort of more meaningful announcement that tell us what you're doing with which hyperscaler and these kinds of questions?

Yes. I think, Ulrich, you probably have to talk to our customer or perhaps through who they are, but you could ask customers about us. From my perspective, that's not my priority. My priority is making sure we're partnering with them effectively. We're delivering what they need, and we're helping them execute on their strategies. That's my focus. And obviously, we're capturing our share of the opportunity that's out there.

So that's where I spend my time. Obviously, I think what's a little bit different about us than some of the U.S. players more broadly is that we also don't have a concentration dynamic because the business is more diversified. And so that may be also something, but there's no indication that I get that there's any kind of geopolitical dynamic to this.

Thanks Ulrich. We'll take our next question from Richard Kramer from Arete.

Justin, you mentioned the elongation of the order book. Can you tell us how much of that EUR 1 billion of new contract orders is firm, i.e., that you have purchase orders against it versus long-term sort of frame contracts, just to understand the timing of realizing that additional incremental EUR 1 billion of orders.

Yes. Actually, Richard, this is a great question. So just to clarify, we have -- actually across the business, including with our telco customers, we have multiyear frame agreements. And sometimes we announce some of those. But the only thing you see in orders is firm purchase orders with delivery dates. What we haven't dimensionalized for you is anything kind of above a certain lead time. But we are -- one thing we are seeing is some of that elongation. But I see that as a net positive because I think it's tied to the demand -- the underlying demand for the products, and it helps us with predictability and capacity planning. So for me, it's a positive in terms of how we're managing and scaling the business.

Did you have a quick follow-up, Richard?

For Marco -- yes, please. A quick one for Marco. Given the working capital buildup, the employee incentives, the EUR 750 million to EUR 850 million of pending CapEx to your EUR 900 million to EUR 1 billion expectation, restructuring and so on, will year-end cash be materially lower than what we see now? It just feels like you have a lot of cash constraints or drains on the business in the next 2 to 3 quarters.

Yes. Thank you. Yes. Just like you said, we had a very good cash generation in quarter 1 and quarter 2 is lower. But we do generate cash continuously year-by-year as well, and we are also securing that we have a very good cash position to have the freedom to make decisions that we need to do, of course, always allowing us to follow the capital allocation principles that we have in the company, that first priority is on R&D. And then secondly is to find other investments inorganic that could support our growth and then dividend. And if we deem to have excess capital, then we can consider share buybacks as well. But we are quite confident about our cash position.

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

Congrats for a strong order quarter. Given the unprecedented demand in AI and cloud, and also the supply-constrained market environment across the sector, is pricing something that's contributing to your guidance upgrade in Optical and IP? Are you starting to see support from raising prices for that?

Yes. Felix, thanks for that. Maybe I'll comment, Marco, you may want to add. But I think in general, what we see is if you look at Optical, you've actually got -- structurally, you've got a cost curve that's probably coming down, which is enabling scaling. And so I would say, in general, we don't see -- is not a contribution on pricing, it's much more unit volume.

What I will say is that I think we acknowledge that there are some cases where pricing is going up. I mean memory has been talked about quite a bit as a structural pivot. And that's a place where we have some exposure across the business. And obviously, we're working with customers on that because in our minds, that's something that's structural that we're -- in some cases, we're passing on. In other cases, we're also working on things like redesigning our products, right? But again, those are focuses that we're working on mitigating. And then -- but in general, I would say, if you look at the growth, it's much more volume driven than it is price driven.

And just building on that, if you think the new launches that we introduced also in the OFC, the main focus is power of the bid. So how can we improve the power of the bid for our customers because that's one of the main KPIs they have, so helping them to improve their cost base.

Did you have a quick follow-up, Felix?

Yes. Just a quick one. I'm not sure if I missed it already, but can you just comment on how long the lead times between getting the order to actual revenues in Optical are at the moment? Just trying to get a sense of the EUR 1 billion incremental AI and cloud orders for Q1, whether or not those will already support 2026 or more so for 2027?

Yes. I don't think we gave you a specific one, Felix. But I think dimensioning probably for this -- for the broader demand that we see is like in this -- in the Optical space is 12 to 18 months. I mean there's -- as you know, there's always exceptions in these things where some things might be sooner depending on the specific product, but that's probably a good way to think about the broader lead times we're seeing today.

Thanks, Felix. We'll take our next question from Sandeep Deshpande from JPMorgan. Sandeep, please go ahead. Sandeep, we can't hear you.

I just find this, perhaps your line in on mute.

My first question is regarding the switching business of Nokia. You -- on the Optical side, you probably have all the hyperscalers as customers at this point. You announced in the past few quarters wins on switches at multiple hyperscalers. Would you suggest at this point that you have a fairly broad exposure in terms of at least what is the future design win activity or future shipments at all the hyperscalers? Or is it still very limited to 1 or 2 hyperscalers in terms of your switching business?

I don't know if I'll give you that much dimensioning, Sandeep, but I would say that as you look at the AI and cloud customer base -- the macro AI and cloud customer base, there's quite -- there's a set of different strategies that each one pursues. And I'd say the places where we get traction is where our portfolio fits our strategy is probably the best way to give you the answer.

Did you have a quick follow-up, Sandeep?

Is it broader today than it was, say, a year ago, the customer base?

Yes. I think it's -- yes, I guess I don't quite measure it that way. I'm looking more at the design wins in the footprint. And I think that's certainly broader based on what we see today than it was a year ago.

And I have a quick follow-up on the financials. Marco, I mean, well before your time, I mean, Nokia in the past in terms of merger, M&A has -- in terms of integration has had problems. Clearly, at this point, you have tremendous growth. So that is helping the top line very significantly. But has the company got a structured process in place such that in terms of the integration with Infinera that this underlying doesn't have any issues going in the mid- to long term? And then secondly, given that there is a new fab ramping up as well later this year, are there any risks associated with that later in the year, given typically with semiconductor fab ramp-ups that can have issues?

Yes. First of all, if you look at the integration, as I mentioned earlier as well that we are tracking extremely well on that compared to our own targets and also what we guided the Street. And we've been actually doing it better than we expected. So the team is extremely focused on securing the integration, and speed is extremely important here. So I understand your comment on the past perhaps, but this is definitely going well, and we're extremely happy with the progress. Do you want to...

Yes, maybe I'll just add on that. I would just say, Sandeep, two things. One is, I think if you look underneath this, even if you took the growth out, I think you'd see very solid execution on the integration. I think the team has done really well. One of the most important things in integration that's a driver of outcome is cultural. And when you -- one thing that was clear to me when I went to OFC was, I could not -- everybody was Nokia -- was a member of Team Nokia. There wasn't an Infinera Nokia team, it was one team. That's hugely important, right, for being successful.

The two other comments I'll make here is one acquisition, as you well know, does not a trend make in terms of successful execution and integration. So we have more work to do before we decide we're effective at this. And it's something that with the focus we put under the Chief Corporate Development Officer, Konstanty, obviously, one is making sure we find the right business for -- the right place for our portfolio businesses. Two is obviously being smart with how we think about capital allocation in terms of M&A where we believe that's accretive to our strategy. And then three is making sure we actually execute the integration.

So that's a place where I'm pleased with the work that he and the team are doing, obviously, in close partnership with Marco, with our Chief People Officer, with all the key functions and the business presidents. But there's a journey here. And I think the net here is Infinera has been a good one. We need to get the learnings on that and then make sure we also don't forget the lessons from some of the challenges we've had in the past.

And then when it comes to the manufacturing, remember that Indium phosphide is quite different compared to silicon manufacturing. So this is, first of all, much lower CapEx needed, but also it's faster. And I think that our team is working extremely well and understanding based on the learnings also from the Fab 1, we are transferring those into the Fap 2 and very good learnings from Fab 1. I don't know, Justin, if you want to say something more.

Yes. I would just say our guide -- the only thing I would add is I think our guidance is risk balance understanding -- contemplating that ramp. And the reality is Fab 2 is a fraction of the ramp for '26, it's much more material to the longer term.

Thanks Sandeep. We'll take our next question from Jakob Bluestone from BNP Paribas. Jakob, please go ahead.

So I had a question on the sort of margin progression as your IP revenues scale. I mean you've put through a sizable increase in your revenue guidance for some of the components for NI, but it's a sort of more modest change in your language at the group level. So if you can maybe just help us understand for IP in particular, as that business starts to accelerate, is it a bit like what we've seen on Optical, where initially it's perhaps not quite as accretive to margins? And then as that business starts to gain scale, it becomes a lot more margin accretive as well. So just if you can help us sort of understand the drivers there.

I think the way I think about it, Jakob, is -- I think probably like any business, there's a scaling effect, right? I guess for me, the big focus right now is on capturing the opportunity and making sure it's accretive profit into the company. that's the priority. I don't know, Marco, if you'd add anything.

No, it's -- always when you're starting with the new products, it takes some time to get the profitability up, and that's why we also mentioned that we see some impact of that in NII for first half of this year. But just like Justin said, that these are definitely accretive to our operating profit, and we see good opportunities there.

As like San Jose...

Thanks Jakob. Go ahead Jakob...

So I just had a quick follow-up. Just on the San Jose fab, can you maybe just help us understand, I don't know if there's any way to quantify whether that will cover your internal needs from the outset or not?

Yes. I mean I think as we've talked about, San Jose gives us support. Certainly support for the growth that we see and expansion capacity for us as well beyond the portfolio that we have today and the volume that we see in the market. So that doesn't mean that we won't look at ways to accelerate -- further accelerate capacity because as we said, we think long term, this is a structural market, and we're pretty uniquely positioned as one of the few manufacturers with indium phosphide manufacturing capability at scale. But we think that too gives us -- certainly gives us the runway for the near term.

Thanks, Jakob. We'll take our next question from Sébastien Sztabowicz from Kepler. Sébastien, please go ahead.

The main opportunity for Nokia remains get across with optical line system and your pluggable optics. But I'm just curious, have you seen any specific opportunity building up around co-packaged optic or near package optics because the market seems to be quite bullish or there are a lot of demand building up these days.

Yes. I think on that side, we've not made any announcements there. We've demonstrated -- at OFC, we demonstrated some technology development, but no announcements at this time.

Okay. And a follow-up on Infinera and the synergies. Previously, you were talking about maybe generating the EUR 200 million synergies in 2026 instead of '27. Are you still on track with that? And attached to this question, given the accelerated investment, is it fair to assume still a nice improvement of margin in Optical Networks this year or not?

Yes. Thank you, Sébastien. Yes, the synergy, as I said earlier, we are tracking very well and a little bit ahead of our schedule. We originally said that it will take 3 years from the closing. And we said that we are tracking somewhat better than that. And we see the impact of synergies already in our quarterly reports as well. Just like in quarter 1, we mentioned that Infinera acquisition synergies are benefiting Optical business, and we will see those throughout the year as well.

Thanks Sébastien. We'll take our next question from Oliver Wong from Bank of America. Oliver, please go ahead.

I had a question on -- going back to the Q1 AI orders and just your backlog and AI orders in general. I guess, so you mentioned that the lead times in Optical and I think IP are 12 to 18 months currently, but you also significantly increased your growth assumptions for this year for Optical and IP. So I was wondering, are these orders even though the lead times are up to 18 months are -- is much of this still quite kind of near-term loaded? And also in terms of the IP growth expected this year, I presume that most of that is from switch business. But you mentioned kind of big design wins and then that translating into orders starting next quarter. So are a lot of these design wins expected to kind of translate into revenues this year?

I think as we touched on some of the design wins will start ramping this year. And yes, and I should clarify, we talked a little bit about Optical being 12 to 18 months. I think you've heard other peers in the industry talk or some of the players -- the ecosystem peers talk about being sold out over multiple years. I think that's probably a pretty good indication of where we see the Optical side. IP is a little bit shorter, but I would say there's parts of that supply chain that have constraints. And so obviously, we work closely with customers on forecasting and planning. And as we said, the only thing we register are the actual purchase orders themselves. That's what you'll see translated to orders.

Thanks, Oliver. We'll take our last question this morning from Emil Immonen from DNB Carnegie. Emil, please go ahead.

So, I have a question on...

We can barely hear you. Your line is very hard to hear.

Can you hear me now?

Yes, that's a bit better.

Yes. So the growth you're saying the 27% market growth that you're now seeing instead of 16%. Could you comment on, is that volume or is that price-driven?

It's volume driven.

Okay. In that case, given the Fab 2 coming online at the end of this year, does that mean that you're building a third fab maybe? Because I think previously, you said that you were planning your current capacity to the earlier growth you were seeing in demand.

Yes. I think one thing we've -- maybe just to clarify in case we haven't clarified in the past, Fab 2, when we shared in November, what we talked about was Fab 2 being able to be sufficient to meet the demands of the guidance we provided, and there was additional capacity on top. Obviously, we're not making any announcements about additional manufacturing capacity at this time.

But that's the way I would think about it is that in the prior guidance, there was excess capacity and ability to build. I would take the -- if you kind of stitch the conversation together, I'll stitch it together for you. We're making additional investments that probably means that we're -- part of what we're doing there is investing in ramping Fab 2 at scale. And again, it's not just the fab, it's all the components of the supply chain because that fab produces a critical component, which is the optical component, but there's also a DSP, there's other components in our pluggables, and there's also many other components in our subsystems from the ecosystem. So all of that factors into this.

And thank you, ladies and gentlemen, for joining us today. This concludes today's call. I would like to remind you that during the call today, we have made a number of forward-looking statements that involve risks and uncertainties. Actual results may, therefore, differ materially from the results currently expected. Factors that could cause such differences can be both external as well as internal operating factors. We have identified such risks in the Risk Factors section of our annual report on Form 20-F, which is available on our Investor Relations website. Thank you all.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your devices.

All right. And now please give a big welcome to the stage, Vice President, Solutions Marketing, Tim Doiron.

Thank you all for joining us at our 2026 OFC Executive Briefing. We know that your time is maybe the most important thing you have at the show, and we're really thankful for you joining us and spending some of that time with us here this morning.

We'll do our best to keep this train on time and running smoothly because we know you have commitments throughout the day, and we want to get you where we're going, but we also want to share some things with you here today.

I have 2 pieces of good news for you, which I think you should all be very excited about. First is it's Wednesday morning. You have made it through 1/3 of your OFC journey. Congratulations. Way to go, you should feel good about that. The second is you have passed the L.A. Convention Center room numbering test, and you have come up 2 flights of stairs to what is now called the 400 level go figure, but you've made it here, and we couldn't be prouder of you for doing that as well. Settle in for the next hour here. We have cold AC or air conditioning and hot coffee, and we're ready to go.

Okay. Before covering the agenda just briefly, just a reminder here that in today's presentation, we will be making some statements about future financial performance and business progress. Those statements are actually predictions and predictions carry uncertainty and risk and enough of that said.

Let's move on next. Let's cover the agenda real quick. And so what's going to happen now is David Heard, our President of Network Infrastructure, will join us. He will hand the baton to Ron Johnson, Senior Vice President and General Manager of Optical Networks. He will then pass that baton to Rob Shore, who is Head of Optical Network Marketing.

David will come back to close out the presentation portion and then a collection of folks will come back on stage and take your questions and do a Q&A session as we try to keep the train running on time and fit our schedule here.

With that, welcome aboard, Mr. David Heard.

Good to see everybody. What a year it's been. Last year at this time, actually 1 year ago, Nokia completed the acquisition of Infinera. I was the CEO at Infinera. So I actually wasn't presenting last year. I was actually sitting in the audience as a potential synergy.

And when I look at what has happened over the last year and why I'm still here because usually I am a synergy, I'm super excited about the future. When I think about the first few decades of my career and what's happened with the growth explosion in mobility, moving from packets or circuit switching to packet switching, all the generations of technology, the cloudification of the network, the coolest thing I see this week and that's happened over the last year is optical is in the absolute spot to find a way to ensure that we can keep up with the 60,000x improvement in compute over the last 20 years when networking has only improved by about 30x.

So we've got some work to do. Power is at a premium. The volumes of what is required outside in the WAN inside to the data center have moved from things that are tens of thousands and 20s of thousands to hundreds of thousands to tens of millions to -- if you've been active in the show, you're seeing many of the inside the data center component technologies driving literally to hundreds of millions of units per year.

You are going to hear from everybody that they're building out capacity. Three years ago at Infinera, we saw that be the case. One of the best-known secrets or unknown secrets of the industry is that we actually put the photonically integrated circuit out there, right, 25 years ago. We had a first fab in Sunnyvale, California. Three years ago, we decided to build a second fab because we saw the impact that volume, scale and power we're going to have out on the network.

So we've seen just in the beginning with the integration with Nokia, an increase in the optical business, 14%. We'll talk more about what that means going forward for the year. Overall, a 36% increase in the cloud and hyperscale business. If you look back at Nokia in 2024, it's about -- when you look at kind of the dramatic impact of that, it's moved 10 to 12x in terms of that business, and we're just now beginning to see the true opportunity in front of us. And we achieved kind of #1 market share.

So I was talking to Simon last night when I joined Infinera, we were #8 in a really crappy industry. We were all fighting for $9 billion of systems business in optical systems. You've seen again, that proliferation of optical in every nook and cranny of the network and now inside the data center, it is a grand business, and we are all scrambling for capacity. So we've launched our 800-gig pluggables.

Ron is going to talk about some really exciting things that I'll flip to here in terms of our new product introductions. When I was at Infinera, we would spend $300 million a year on research and development. As the President of Network Infrastructure, we are investing about $2 billion in research and development and a ton of CapEx in building out demand in this very accretive business for us.

So we have expanded those fab capacities in San Jose, 3 years ago, we kicked that off. We are qualifying that fab this year. Ron can talk more about that. We also have our own advanced packaging center in Allentown, Pennsylvania, which we also have extended. We had the support of the U.S. government via the CHIPS Act to be able to make that happen as Infinera. And now we have the scale of Nokia to really take things to the next level.

So again, moving from us from #8 and Nokia from kind of a #4 to a #1 position, that's something that when I was at Infinera and said, ultimately, we're going to be #1. A lot of people looked at me and said, you're crazy. Well, hey, we were #1 in Q4. I don't measure just by that. I measure it the opportunity and growth opportunity that's in front of us and the execution that's in front of us.

Just so you know, as we look at optical and where it's hitting the network, both in the WAN and inside the data center, there are some really important adjacencies that also attracted me to stay for this opportunity, which is as the President of Network Infrastructure, we have an optical networks business, as I mentioned, that's #1, scaling has a pluggables business, has a component play inside the data center.

We are #1 in edge routing and IP networks and have entered and had our design wins ramp up this last year inside the data center with our switching portfolio. That has a very nice play with optics.

Optical and switching together are really opening up huge opportunities for the hyperscalers and also in the wide area networks. And that scale allows us to leverage our technology, not just for inside the data center, but take those advantages, especially when you operate a fab and you're building DSPs, that scale effect gives our customers in the wide area network the lowest cost per bit and the lowest power per bit.

And then in fixed networks, unknown fact, we're #1 in the world, including Huawei, including Huawei in broadband access and PON. So we're seeing technologies like when you're #1 in PON in the wide area network to be able to pull those technologies inside the data center, and we're seeing the technologies that we're using inside the data center that we can leverage outside in the wide area network.

And so that, again, unleashes a huge opportunity for us. I'm not going to go through this slide. Nobody needs to tell you on Wednesday of OFC that the opportunity in front of us is absolutely enormous. Again, the scale effect of what we're seeing out there. We are at the right place at the right time with the right people, the right technology and again, the right vertical integration to be able to win.

When we would come to OFC with the $300 million budget, we would announce a new DSP because we were doing systems and we were doing subsystem technology. We have to do DSP maybe every 3 years. We'd announced it 1 year, and then we talk about its progress and then we talk about early trials and then we talk about deployment.

Cycles have moved from 4 years to when you're dealing with hyperscalers, neoclouds and even now in some of the wide area networks, the demand for lowest cost per bit, lowest power per bit, Moore's Law to be able to hit the optical network, it's requiring less than 2-year splits, 18-month splits on DSPs in many cases.

So we're announcing here at the show, what we announced earlier this week, 4 new DSPs that together are the building blocks for 13 new coherent solutions. Ron is going to dig into that. Each of these, each of these is all indexed to lower CapEx, OpEx and particularly power, performance and reliability.

We've been making lasers for 25 years and what we've done. We've never had a laser fail in the field, pretty important to the web scalers that we deal with. What's changed in the year? Super excited about what I just talked about. We are loaded for bear ready to go. But what you want to hear at OFC isn't me. You want to hear Ron and the team go into the implicit details of what's coming ahead and what profound effect does it have for our client base. So Ron, why don't you walk them through the specifics of what we're going through this week.

All right. I couldn't be prouder to be up here today representing optical for what was Infinera as well as Nokia Optical. It's really a great time to be able to bring these 2 resources together, an amazing talent on both sides of that equation. And the timeliness is really great because our customers, frankly, are fragmenting, where we're seeing all the different hyperscalers have different careabouts, different reasons for optimizing in different ways to even solve the same problem.

And it's not that we want to build bespoke solutions. We're doing as much as we can to optimize what we do and how we do it. When you hear about us talking about 4 engines, but 13 applications, it's really because we're taking those same building blocks and repackaging them in different ways to drive value and efficiencies in our development.

But it's not as simple as saying we are building one solution for the entire market. It's building what our customers want, when they want it, how they want to consume it and for different reasons. The market is shifting. We're certainly seeing a lot more focus on pluggables, a lot more focus on lower power. This is a representation of the market today in 2025 -- today, yesterday. This is in 2030. You see about a 65% growth expected in the business that we're talking about here today.

It's another business that we're investing in. We're not talking about that a lot today. This is inside the data center. You can go to our booth and see a lot of the innovation that's going on for us inside the data center, but you'll see more. You'll hear more from us as we go throughout the year and approach ECOC in September.

The big growth here is in pluggable-based solutions. It's because these solutions are cannibalizing more and more of the embedded base solutions. Embedded will become really the super high-end situations where fiber is a massive constraint or in subsea. But for everything else, pluggable-based solutions will pursue these opportunities.

In fact, we'll see a blurring of even what pluggable-based solutions means. We'll get higher power devices and pluggables. We'll see higher powered pluggables address certain situations like XPO. Is XPO a pluggable? Is it a line card? It's kind of a similar power level to what we would have talked about in the past about an entire line card, but maybe have the opportunity to take some of the building blocks we're going to talk about in a minute and drive that into a 12-terabit pluggable.

And then line systems is really exploding. You'll see in a minute why that's the case. Line systems is exploding because the capacity is not slowing down. Capacity is growing at a breakneck pace. The ability to pack more capacity onto fiber is not changing at that same pace.

So our objective and what we sit down and talk to our customers about is really, how do we take and look at the paradigm today, look at 800 gig that can go 1,000 kilometers in most networks in a pluggable. And how do we focus on technologies that will drive 10x the capacity at the same CapEx, same power, same footprint.

And luckily, because I think that's already happened with pluggables, luckily, the market is growing so fast. We're seeing opportunities to grow not at 10x, but 100x and even 1,000x the capacity that's in the network today. We will still see massive growth. We'll still see massive changes in the distribution of who wins in the network, but it will happen because of these innovations and because of delivering tremendous value in terms of cost per bit per kilometer.

As we approach the Shannon limit and we get closer and closer, you've heard this for multiple years now. It's taken a lot of innovation to continue to get close to that. We'll continue to invest there.

It still has tremendous value to do so. It's part of our plan. But there are situations where customers now are just saying, look, I want the most operationally simple solution that I can get. If I can get a simple pluggable that goes in every router port that I have in the network, and I can throw that bandwidth onto fiber very efficiently, very quickly. In a simple way, let's do that.

In other situations where they're really fiber constrained or really have some other motivations to deliver more capacity per fiber, we're going to deliver those solutions as well. The power continues to scale up in the data center. We're doing that. We're seeing this kind of scale even though tremendous innovation is going into TPUs, GPUs the engines that run optical. And we're seeing this now just for -- I don't know how to think about terawatts, but playing with my friend, Gemini, I was able to look at it today.

And if we look at all the data centers in the world, today, they add up to about the power required in the U.K. And if you add up all the data centers that were projected in 2030, it's about 4% of the total power that's required on earth. So it's a big number, but it's not out of the realm of possibilities to deliver this.

So I try to simplify this and keep it simple. I think of it as freeways and cars or infrastructure line systems and engines. This is where our innovation is really focused around. On the line systems, we've created massive freeways with a huge number of lanes. We've extended the width of the freeway through investing in Super-C and Super-L, and that's taken off in some meaningful places in the network, but we also optimize around C+L.

On the embedded side, we've done a tremendous amount of investment here that has given us in the [indiscernible] realm, a capability to drive 800 gig anywhere in the network. Now we've moved that -- those 2 capabilities forward, and we've delivered multi-fiber optimized line systems.

Today, we can fit 20 ILAs in a single rack, which is a tremendous innovation that's occurred over the last few years to enable that. We've also taken this capability and squeeze it into pluggables, right? And we keep pushing the envelope further and further.

We're working with our competitors, frankly, in this space to make interoperable solutions so that we can drive 800 gig 1,000 kilometers and more in the network, and it doesn't have to be us on both ends of the circuit. So it makes it easier for our customers to realize that opportunity. So if we really look at what we announced, and I'm just going to introduce it here on this slide, and I'm going to turn it over to Rob to really dig into those 13 applications.

It's really twofold. One is we took those -- the 20 ILAs in a rack, which is state-of-the-art today, and we're going to deliver later this year, the ability to multiply that by 8. So we'll get 2 ILAs in every rack unit -- or 4 -- sorry, 4 ILAs in every rack unit, 40 rack units in a rack, 160 amplifiers in a single rack.

And then on the DSP side, we have lots of different motivations, lots of different optimizations. If you go from left to right, it's really an optimization of applying a DSP per distance and trying to get the power out of it and the cost out of it. We've been investing in CL technology. Our variant of CL technology is mostly focused around our strengths, which is in coherent transmission.

This is where our customers are trying to connect outside the data center length of 10 kilometers, 20-kilometer type distances. We've invested a lot here, but this is a changing space, OIF, if you follow it, has made some decisions recently that we have to incorporate back into the chip.

So we can talk about that in detail, but we won't cover that here today, but it's a moving target, but we've invested in the technology to be ready as our customers are ready to leverage this. Huron, these are all lakes, by the way, or oceans, big bodies of water.

Huron is a technology that evolves this 800-gig capability we have today with ZR/ZR+ into 1.6 terabit. This will tape out in a few months and give us the ability to deliver product next year, which has the capability to stretch 1.6 terabit to these types of 1,000, 1,500-kilometer type distances in the network.

As we were building that and defining this, we found all kinds of things that we wanted to do, really good enhancements to our ability to squeeze more capacity into a DSP and drive it further. And that really became the definition of what we call Superior.

Superior has the ability to scale up to 2.4 terabits and can work in some pluggable applications, but mostly can work better if we throw a little bit more power at it and provide some kind of hybrid between pluggable and embedded applications, and Rob will talk a little bit about that.

And then we have Pacific, which has frankly been a placeholder for now for us for some time where we're putting all of the innovation that we can think of -- and as we've built out our road map, we keep pulling capabilities as it makes sense to the left.

And so we've done that more and more, providing -- going from what was at 400 gig very short reach distances in the network to much longer, in many cases, long-haul distances at 800 gig, extending that a little bit further now with 1.6, and we'll continue to make innovations and drive that capability as we move forward. What that enables?

DWDM plugables are going routers and switches, where we announced a double-sided device. So this -- you could think of as a transponder and a pluggable. It has the client side and the trunk side built into one device. So it sits in a transport platform that looks a lot like the density of a switch. We're enabling that in the GX products, which are the Infinera products as well as in the 1830 PSS products.

So as our customers look to provide the capability to do MOFN applications for hyperscalers. They can leverage this under the same umbrella as the management that exists for both Infinera and for Nokia. Same with thin transponders. These devices may be hosted in this thin transponder. These devices may also be hosted in these thin transponders. This is the GX version of it at QSFP. There's an OSFP version of it that you could see on the floor.

There's also a larger high-capacity shelf for the 1830 that we're building for the same capability. So this enables an easy path for our service provider customers to get investment protection. So where they've made massive investments in manageability in our 1830 platform or our GX platform, we want to allow them to continue that investment and win that new hyperscale opportunity. We've also been working very closely with our customers to get this concept of a full-band transponder.

So if we really want to focus around how do we drop the density as much as possible, how do we eliminate cabling, how do we simplify taking a transport device, just having client optics and spit out a C+L solution that can go thousands of kilometers in the network. This enables that.

And our customers are very excited about this, and we're very excited about this because it's a good blend of technologies. This is air cooled, the way it's shown here. This is 4RU to get the entire C+L+ line system, all in a very dense terminal. the likes of XPO that many of you heard of and seen this week will enable this with a liquid cooled device to actually dramatically even move that density much tighter. We could even get this into -- from going from 4RU to 2RU with some space left over.

And then embedded transponders, we're going to continue to invest in embedded transponders to enable that upper right part of the curve where our customers, again, have fiber constraints and they need more capacity in the fiber and are willing to dedicate more space, more power to achieve that because the fiber is the constrained asset. All right. And with that, I'm going to turn it over to Mr. Shore to go into detail about each of these.

All right. So I get the fun job of going through all the detail of everything that we're doing, why we're doing it and the benefit it's going to bring our customers. So Ron kind of gave a pretty good high-level overview of all of these different things, but we're going to dig a bit more into it so we can explain the applications, the drivers and the benefits.

And we are going to start here on the left-hand side of the screen for the line systems. So we talk about the scale of the network and how rapidly things are growing. It's really very few better examples of how rapidly things are growing than this, right? So this is a kind of a typical data center interconnect network. You got 2 data centers. If it's more than 80 kilometers apart, we have to put these things in between called in-line amplifiers to boost the optical signal to get it to where it needs to go.

Historically, how much fiber did people put in between those locations? And we've seen a number of announcements from different network operators. Lumen and Zayo made public announcements about this. A number of other people talk about it. You've seen a lot of it on the show floor.

Historically, people would put maybe 100 or 200 fibers between locations, and that was to cover the amount of capacity necessary. But as Ron pointed out, bandwidth is growing like crazy, but fiber capacity isn't, right, because of that little annoying thing called the Shannon limit. So the only real recourse our customers have and network operators have is to add more fibers.

And this is the kind of increase in fiber capacity people are adding. We're going from hundreds of fibers to thousands of fibers. In fact, I just saw a presentation yesterday where Zayo was talking about 13,000 fibers between locations. And this is the kind of capacity that's required to meet these bandwidth demands. So last year, we talked about working on the endpoints.

What do we do inside the data center to simplify the aggregation, deployment and demultiplexing of all those optical signals and we rolled that out last year, and we're now shipping that solution in volume at the endpoints. This year, we're focused on these intermediate locations, these intermediate amplifier locations. And again, you have these locations that look like this. That's basically a double-wide shipping container that they ship out to a field somewhere and run all the fibers between it and sometimes put this pretty rock face on it to make it blend seamlessly into its environment. But this is the idea.

You got to get now from 200 fibers that you need to amplify to 7,000 fibers that need to be amplified. This is all about density. How can I create technical solutions that can enable us to enable our customers to amplify more fibers in this physical footprint, so they don't have to modify and upgrade their infrastructure. They can leverage what they already have. And this is what we've done. Today, this is the highest density solution in the industry right now, okay?

This is 4 fiber pairs or 4 ILAs, 8 rack units. What we're doing is taking this and condensing it into a single rack unit for 4 in-line amplifiers, 8 bidirectional fibers in a single rack unit. This will be the most dense solution in the industry. You've probably heard some of our competitors out there talking about their version of this solution. They're getting 128 ILAs per rack. We're getting 160 ILAs per rack. So this is the current highest density solution. When this comes out at the end of the year, this will be the highest density solution, about 25% more dense than any other solution that will exist in that time frame.

And again, density in this application is the name of the game. Whoever is going to enable a network operator to provide more services over that existing infrastructure is going to have a substantial advantage and enable network operators to do more with their existing infrastructure. One of the other real benefits of the way we've architected this is this fits seamlessly into our existing platform. okay?

The GX is an extremely well-architected platform that really enables you to integrate virtually any technology into it. So you can do line systems, transponders, pluggables, thin transponders. And now this multi-rail line system, this multi-rail ILA just seamlessly fits into the existing platforms our customers are already deploying. So they don't need to onboard a new platform. They can just leverage what they've already done. And that's been a really big fundamental principle for Nokia for many years now is this idea of these modular-based platforms that is very easy to configure and upgrade, okay?

Let's move on to optical engines because this is a really more interesting story, more involved story to tell. And we'll start with here. Ron kind of talked about, we've got a whole host of different distances that need to be addressed in the market, everything from these short-reach campus, metro regional long haul all the way to subsea for multiple thousands of kilometers, okay?

That market right now, again, if you take out the line system and you just look at the engines, that's about a $9.3 billion market today, okay? And how are we addressing that market today? We're addressing it with these 2 optical engines, a pluggable and an embedded. And we use these 2 engines, everybody, this is an industry.

We use these 2 engines to address every application across the entire spectrum. And even this is relatively new because historically, as Ron mentioned, we've been focused for 30-plus years in the industry on building engines specifically focused on maximizing capacity per fiber. That has been the focus of our innovation. This generation is the first generation where we've really shifted, right? Customers recognize they can't do everything they need to do on a single fiber pair. They have to go to multi-fiber networks. They're deploying 7,000 fibers. Now they can shift their focus and they want more cost base and power-optimized solutions. And that's what caused the industry to introduce this engine here, this 800 gig pluggable.

And it was really the first foray for the industry into this shift of focus away from maximizing fiber capacity to cost base and power optimized solutions. So what's happening now in the industry?

Well, a couple of key things are happening, right? Number one, that top line, you can see the market is growing really, really rapidly from $9.3 billion to $15.4 billion in just a few years. So the market is growing very, very rapidly. But at the same time, the applications are diversifying, right? We're going from just these current engines, right, these kind of space cost and power optimized engines that, by the way, are designed for a very specific power envelope.

These engines, the pluggables we have today are specifically designed to go into routers. When you put a pluggable in a router, they got about a 30-watt power envelope. It has to be at 30 watts or less to operate inside a router. So we designed the engine specifically to do that, so you could plug it into a router, okay? One of the things we noticed as we go to the right here is those engines, even the 800 gig engine we have today, still has a lot of gas in the tank, you might say, right? We're only operating it at like maybe 50% or 60% of its actual capacity because we got to keep the engine cooler to fit into a router.

If you actually push that all the way to the red line, these engines have a lot more capabilities than we are actually using them for today. So what we're seeing in this next generation is a whole new line of these same types of pluggable engines, these space, cost and power optimized engines, but operating at their peak capacity, maybe in more like the 60-ish watt range that maybe won't go into a router, but can be used in these thin transponder solutions.

We'll talk a little bit more about that as we get into it. But now you can really get a lot more out of these same types of engines that are still, as I said, cost, space and power optimized, okay? On the other side, by the way, you have a bunch of these shorter distance solutions, these maybe campus or 80-kilometer type distances. A lot of these are addressed by direct detect optics today. So very cheap, very simple, very reasonably low performance optics.

They were able to address these distances up to about 800 gigabits per second. As we go beyond that into 1.6T or 3.2T, they can't reach that distance anymore. Those direct detect optics are not capable of closing those spans. So this is opening up a whole new market for low-power optimized coherent engines that are optimized around that 80-ish kilometer range.

A lot of people call that coherent light, okay? But that's a whole new market for coherent optical engines, right, and something that needs to be specifically addressed. And as Ron said, there will always be this right-hand -- left-hand side here, I guess, your right-hand side, my left-hand side.

For people that are fiber constrained, if you only have a couple of fibers, then you will pay extra, you will give more power to solutions that maximize your capacity per fiber. So there will always be those, and you need to, of course, address those applications and have solutions optimized for those as well. But on top of these diversification of application, we're also seeing a much wider variety of network deployment models. All these different types of implementations that need to be addressed.

As Ron said, how customers want to consume this is also increasing in variety. So whether it's these new kind of CPO switches or regular switches or routers, thin transponders, full fiber solutions, embedded transponders. And it's not just these solutions, but they want all kinds of different pairs, right?

They want short-reach pluggables, short-reach thin transponders, short reach full fiber, long reach, high performance. So they want all these different combinations of solutions, both the type of performance from the engine and the implementation model. And so what we really realized is you cannot address this market effectively by just doing another version of the engines we have today. This is not going to get it done.

Customers are increasingly wanting applications or solutions optimized for their specific applications. This might be a great solution like are the 800 gig plugs we have today are the absolute best solution you can find for roughly 1,000 kilometers. If your application is 1,000 kilometers, that is the best you can do.

If you want to go 200 kilometers, well, now it's overkill, right? You could have a more optimized solution that would save you money. And this is exactly what we're talking about doing, right? Essentially, instead of just 2 solutions, 2 new engines, a new pluggable and a new embedded, it's really coming up with a different methodology for building these optical solutions based on a building block principle, essentially taking the technologies and building them in these very standardized implementation methodologies, standardized control languages, standardized data paths so that we can take those engines now, these building blocks and integrate them into a whole variety of network implementations.

Now you can get a mix and match of combinations of solutions so that customers can have solutions that are optimized for their very specific applications, and they're not leaving a single penny or a single watt on the floor. And this is the concept. And by the way, this is not new. Infinera/Nokia, we did this about 10 years ago for the optical systems market.

Historically, optical systems were these big giant monolithic custom design solutions. And about 10 years ago, we shifted to something called compact modular platforms. where we took those big monolithic solutions, and we broke them down into small discrete technology blocks called Sleds, and you could then configure those systems however you want to give you an optimized system for your application. and you could then configure those systems however you want to give you an optimized system for your application.

What we're doing now is the same architects that came up with that concept for systems have now developed that same concept for optical engines, enabling us to have building blocks and a much wider variety of solution implementations that are customized for our customers' applications, okay?

So let's talk about the building blocks. And Ron already talked a little bit about it, but we'll jump through it a little bit more. Four different building blocks, all designed for different distance applications. You've got Huron -- or Ontario, excuse me, which is short reach, low power, you're looking at 18-ish watts, 16 to 18 watts is what you're aiming for there. So when you have these short campus style applications, right, this is going to give you the optimal solution with the lowest power and the lowest cost.

Moving one over Huron. This is really the spiritual successor to the current generation of 800-gig pluggables. It's the 1.6T variety. These are all based, by the way, on 2-nanometer-based technology. So we're going up one generation in node process, okay? But this is the spiritual successor to the 800 gig, just a generational upgrade. It's still an IP over DWDM optimized solution. So it's a device that can be plugged directly into a router and fit within that power envelope, but maximize the performance and give you that generational upgrade from the 800 gig today.

Next, you have that Superior, and this is that engine that I was talking about. It takes the same technologies really that we're using in Huron, which really is running at about 50% maybe to fit into that power envelope and just stepping on the gas, throw in a couple of extra chromatic dispersion gates, maybe a few other things to enable you to go longer distances. And now you have the real true potential capability of the space cost and power optimized engines.

Now you're talking about a device that can be put into a pluggable that can run at 2.4 terabits and take that over 1,000 kilometers. You have now a pluggable-based solution or a solution that can be integrated into a pluggable that can support virtually every terrestrial application and virtually in most subsea applications, okay?

And we'll take a look at some of the specific details on the performance of that when it's integrated into a pluggable, okay? And last, of course, but not least, is Pacific, you will still have, right, these high-power solutions that really are optimized to maximize spectral efficiency, right, to put as much capacity onto a fiber even at the cost of cost, space and power, right?

But for people that only have a limited number of fibers, they're willing to pay the extra for that, right? You can get 10%, 15% extra capacity per fiber. That's meaningful if you only have one fiber. Less meaningful if you have 7,000 fibers. But if you only have one fiber, that's an important value. Now these are the building blocks.

The really interesting part of this implementation approach is our ability to integrate those into all of these different varieties of solution implementations. And we're going to go at each one of these, right? But you've got IP over DWDM, those double-sided plugables, which we'll take a look at, thin transponders, full band and embedded.

Now these are the 3 we've been doing, right, pluggables that go into routers, pluggables that go into thin transponders and embedded. The 2 completely new solutions are right, these double-sided pluggables, never been done before in the industry. Full-band transponders, never been done before in the industry. And of course, by the way, each of these implementations can be a host for any of these building blocks. So even with the full band transponders, I can do a long reach, medium reach or short-reach version.

So if you have a short-reach application and you want to use that solution, you're not wasting any space power or money with a more powerful engine than necessary, right? That's the idea, right? So digging into kind of the traditional ones, we're going to cover them both in one slide. These are basically just generational upgrades. This is what the industry has been doing for 30 years.

If we didn't do this building block approach, this is all we would be announcing. It's probably what most of our competitors are going to announce. It's just these 2 solutions. And there's benefit to them, right? This is right, your traditional IP over DWDM, just the successor to 800 gig. This is your embedded, so your successor to i7 or PSE-6, right? And they provide value. They give you about 30%. This is what you normally get for a generational upgrade.

You get about a 30% improvement in TCO and that space cost, power, fiber efficiency and operations, right? That is your normal benefit. And it's still good, and there are these applications, and we want to get those benefits. But if you have one of these other applications, you want something more optimized for that.

And our customers are increasingly demanding that and selecting vendors based on who can provide them a solution most optimized for their application. So let's take a look at the double-sided pluggable. This is a fun one.

One of the scenarios we're having to deal with in the industry now is these switches and routers that have integrated optics, whether it's CPO or LPO or LRO or XPO or NPO or any of the other POs out there, they have optics in them.

Coming out of the fibers with optics already. I can't put a coherent pluggable into it because the optics are already integrated, and this is gray light. It's direct detect. I need to somehow convert that light. This is, by the way, great.

If all I'm doing is 100 meters inside the data center, boom, I just connect those 2 things together, I'm good to go. But if I want to take this anywhere else outside the data center, 10, 20, 30 kilometers or even 7,000 kilometers, I need to convert this white light into coherent.

How do I do that? The way I would do that today, this is the most efficient way to do that today. I buy a thin transponder. Of course, I got a chassis, a thin transponder. I have a client pluggable that connects to the switch, then it takes the signal across that thin transponder to the coherent transceiver. It converts to coherent light and off I go. That's how I would do it today. This is the most efficient way to make that happen today. What we're saying is we can optimize that solution.

By the way, what are these optics right here? These are potentially 1.6 terabit direct detect optics. For us, that's ICE-D. We already have that solution. We make that solution.

We can do now is take these 2 devices and integrate them into a single pluggable. Instead of an electrical interface on the back, it's now an optical interface. That's why we call it double-sided, optical in/optical out. Gray optics or white optics coming in, single DSP pointed this way and that way, coherent going out the other way.

Now instead of a thin client optics, thin transponder, coherent optics, I have just a single pluggable. This will save you about 70% TCO. And again, space cost and power. instead of a big thin transponder, 2 pluggables, all the operational complexities, literally a pluggable, I plug it in, I'm done, right?

And this is what I mean about application-optimized solutions. Could I solve this with our current generation of solutions? Yes. It's just unoptimized. So you're leaving space cost, power and money on the table if you use a solution that is not optimized for this application. And that's the first example.

Second example, what we're doing with these thin transponders? Now of course, we do this today, thin transponders, and we use it essentially with the 800 gig, and we're certainly going to have a Huron implementation of that, which will give you pretty much the same kind of performance you're getting out of the 800 gig plugs today just at 1.6T.

But I do not have the same power restrictions on this thin transponder that I do in a router. These can go up to 60, 65 watts. I can take the harness off that engine and push the gas all the way to the floor, and that's where you get this kind of performance, building a superior base solution into a pluggable that can now enable you to have this type of performance, right?

If I compare it to what we're doing with the embedded engines today. So this is i7, PSE-6, WaveLogic 6, you name it. This is what you're getting today with an embedded engine, which is the big giant Sleds, okay? This is a pluggable, and it's giving you anywhere from 50% to 100% more capacity, so 2.4 terabits. It's taking the peak line rate almost 50% further, almost twice as far.

So these take their peak rates about 600 kilometers. This will take 2.4T, 1,000 kilometers. Of course, it has PCS, so you can tune it down and take it really virtually any distance, 7,000, 8,000, 9,000 kilometers, right, at lower bit rates, just like this current generation, okay?

But even at the peak rate, it has better performance, dramatically lower power per bit. This is a 73% savings in power per bit, better performance, better reach, and, oh by the way, better spectral efficiency. It's about a 13% improvement in spectral efficiency by tweaking the forward error correction and other signal transmission protocols, there we go.

So you're getting higher rate, higher reach, higher performance and 73% less power in a pluggable form factor. And this is what I mean about when we shift our focus from just building bigger and fatter engines to building engines that are space cost and power optimized and optimized for these specific applications.

And by the way, there's a lot of good reasons to use a thin transponder, right? Certainly, one of them is you're a wholesaler and you don't own the router. You can't put pluggables in somebody else's router and you're just trying to transmit that service. It provides domain separation, alarm correlation, lawful intercept if you need it. And also, of course, operational domain separation. You can do things like client splitting and client aggregation.

So there's a lot of good benefits for thin transponders. Even if you can't -- even if you could put a pluggable in the router, there's still some benefits. So this is going to be a very popular solution. It's already a popular solution today, thin transponders. And now we're actually getting the full capabilities out of these thin transponders. And so that's the idea.

And this, again, when I compare this 2.4 terabit pluggable to today's embedded engines, it's a 60% TCO savings. This has never happened in the industry before, where one generation to the next, you're getting a 60% reduction in TCO, right? This is really monumental. And there's actually -- it's an interesting thing we just looked up the other day called Jevons Paradox. Anybody heard Jevons Paradox?

All right. Yes, thank you, Tim in the back, who looked it up with me the other day. There's this concept, right, that, oh my God, you're cutting cost and everything by 50%, isn't that going to cater the market like this thing you were selling for $100, you have to sell for $50. The answer is that's the paradox. Lowering the price actually increases the market because people find new applications for these solutions. This is pluggables, right?

The 800 gig pluggable is about 50% lower cost per bit than the embedded today, okay? What happened? It created the entire scale across market that didn't exist and wouldn't exist if we weren't able to build pluggables in that form factor and cost profile. And this is the idea here. This is enabling customers to achieve their objectives and enabling new types of applications.

Okay, Thin transponder. Last cool new solution, the full-band transponder, okay? This will come as no surprise to anybody, but we have customers today that aren't just lighting up full fiber day 1. They're lighting as many as 10 full fibers day 1, one purchase order, one installation effort, all at once, 10 full fibers worth of capacity. This is what you'd have to order today. This is just one fiber, 64 coherent pluggables, 64 client pluggables, 22 thin transponders, buy all of that inventory, receive it, install it, cable it all up.

For 10 fibers, that's more than 1,000 components, more than 1,000 fibers that need to be connected, okay? Not only do customers saying, hey, this is way too much cost base in power, it's just way too operationally intensive. And of course, what's the #1 cause of failures in a network? Humans, right?

So the less amount you can have people touching it, right? That's good for a little while until robots take all of our jobs. But until then, it's still humans. So they're saying, hey, I need a much more efficient way to do these types of solutions. When I have these kind of hyperscale demands, how do I more efficiently address it? And this is what we're doing. We're building this full band appliance.

It takes not only the coherent optics and the client optics, but if you'll see in that animation, which we can all watch again because it's really fun. It integrates the DWDM line side integration as well, all into a single appliance, okay?

So essentially now, instead of over 1,000 components to light up 10 fibers, I can do it with about a dozen components. And instead of 1,000 fibers, it's literally just one fiber because I've got no -- all of the connections between the coherent optics and the aggregation, all integrated onto the Sled. There are no fiber connections. It's all integrated into the Sled and chassis. And all I have coming out of this is a single fiber that's fully loaded with all my traffic.

And by the way, yes, this is great for hyperscalers that have these massive bandwidth demands, but it could be good for service providers, too. We had a little thing at Infinera years ago, we called Instant Bandwidth, where we predeploy the bandwidth, but they only pay for what they actually use. That way, they can turn it up much faster, be much more responsive to their customers. They can use this solution for that same purpose.

Turn up the whole fiber, pay for what you need as you need it or you got 10 fibers worth of capacity, you could turn it up in a fraction of the time, a fraction of the cost base in power and with many fewer errors due to humans misconnecting fibers or not cleaning the fiber cable properly. There's about a 70% TCO over that thin transponder implementation.

And again, this is what I mean. I could use thin transponders to address that today, but it's not optimized for this application. You need an optimized solution. And with the building block approach, not only can I build these full band appliances for regular distances, call it, regular 1,000 kilometers, I can build it with Superior to enable you to do this over subsea applications or I can build it with an Ontario to enable you to do campus or scale across type applications.

So again, this is the beauty of the building block. It's not only being able to introduce these new types of solutions, it's being able to integrate any of these building blocks into those different network implementations, right? And that's why really what we're focused on is not just a few new engines, but it's a new paradigm for building optical -- coherent optical solutions that enable us to address our customers' specific applications with the most optimized solutions.

This is not only good for them because it will enable them to do things that are more ambitious than what current technology enables them to do, but it's good for us because if we're going into a competitive environment with somebody trying to use a 1 or 2-size-fits-all solution and we have an optimized solution, we will be 30% to 40% lower TCO for that customer for that application, okay? So this is the summary of the solutions.

Next question, and Ron kind of already let the cat out of the bag on this one, but when are they available? We're going to be sampling these in the summer of next year. So when the first samples come out with the first of these solutions, which is going to be the Huron-based pluggable will be available at the end of next year. So now you might be asking, hey, Rob, why are you announcing this so far in advance?

Well, there's actually a really good reason for that, which is we are building these solutions to help our customers plan their network strategies. Where are they going to put the next data center? How much power can they put in it? How much capacity can they do? What are the distances between them? They need to know that because they need to know that now for what's going to happen 2 or 3 years from now, so they can make those plans appropriately because it takes 2 or 3 years to build the data center.

And when they turn it up, they want to make sure they're using the latest technology, and they've architected their infrastructure to best leverage what's available at the time. So -- and by the way, this probably goes without saying, but we don't do any of these things in a vacuum.

This isn't just a bunch of people, engineers in the closet dreaming up a bunch of cool solutions. We work very closely with all of our customers to understand what their applications are. and develop solutions to specifically address them. And a lot of them are hyperscale, not exclusively, but a lot of them are hyperscale. So each of these applications are real.

And the volumes are just massive, right? They are demanding customized solutions for those applications, okay? So this is the idea. We will be around after for questions, and I'm going to now hand it back to David to close this up, who's getting ready to run up on stage since I've got a few minutes over.

All good. By the way, Rob had coffee from the left carafe. So I suggest you stay away from that. I thought I was bad. Hey, Rob, thank you very much. Hey, when you take Bell Labs and you take scale and you take the largest coherent DSP team on the planet, when you take having 2 fabs in indium phosphide plus a team, if you remember, Nokia had bought Elenion and Silicon Photonics.

And you put that all together and then you really listen to your clients, this environment is perfect for that. because especially hyperscalers and neocloud players and even now out in the wide area network with service providers and mission-critical enterprise, they are buying road map because they are making plans, they're buying data centers. They're buying facilities. They're planning HVAC right now.

And the reason we are committed to this road map is they have helped us shape what is in each of these products. And you know what, that minimizes loss, less gates in a DSP. It says less lines of code in the software that we write to stitch this all together with, again, automation that goes across, moving into domain controllers and truly event-based automation.

At the same time, we're able to plug this into the rest of our network infrastructure platform. So when we talk these scale across, we talked a little bit about this, Simon, last night, the scale across architectures, we're rolling out half a petabit switches in scale across with 576 suite 800 optical plugs in it.

That is really rich for us in terms of business growth as we go forward. And so the opportunity has never been more important. It's about pulling together the right technology, the right people, the right interface with our client base and having the scale.

So I couldn't be happier to be here a year from a year ago because we've got those things, and we are leaning forward in the industry. So we're going to kind of come up here. Sorry, we're running a little bit over, but we've got time for Q&A.

We have a couple of different folks joining us here. David Mulholland from our Investor Relations is here and on the far end. Julia Larikova from our Vice President, Product Line Management and a lot of the leadership behind the work that we're doing here.

We have some amazing microphone sherpas that have mics, and we're ready to take your questions. Just raise your hand, and they will run by and hand you a microphone and give you an ability to ask really anything you want from this esteemed panel. Anybody, don't be shy. There he is. I knew Ryan would do it go right ahead.

Thanks, Ryan Koontz with Needham. What's the plan for the new fab? I mean, how are you using it now? What's the vision for the future? What kind of competitive advantage does that give you? Maybe walk through that a little bit.

Ron, do you want to start and then maybe, David?

Sure. Yes. I think I know the new fab is finally flowing gas, flowing chemicals. So it's -- all the equipment is being turned up. We're qualifying it this year. It will start production late this year, early next year.

Our focus is to ramp that pluggable that is in such high demand, meet our customers' expectations to deliver these scale-out applications or scale across -- sorry, across scale across applications.

And then there's a lot more capacity in that fab, which we're building multiple different things inside the data center. indium phosphide is in is a coveted thing right now to have capacity in indium phosphide. So we're being careful about how we're committing that, and we're working with our customers to do that in a meaningful way.

Is there anything we're doing with wafer size or anything with that?

Yes. No, it's 16 -- or sorry, 6-inch fab that...

That out there.

We're going to 16.

That's the latest -- you heard it here.

Like a laser disk.

Yes, 6-inch, which is 4x the capacity of a 3-inch wafer like we have today. That, along with the advancement in tools and the more tools gives us like 20x the capacity to build really, really complex things.

As we build simpler things, like, for instance, lasers or inside the data center applications, it could drive many, many, many more wafers to address some critical needs in the network today.

In addition, we have the packaging in Pennsylvania, and we have expanded that capability as well, all driving both the embedded and pluggable growth that you see with these DSPs coming forward. And we're leveraging, again, the largest DSP team, coherent DSP team on the planet to make that happen.

And that was one of the advantages of the acquisition is being able to split that team up to be able to drive that kind of building block innovation. Even within the DSPs, there's 9 to 10 building blocks that we're able to kind of reuse generation to generation.

Yes. Daryl Inniss from LightCounting. You basically made a promise today. You're talking about something that's going to happen in 2027 or later. It strikes me that this is new to the industry. I don't think that we have made these kinds of promises. I'm worried about your ability to deliver or examples of track record where you're able to hit this. And so anything that you can share with us would be helpful.

Yes. I mean I think if you -- one, I appreciate it. It sounds a lot like my wife talking to me when I come home. So I travel a lot. So when we talk about this, it's a promise and a handshake with our clients because they are planning those facilities to be able to meet those specifications.

And so we do a lot this isn't a paper exercise where we're taking binders back and forth. We're doing predictions. We're writing algorithms to be able to sense what we can do. On DSPs at Infinera, we've never had a respin on a DSP. Let me knock on some wood.

We have the resources to make that happen. Remember, we've indexed from $300 million of spend all the way through. We have the visibility of -- by the way, our route -- our switch that we are able to plug into because we can plug into all the elements of the network, we get inherently a data lake of information that helps us get better. And we're investing the dollars to make that happen.

I mean, we are investing again at a $2 billion rate to make that happen, and we put the capital in play to make that happen. So all I can tell you is that when we've put our performance statistics out there with our clients before, no offense, but what I care about is do the clients care enough, and we're in an environment where they need us more than ever.

And you're hearing everybody talk about my God, where is the capacity, where is the capacity. So the trust we're building with them is what they're seeing us deliver both in past generations and what you're seeing that growth, especially with the hyperscalers and their demand for not moving on 4-year splits, but having a clock speed that's less than 2 years on these splits.

Maybe to add to that, I would say that this is not all that new. This is just extremely honest in terms of where we're at in the process. It's a 4-year journey to build a new DSP and put that into play. We will deliver alphas, betas. We will test these algorithms in real customer environments.

It's more of an indication, I would say, of the lock-in, the hand-in-hand approach that we're taking to building these solutions to meet the customers' needs and have it ready when they want it and when they need it, again, across the entire ecosystem.

So not just a bespoke pluggable, but the engine, along with the infrastructure, along with the other pieces around it that are needed to make this happen. So I think it's, from my perspective, a maybe a more honest or more clear view of what exactly we're doing so that our customers can take that to the bank and can plan around that, so that they can take advantage of those TCO savings that Rob described in that time frame.

It's also just -- I've never seen this before. It's a different way to buy now. People are 100% buying on the road map, and they're doing more than kick the tires. I mean they're in our labs. We've had them in our contract manufacturing locations, in our fabs, in our packaging facilities at a huge detailed level going through not just ability to technically deliver on something that we've always led the industry and the highest performance DSPs in the industry, but also the ability to scale because that's what everybody is concerned about.

The numbers that we're showing, everybody always asks like how come your growth rate isn't the same as Ciena's. We were a little bit late into some of these markets. We weren't in 400 gig. As an example, in the pluggable solutions. We've kind of entered at a perfect time. And again, our customers, I'm not as worried about the size of the pie. There's plenty of pie to go around, and I feel really solid about the technical solutions that Ron and Julia have put together and Rob has laid out.

I think we'll go over here. I see a question back there. Sorry. Over here, sorry.

So thanks for the presentation, super exciting. So this is Evelyn. I actually have some questions related to the question just asked. First is, I feel like you're really saying that in the next-generation product, we are going to really be the best solutions for -- in many cases, right?

And I'm sure Cisco and Ciena have different views on that. So I'm just curious like what enabled this kind of performance inflection? And what is it like the 2 teams really came together, you unlocked something special? Or was it like what Ron said is in the making and maybe we were a little bit late, so now it's the time to show it.

So I'm just curious like what enabled us to come up with -- I really feel is like a much better portfolio and much better performance position in the next-generation product.

I think maybe Ron and Julia. Julia?

Sure. First of all, I think we've always been the best, right, whether it's embedded, and then we just proved the point that we can do it in the pluggables as well. We've done it through the hard work, right, through the algorithm that pretty much nobody else deploys.

We push the standards to the ZR+, [indiscernible] PCS, to the 2 sub carrier standards. So I think we know what we're after and that gives us a leg up, right, on the competition because what we can do, we can merge pluggable technology and embedded technology and create something new to it that will be just as good as ICE-X, just as good as Tahoe pluggables that we have in the market right now that have been incredibly successful, more successful than we ever expected them to be.

So -- and now with the double the team and the double the talent, right, what you see on the screen is not a guess, right? It's the simulations, it's the lab experiments. And most importantly, it's the field deployments that we've been doing for the last 2 years, right? We know we can get there.

Yes. One thing I would say, I've done a bunch of M&A in my career. In optical, when we did this, the good news is with open line systems, we could continue to have our existing line systems and focus the team on building the best line system architecture rolling forward, and we hit it at the perfect time.

The complementary material science of having Indium Phosphide and Silicon Photonics has given us ultimate flexibility. Advancing to $2 billion of research and development, leveraging Bell Labs and having the trust from the clients needed all at the same time is just perfect timing.

And by the way, the cultures of the team, super, super important. Again, not working on 2 line systems to be able to index on these things and working super close with our clients. I think that's what's changed dramatically in the...

Customer intimacy one the front end.

Yes, we call it co-creation, but it is 100% if you bake in their requirements, their characteristics of what you do, it eliminates waste and then they plan on your road map, and they are testing all along the way.

And the key for us is this is super exciting, super excited about it, super excited about the market. A lot of execution ahead. And so when you hear about us just saying, hold on, hold on, we're not getting ahead of our skis. The investments are there. This is where we're going. But obviously, it's up to us to execute.

I have a quick follow-up, if you don't mind. So what about the current generation product, the 800 gig? So in hyperscaler, I feel everybody is like racing too rich AGI stuff like that. So does that mean that we are still going to be a little bit under-indexed in the current rollout of scale across? Or do you feel like the next generation is really the massive rollout of the scale across applications potential? Or is there other?

No, no, no, no. Listen, scale across, again, is towards traditional WAN traffic when you get to the back end versus DCI on the front end, it's a 14x multiple of the traffic index.

Again, at Nokia, we've rolled out the 18E switch to be able to do scale across with 756, 800 gig ports. Let's realize 800 gig, there weren't a lot of switches and routers capable a year ago to be able to go do that. So we're just now in that sweet spot and in that scale position.

And that's what you're hearing in the industry is everybody is jumping to scale. And yes, do I think there'll be -- everybody will be looking for lasers over the next couple of years based on how many are going to be required as Jevons principle becomes to -- how far can you drive fiber into the network? Yes, I do.

I think one more -- okay, last question only because of time. But after this, obviously, we want to continue the conversation and the rest, but we know everybody has got to get to other places. So go right ahead.

A lot of heat on the last question here. So can you -- this is Ryan from [indiscernible]. Can you talk about the customer engagement and the competitive dynamic? I mean, obviously, your customers are out there are trying to deploy as much bandwidth as fast as they can.

And so when you think about -- or when you describe this as an architectural decision and a close collaboration with your customers. These are decisions that are -- these are products that are 2027, 2028 probably real volume. And so what -- how do we think about like the milestones from sort of here to that point with the customers?

When do they have to make sort of hard commitments to making this transition? And are these architectural shifts, particularly where you're bringing innovation to the table, like how do you guys work with the architectural shifts that these products may be require versus a competitive or an incumbent position that you may be having to go in and penetrate against?

Yes. What I'd say is that, especially with the hyperscale community and neocloud community, when we lay these things out, they've got test sequences all along the way. We have development sequences all along the way to be able to test where we are.

Some of these products in terms of the actual products that bring them together come before 2027. But when we lay these out with our client base, we've done this with that architecture in mind. And the good news is what's happening amongst the -- they share an awful lot in terms of common architecture.

So this isn't like to separate architectures. That's why this building block solution allows them to adjust within the tolerance levels that they look to design. So we think we've gotten that right by heavily engaging with them. I think the other piece is because we are so prevalent in the wide area network as well, that scale is super helpful.

And the things we're doing on this architecture help the wide area network and the economies of scale of ramping fabs and ramping packaging allow us to get, again, lowest cost per bit, lowest power per bit out in the networks. And we do keep open to everything we do.

So building best-in-breed and they want to select from things, but you have to be absolutely committed to being open interface in between those. But when you do choose us as a total -- like I'll give you that example of that 18E, Ron, the power envelope, we've tested with lots of routers in the industry.

The power envelope of that is the most forgiving from an optical platform because that thought was in mind. And that's what happens when you stop developing in silos and you start developing by listening to a customer and how they're going to use technology.

And maybe to add to that, we take a few brilliant people and a few of our customers' brilliant people and put them in a room. And they come up with some amazing innovation in a very, very fast pace. We take that information. We go back and we -- we iterate on that, and we meet weekly until we finalize on a plan. And all these plans have been done to that level. And now the tweaking or the adjustments that need to be done, the course corrections along the way are going to be very, very minor, right?

So we want to share this so that it gets ahead of this. We want to drive an industry of technologies that are needed to contribute to this, right? One of the challenges we run into -- in the recent past was that the scale took off so quickly that nobody had visibility to it. They all had your reports that told them exactly how to scale their business. And I'm talking about things like depending on a ceramic package or depending on the lens, depending on a piece of fiber, right?

If they provision their capability to the limited view that exists today without more transparency coming from the hyperscalers coming from us, then we'll never get there, right? We need all of us collectively to understand the scale of what we're about to embark upon and feed into that in such a way that it is ready when our customers are ready to deploy it.

And they're trumping the bit to do it, but they realize that when we go to a supplier and we give them a PO and they say, that PO is bigger than analysts told me the entire market was going to be. We have a challenge, right? And we have to -- we've gone through and we've gone and piece in a very surgical way, fix all of that.

I think if we're more transparent, if our customers are more transparent and you really understand the magnitude of these networks, this 14:1 exposure to the WAN, it changes the industry, and we have to be -- we have to lead that. We have to be that transparent. We have to show that transparency if we have any hope of hitting these time lines with the scale that we really need.

Yes. The last time there was a supply chain crunch with COVID, Infinera and Nokia both gained share in that period. One, from scale and leveraging supply chain relationships, which we are continuing to do. in putting LTAs in order. But the second is vertical integration. And so the more that we can put under our control and build in some cases, in a monolithic pick or in some cases, again, very, very tight partnering with technology partners, the better off we're going to be.

But we've laid out the promise. Now it's time to shut up and deliver. Please get down to the booth, and you can actually see these technologies live and active and tonight.

Yes. tonight, all you need is your OFC badge, and you can be jumping up and down to Freddie Mercury and Queen and others. If you haven't attended a hairball before, either on an aircraft carrier or in a basketball arena, today is outside tonight at 8:00 at the Peacock Plaza area there.

Bring your OFC badge. Admission is free. And if you haven't heard the hair ball before, you should come because it's amazing. Every 80s rock song that you ever liked is going to be played, and you'll have a great time. So please join us. Okay, opens at 6:30. The concert starts at 8:00. Thank you all very much for coming. Thank you for your time. Have a great rest of the OFC show. We'll see you in the booth later today or tomorrow. Thank you all.

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 Wiren, 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 Factors 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 EUR 6.1 billion, with operating profit of EUR 1 billion and free cash flow of EUR 0.2 billion. For the full year, net sales were EUR 19.9 billion and operating profit was EUR 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 EUR 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 super cycle, 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 1, 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 the 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 O-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 Telefonica 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 EUR 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 U.S. and includes the technology we acquired from Phoenix 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 EUR 200 million of run rate cost synergies with integration costs of approximately EUR 350 million to EUR 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 EUR 2 billion to EUR 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 continuing 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 EUR 1.5 billion in operating profit, consistent with our performance in 2025.

As announced at our CMD on January 1, 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 EUR 850 million and an operating loss of EUR 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 EUR 150 million in 2026 compared with EUR 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 EUR 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 EUR 226 million of free cash flow and ended the quarter with EUR 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 4, AI & 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.

And 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 EUR 37 million in the quarter. So 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.

And 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.

In 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 4, and our annual net sales run rate remains at approximately EUR 1.4 billion.

Operating profit was impacted by a EUR 20 million impairment charge, and this is related to a prior asset purchase, which we deem to have minimal future value in the context of our product portfolio.

Now let's look at the net sales by region. And as you can see here, in North America, we saw strong growth in Networks 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. And excluding Nokia Technologies, Europe grew 4% with strength in Network Infrastructure. Middle East and Africa grew in both Mobile Networks and Network Infrastructure.

And then regarding cash, we ended the quarter with a net cash position of EUR 3.4 billion and the free cash flow was positive EUR 226 million and ending the year with a conversion rate of 72%, which is within our guided range of 50% to 80%. And in the quarter, cash increased as a result of the NVIDIA equity investment, which was EUR 0.9 billion. And we also completed the acquisition of the NSB shares, which impacted cash by EUR 0.5 billion.

And 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.

And today, we have also published recast financials based on the new operating structure, we have implemented at the start of the year. And 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 Businesses segment, as Justin explained earlier.

In Group Common, the recast cost base for '25 is EUR 180 million as we have reallocated approximately EUR 193 million of the cost to the primary operating segments to better reflect the nature of these costs.

And 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.

And 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 1, 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 4 2025, we currently expect quarter 1 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 EUR 50 million to EUR 150 million. And 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 EUR 500 million. And we are planning for CapEx of between EUR 900 million and EUR 1 billion as we invest in additional manufacturing capacity for Optical Networks, along with some real estate renewal projects.

And finally, we expect free cash flow conversion of between 65% 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.

[Operator Instructions] I will now hand the call back to Mr. Mulholland.

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

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 referenced good order momentum as well as a solid percentage contribution from AI. So I wondered to what degree your guidance for the segment reflects conservatism?

And 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 of a better than seasonal 4Q or whether there are other factors to take into account?

Yes, sure. So Alex, good to hear from you, and let me answer your first question. You're right. We obviously grew 17% in Q4 on Optical Networking. 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, was still very telco-centric in '25, so 70-30. And if you think about where we were before that, certainly before the Infinera acquisition, significantly telco-centric.

So 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. So, I think as you and I have talked about, we want to be disciplined in our execution and our predictability. And so therefore, that's why we've guided the way we have. But 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.

So, 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 will be a significant player in for many years ahead, but balance 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 & Cloud segment.

And 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 4, we easily see a larger decline as well. And this is a little bit based on as well how our telco customers are buying. And 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 4 and usually the start of the year, a little bit slower, and 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.

Justin, you're pledging to grow CapEx to really record levels of EUR 900 million to EUR 1 billion. Do you have visibility in your order book of Optical or IP orders? And or is leveraging this investment require additional unannounced wins with hyperscalers? And where are you in that sales cycle? And I have my follow-up.

Yes. And 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 invested in a year and you start generating returns. So 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. And for Marco, we saw EUR 300 million of restructuring in '25 and you're guiding to another EUR 450 million in cash outflow. Can investors look forward into 2027 where you think these very heavy impacts on reported versus comparable earnings drop to immaterial revenue levels?

Yes. 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. And we guided by that time that we expect cost savings between EUR 800 million to EUR 1.2 billion, and we said that also the costs to generate these savings will be about the same and also the cash flow is following that. And usually, the cash flow considering that we have more footprint in the European area. And that's usually -- there's delays on acting on those different cost actions that we are doing. And this is the reason why we see that '26 is more heavier on the cash outflow side as well. And -- but 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.

First thing, I wanted to ask about is particularly within the optical space scale across projects are new variant for data center interconnected. 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? And then I've got a follow-up.

Yes. 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. I mean, 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. But 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.

But then we expect that 1.6 and 3.2 will come. And when you look at that scale across is the tailwind for both the technology transitions and the demand. And then, of course, over time, we see scale out increasingly be an opportunity for coherent optics. So 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. So switching is much more about the data center racks, the spine-leaf architecture. But when you think about routing, that's another tailwind.

But 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. And 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. And I think a much more mature in ecosystem as well.

So 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 both in terms of CapEx, but also R&D capital in the space.

Do you have a follow-up, Simon? I guess we'll move on. We'll take our next question from Sami Sarkamies from Danske Bank.

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? And 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?

Sami, thank you for that. Yes, I would just say a couple of things here. First of all, 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. So it's been a big focus for me as we started -- as I started. And obviously, for David, as he took over.

And in fact, we just announced earlier this week that we have a new Head of IP Networking, Greg Dorai and Vach Kompella, who, for those of you that have been around this industry, know Vach, is an industry legend, he's retiring. But part of that in bringing in Vach's successor was looking for someone that had deep data center experience.

So 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's going to take us a little bit of time to see the growth. But I'm really, really pleased with the design win we had in Q4 that I referenced. I'm pleased with the order backlog. But 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 like a multiyear undertaking, if you think about higher CapEx or just like 1 year thing?

Yes. 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. So 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. So 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 to add?

No, I -- just building over 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 capacities that are needed be able to deliver those demands that we see that especially in the optical side are increasing. But still, it's not so that there's a huge CapEx investments compared to other data center investments. So 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.

So I would like to pick your thoughts regarding recent news coming out from Brussels. So, what comes to this Cybersecurity Act, the Digital Network Act. So 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. I mean, this is -- 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 out -- 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. But it's a complex technology project. So, we think this is something that we recognize there's complexity and support.

And 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 where we're -- the platforms we're investing in today will be all the things that need to become 6G ready in the near future. And if you think about what we talked -- 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 upgradable to AI-RAN as we launch that platform.

And so that's the kind of opportunity we're making the investment decision now and having clarity now as an operator. As you run that project over a 2- or 3-year period, we think is particularly important, and that's why it requires support because, obviously, it's not in anybody's budgets to run an accelerated CapEx program amongst our customers. But 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. So 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, I was talking about last week in Davos is, this is an opportunity for Europe to reshape its long-term competitiveness, its long-term competitiveness in technology, its long-term competitiveness in infrastructure and innovation and ultimately, national security, sovereignty and economic competitiveness. So I think this is really, really important.

And you can just look back at the Internet super cycle to see where the winners in the Internet Super Cycle came from as a result of significant infrastructure investment. When you think about Europe and AI, Europe is incredibly well positioned. It's well positioned because you've got a great industrial automation technologies, obviously, manufacturing industries like automotive and you've got great talent in Europe. And obviously, as being our largest talent base in our -- 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. And could you maybe comment whether you see some supply-related constraints when it comes to growth? I recall from CMD, so you have been commenting about order growth year-to-date a bit more than 40%, and we do understand that the market fundamentals are really robust on that front.

Yes. Look, I think it's a great question, Artem. So first of all, obviously, if you think about this broader ecosystem, the one thing I would remind everybody is the consistent thing in the AI data center build, AI infrastructure build has been 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. So 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.

And again, if you look at Optical, Optical is not nearly running at the kinds of volumes that you'd see that 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.

So, 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. And 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.

Yes, on the Mobile Networks, it was clearly better than expected, and some decrease primarily due to North America. And 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 possible inroad again with AT&T with the 600 build, for example, with the FirstNet upgrades? Any comments would be grateful.

Yes. 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 the customer losses 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 & Cloud in North America is extremely positive brands there right now when it comes to that segment.

Let me take AT&T. First of all, and just to remind everybody, AT&T is a very, very large, strategic and important customer for us. They are a customer for us across core networks, fiber access. So 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 and their networks. And 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. And 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. And 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?

Yes. 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, the relative magnitude or something?

Each one is good. Each one is healthy on the book-to-bill. If you put them together, they're good. If you split them, they're good. We're not blending.

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

I had a question around the operating guidance for the full year, please, of EUR 2 billion to EUR 2.5 billion. I would love if you can provide some color around the EUR 500 million guidance range, please. You noted that 2025 was slightly ahead of the midpoint. So I'm just interested to learn about reasons to be a bit more optimistic, and reasons to a bit cautious in your thinking.

And then the quick follow-up relates to Q1 guide. What FX are you assuming there? Are you using the spot of USD 1.2?

Marco, do you want to take that?

Yes. When it comes to the guidance, EUR 2 billion to EUR 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. And that's what we see. But of course, these product introductions are very important for our longer-term journey and we see very good market opportunities going forward.

When it comes to the same opportunities, we also -- just like we have said earlier, we invest in more in our opportunities in AI & Cloud, which will have an impact on the OpEx as well. But 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. But 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 in the market.

Yes. 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. And 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 & Cloud, flat market in telco, emerging opportunity in defense and mission-critical enterprise. So, 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.

And 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.

And I'd 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 USD 1.18 in our estimate, and this is based on what we see right now. And if there's any changes in the currency, we will update as well. But remember that we have about at least half of the U.S. revenues, for example, U.S. flows are hedged for the full year. So if we just look a little bit the sensitivity, before hedging a EUR 0.02 move on the USD versus euro would imply an operating profit of EUR 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.

Yes. 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? And can you just provide some color on your cost exposure to this trend?

Yes. 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 a 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, and we do have -- this is a place where we have long-term agreements. And then, of course, I think as you've heard in the industry, I think we expect this to be passed through to pricing. So from our perspective, this is a market effect. It's very consistent across the market. And so we'll address that. But overall, this isn't -- 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.

Do you have a quick follow-up, Felix?

Yes. Just quickly on your balance sheet and net cash. I think the end of the year 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 levers? Or do you see anything that you would want to do with that setup?

Yes. Thank you. When it 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 #1. And just like we alluded earlier as well, that we see opportunities in -- especially in AI & Cloud customer segment. So 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.

And the third one is the dividend. So, we aim for recurring and stable and over time, growing in dividends.

And then the fourth is that if we deem to have excess cash, then we can consider share buybacks. So 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.

I just had a question on the investment in 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 that your capacity is already utilized? So, 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, Emil, thanks for the question. So if you think about what we've shared so far, we have an existing fab in California. We've been investing in bringing a new fab online. This is something that Infinera had started before we acquired them, and we're continuing to invest. And this was also the place where we got partial funding in the CHIPS Act from the U.S. government. That indium phosphide fab is the one -- 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 forecast. So, 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 a -- 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.

So what we can do and what's a little bit different than when you think about a traditional semiconductor fab or the higher volumes 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. And that's really just the nature of optical technology and also the nature of indium phosphide.

So hopefully, that gives you a couple of dimensions to think about, but I would think about the investments we're making really in that new fab supporting '27 demand. They're starting to ramp during '27. We'll have some reduction this year, but mostly in '27. And then think about the ability to add capacity in that fab or in others as being much smaller chunks.

So because I realized, 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 investments that some of the -- some of our partners in memory and computational silicon make.

Do you have a quick follow-up, Emil?

Yes. Maybe to follow up on how aggressive do you feel you are? So is this -- it's still -- yes, it's a nominal amount. But would you say that you're aggressive? Or is this kind of you're only investing for the 100% of demand you're seeing right now and you're not wanting to overinvest at this point?

I think we're -- I think this market is moving, Emil, so quickly that we're -- this is a conversation that is ongoing in terms of where we see the long-term market and where we're investing. And 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. So you've got a clear segmentation in the value chain. Memory is vertically integrated.

So that's the other strategic question we'll continue to think about as we go forward. But 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 will be more opportunity for coherent optics within the data center.

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

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 always tends to be a bit Q4 weighted anyway?

Yes. Thank you. Yes, especially, as we said that this is visible in Network Infrastructure side, considering that we launched 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 and second half is that why giving a little bit 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. I mean, given it looks like you probably have elevated pricing for at least beyond this year. Can you maybe just give us a sense of those contracts multiyear?

Yes. I mean, I would think of these as multiyear contracts. And obviously, the supply agreements are multiyear and then pricing varies depending on the contract term.

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

On Mobile Infrastructure, you don't provide any guidance and notably for sales, maybe given more limited visibility. The LAN market is now stabilizing. Do you see any specific downside or upside to your market share in mobile in 2026 beyond the noncontract loss at AT&T?

And the second one is on the 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 a normal OpEx run rate going forward?

I can start. When it 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 recovery in India. And then there's some other pressures in like LatAm and other areas.

Of course, our aim, as we had guided in -- already in the Capital Markets Day is that in the Mobile Infrastructure side, our aim is that we will improve the profitability. So we guide gross margin and operating profit levels. So gross margin, we have said that we aim to 48% to 50% gross margins. And we've said that we will grow from the EUR 1.5 billion levels going forward towards 2028. And 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.

When it 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. The other thing for us, as we talked about, is we're not chasing revenue for revenue's sake. So I think what you -- what I would think about is the reason we gave you a guidance 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.

So those are the ways I would think about the dimension of the approach that Marco was talking about.

Do you want to talk about cost reduction?

Yes, thanks. When it 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 promises, what we have said earlier as well. So, and 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 are focused on the efficiency, operational leverage, and secure that we are doing things in the most efficient way continuously. So, this is something that we are getting 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. So 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 Factors section of our annual report on Form 20-F, which is available on our Investor Relations website.

Thank you all for joining us.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Hello, ladies and gentlemen, and welcome to Nokia's Capital Markets Day 2025. It's great to see so many of you here in person, and welcome to those of you that are joining us on the webcast. I'm David Mulholland, Head of Investor Relations at Nokia.

Before we get started, a quick disclaimer. During this event, 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 Factors 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 basis and profit or margins will relate to Nokia's comparable reporting. The presentation will be published on Nokia's Investor Relations website following the conclusion of the event.

In terms of the agenda for today, you'll get to hear from many of Nokia's leadership team. Justin will start and outline Nokia's strategy and the next chapter in the company's evolution. Pallavi will explain the journey we're on towards AI-native networks. And Raghav, in his new role as Nokia's Chief Customer Officer, will discuss Nokia through the lens of our customers. We'll then move on to the business segment presentations with David Heard outlining the growth opportunity we see in Network Infrastructure. We'll then take a 30-minute break, so we can all recover and get some refreshments. And then Justin and Patrick will discuss our Mobile Infrastructure business and how we're transforming to lead in AI-native networks. We'll then finish the presentation with Marco bringing everything together from a financial perspective. We'll then conclude with a Q&A session, and we expect the event to last until approximately 12:30 or 1:00 p.m. New York Time.

With that, let's get started.

[Presentation]

The AI supercycle. It's something I touched on when I was announced in February, and it's something that I've talked about continuously since I started as CEO in April. And when I say supercycle, I'm not talking about something that's just a single boom. I'm talking about a technology revolution because the supercycle is a surge in innovation, multiple booms, and it's waves that build on each other.

Now most of us in this room are probably old enough to remember the last one, the Internet supercycle. In fact, back in 1997, I was starting out my career as an engineer in the middle of a boom. I was building 2G mobile networks across the United States. We were just at the beginning of the Internet supercycle and the dot-com boom was just about to reach its peak.

However, there was another boom underway, the one in telephony. This was the boom that I was a part of at the time. Because in 1997, while Netscape was making progress, the device capturing the world's attention and imagination was the mobile phone. And shortly thereafter, there was a device that everyone wanted to own. And you're probably familiar with it because it had a sound that was exactly like this.

Nokia, then a relatively unheard of company from Finland, that began in paper and rubber, rose to become one of the world's most recognized brands and most valuable companies. It was a market leader for over a decade, not just because of technology, but because of what it promised. Its promise was simple. It was about connecting people. And it was more than a tagline. It was an idea that shaped the company and shaped the generation. It was an idea that transformed how we thought about communication. And as the world moved from 2G to 3G, we all became obsessed with it. We became obsessed with calling anyone anytime, anywhere, friends, families, colleagues. We became obsessed with sending SMS messages, so much so that we forced ourselves to learn how to type on a 12-key keypad. And many of us became obsessed and attached to playing a game called Snake.

But the reality was that boom ended and the Internet supercycle, which was getting started in 1997, gave rise to multiple booms, including many that started after the dot-com boom because the Internet supercycle was more than just about connecting people. It was about connecting information. And that connection spread from the computers on our desks to the phones in our pockets. And as the world moved from 3G to 4G, new leaders emerged as the market shifted from the Internet to the mobile Internet, to SaaS and ultimately, to public cloud.

And there's a lesson in that, that is very clear for us. Sustained success isn't about riding a single technology wave. It's actually about focusing innovation and investment and investing R&D, in particular, where future opportunities lie, where we create real impact and ultimately, real value.

So when I talk about the AI supercycle, I'm not just talking about what's happening today, the ubiquitous deployment of large language models and deployment of AI agents. I'm talking about a multi-wave structural transformation that will raise new opportunities, reshape industries, transform economies and ultimately advance human progress. And as intelligence moves beyond the data center into the physical world, it will transform how devices interact, how industries operate and how people live and experience technology. And for companies like Nokia, it's a moment of disruption and a tremendous moment of opportunity because it's an opportunity when new leaders can emerge.

In fact, when you think about it, let's talk about LLMs. Hundreds of millions of people are already using LLMs, ChatGPT, Grok, Gemini, Claude, Llama, Perplexity and others. And they're not using it just to gain knowledge. They're using it to generate images, generate video, write code, explore scientific questions, automate workflows and increasingly leverage intelligent agents to assist in their daily lives. And that shift is already visible in the network. We're seeing far more intensity and actually far more variability in traffic patterns and entirely new demands on latency, reliability, security and throughput.

In fact, our researchers at Bell Labs have done analysis that shows that as inference workloads expand and token exchanges multiply, consumer AI traffic across mobile and Fixed Networks is set to grow at over 20% annually through the next decade, with enterprise and industrial AI traffic accelerating at nearly 50% annually, driven by more distributed and more real-time applications. The reality is, if you think about every generation of technology boom, connectivity has become more critical, bandwidth is more essential and interruptions and trust -- interruptions cannot be accepted.

This is only the beginning of the AI supercycle. And what this means for Nokia as a trusted Western provider of connectivity is clear. The AI supercycle is an opportunity for us to lead again. And to seize that opportunity, we also recognize that Nokia needs to evolve. And that's exactly what we're doing. And today, the company that used to be known for connecting people is now the company known for connecting intelligence. And connecting intelligence is critical because it flows directly from our North Star as a company, which is advancing connectivity to secure a brighter world.

The first wave of the AI supercycle is already reshaping demand across our industry. AI adoption is scaling faster than any technology in history, and that impact is already showing up in the network. Because the network isn't just carrying bits of traffic, it's increasingly carrying tokens, the currency of intelligence. And these tokens represent everything from the prompts and responses flowing through LLMs to real -- real-time sensor data used by intelligent agents and applications. And this is only the beginning when you think about autonomous vehicles, robotics, delivery drones and more and more adoption of augmented and virtual reality applications. And we're already seeing the beginnings of this transformation because across the world, AI factories are being built at an unprecedented pace. Data center construction is accelerating. Optical Network -- optical transport requirements are increasing and IP networks are being re-architected to move AI workloads.

AI infrastructure is also evolving rapidly as compute and memory fabrics become bottlenecks, creating demand for the kind of high-performance optics and switching that Nokia is known for. In fact, in optical and IP networking, we're already capturing this opportunity, and we're serving as the backbone of many of the world's AI factories, moving the data and the compute that power AI training and real-time inferencing. We enable hyperscale connectivity across continents and within the data center. And as inference workloads expand beyond centralized clusters, our networks are enabling data and compute to move closer to the users and the devices that rely on them. And it's as this phase accelerates that our opportunity in Network expands.

Today, the NI market is forecasted to grow from EUR 48 billion in 2025 to EUR 60 billion in 2028. And we see meaningful upside beyond that as AI workloads become more distributed, data center traffic becomes more optical, more coherent and more performance-intensive. The reality is today, this is a portfolio and a business that sits at the heart of the AI supercycle. And we're already capturing the early waves of this demand.

However, the opportunity doesn't stop here. As AI moves into the real world, into physical AI, into industrial AI, into autonomous systems, robotics, industrial automation, augmented reality, digital twins, access networks, both mobile and fixed, we'll need to evolve just as dramatically as optical and IP networks are today because ultimately to deliver intelligence everywhere, connectivity will need to be ubiquitous, trusted, performant and adaptable. And it won't be just enough to deliver it the way that we have traditionally, deterministic and static.

Connectivity will need to be optimized in real time. It will need to be able to adapt. It will need to be able to support the demands of tokens with the right bandwidth, the right latency and the right security for that specific token. That's why the next major opportunity for Nokia lies in AI-native mobility. While the Mobile Infrastructure market is stable today, we see long-term growth coming, and it will follow the rise of AI-enabled devices and the demand for these intelligent applications at the edge.

So I want to transition and talk a little bit about looking at this not from just a market view, but from the most important lens that we think about, our customers. And let me start with telecommunication providers. As we all know, telcos today have invested billions in spectrum, significant CapEx and access technologies and transport infrastructure and, in many cases, are looking to unlock more value from their networks. And they're already looking to us today to evolve their networks to improve performance and to identify new opportunities to bring new services, new sources of value to their customers.

In fact, one great example of this is a customer of ours called AT&T. AT&T has a bold vision for fiber connectivity. They're aiming to double their subscriber base to 60 million homes by 2030. And our passive optical networking technology plays a critical role in enabling that expansion. We provide the next-generation fiber platforms that will upgrade and extend one of the largest fiber networks in the world. But it's not just in fixed access, it's also in mobile.

Turning to Europe. In Estonia, Elisa selected Nokia radio technology for their entire 5G network. And that Radio Networks has independently been assessed as one of the highest performing networks in Europe. And ultimately, all of these high-performance access networks can't operate on islands. They require high-performance transport networks. And what we do in Network Infrastructure and Optical and IP Networking provides a backbone that allows this traffic to be carried reliably, performantly and at scale. And that's what sets us apart is that we bring together the entire network for telcos, radio, core and transport, helping them to solve our customers' most complex challenges and helping them to deliver more value, more capability and more services to their customers.

The second major segment for us is AI and cloud providers. These are the companies building the physical infrastructure of the AI economy. And as we all know, they're investing at a pace the world has never seen. In fact, just to dimensionalize that, the largest hyperscalers are now investing more each quarter than the largest telcos invest in a year. And increasingly, they're coming to Nokia to power their AI factories, co-engineering and co-developing some of the most complex networks we've ever seen. In fact, today, 9 of the world's top 10 hyperscalers use our optical technology. They're investing and trusting our innovation from ICE-X 400-gig and 800-gig pluggables to IP routing systems that handle petabit scale capacity. And we don't just sell to them, we co-create.

This was a key point and key value driver of our acquisition of Infinera because Infinera deepened our presence in this segment. It brought us depth and experience in co-engineering with this critical customer base. And just as importantly, it brought a culture of speed and agility that has strengthened our road map and our relevance with these customers. And when you look at the order and revenue growth, we're already seeing, not even a year into this acquisition, it's clear proof that we're making progress. And you'll hear more from David on that progress and the road map ahead.

Our last major segment is mission-critical enterprise, and this includes defense. This is a segment where connectivity is a strategic asset and a critical differentiator. Now this isn't broad enterprise. This is a very specific group of enterprises, where persistent connectivity for them is critical because they depend on it for their operations and their operations simply cannot fail. These are -- examples of this are public utilities, rail, transportation, public safety organizations. They need performant, reliable, trusted networks. And of course, as I mentioned, it includes defense. As I've talked about, this is an emerging adjacency for us. We see it as an opportunity, though it's still quite nascent when you look at it in the context of our financial results.

And so to capture that opportunity, we today announced that we will stand up a new business unit called Nokia Defense. While this business is still in incubation, it includes our acquisition of Phoenix and our existing portfolio of Nokia Federal Solutions. And its objective is simple. Its focus is on accelerating co-innovation and co-development with partners in the U.S. and Finland across NATO and Five Eyes nations. And when you think about these customer segments, while they're all slightly different, one thing is consistent. They all share a common need for Nokia's core technologies from optical to IP to fixed access to core and Radio Networks.

We're uniquely positioned for this moment and this opportunity because we are the only Western company with a complete portfolio to power the most critical networks in the world. However, technology is great. Passion is important, but it's ultimately not enough. Winning requires focus, execution, speed and agility. And that's why we've outlined 5 strategic priorities to guide our strategy.

Let me walk you through them. First, number one, accelerate growth in AI and cloud. We've been talking about this quite a bit since I started. And what we're doing is simple. We're aligning our portfolio to the infrastructure that powers the AI supercycle from data centers to the intelligent edge, and we're capturing the demand that we see in the market today. Second, we want to lead the era of connectivity with AI-native networks in 6G because we're pioneering trusted, secure AI-powered networks that make connectivity invisible and intelligent. Our partnership with NVIDIA is a signpost of our strategic intent in this space.

Third, I've talked about this a little bit already, but let me be explicit. We want to grow by co-innovating with our customers and partners. The reality is for us -- for where we are today, the products we have in market and the future we're building, many of our best innovations don't come just within our own labs. They actually come from co-development and co-engineering with our customers. And while we're doing well, I want to see us lean in here more, driving co-creation that improves performance for customers and strengthens our own competitiveness, giving us more sustainable differentiation in the market. Fourth, this is all about focus, deploying capital where we can differentiate. This starts with R&D. We will invest where we see a technology advantage for Nokia, where it's clear, where we can deliver it at scale. And everywhere else where we cannot deliver that differentiation, we're going to partner with the best in the industry to accelerate time to value.

There's a great example of this in our core, our core networks, Core Software, where we focused on real software differentiation. And I'll talk about that a little bit more later. But in that, what's not as obvious is we made a very important strategic decision. We recognize that building our own cloud stack was going to be something where we could not add differentiated value, and it was something that would slow customer adoption of our solutions. So we made a bold decision and partnered with Red Hat instead of building our own stack. And when you look now at what we've done, we've accelerated our footprint across multiple public cloud platforms.

And finally, most importantly, taking these steps to ensure we're unlocking sustainable returns. This comes down to a few principles. Number one, we want to drive AI-enabled productivity. Number two, we're empowering Team Nokia. And number three, we want to make sure that everything we do is associated with delivering durable value for our shareholders.

Our strategy is clear. It's focused. It positions us to lead. And ultimately, now it comes down to one thing, execution. And just so I'm clear, since I started, we've already actually begun to execute against these priorities. One of the key steps was making Nokia a more outside-in organization. And what I mean by that is aligning us more closely with how our customers buy, how the markets are evolving and making sure we're deploying capital against where we see the greatest opportunities. And now we're taking the next step, simplifying and streamlining our organization because we want to be able to accelerate innovation, unlock operating leverage and move faster in the markets that we're in.

Starting January 1, we're going to move from 4 business groups to 2 business segments. Network Infrastructure is the first. Network Infrastructure is our Optical Networks, our IP Networks and Fixed Networks portfolio. And if you look at the past 12 months, Network Infrastructure generated approximately EUR 7.8 billion in revenue and at a 10% operating margin. It also delivered a 43% gross margin. NI will continue to be led by David, and you'll hear from David a little bit later this morning. What you're going to hear from him is that we view NI as our near-term growth engine because we have clear technology leadership and strong customer momentum.

Optical and IP are winning categories for us, and our leadership in Fixed Networks positions us well as global fiber investment continues to scale. The reality is this segment is already sitting at the center of the AI supercycle, and it's where we're already capturing the early waves of AI-driven demand.

Our second segment will be Mobile Infrastructure. This brings together our Core Software, our Radio Networks and Technology Standards. And when you look at Mobile Infrastructure over the past 12 months, it's an approximately EUR 11.6 billion business with 48% gross margin and 13% operating profit.

We're in the process of seeking a permanent leader for MI. In the interim, it will be led by me. And MI is where we're focused on improving execution, product performance and ultimately, returns. We have some strong foundations to build on in this business. Our leadership position in Core Software and in automation is already enabling us to grow at above market rates and the robust portfolio we have of IP and Technology Standards provides durable profit and cash flow. But we also recognize that while we've improved product competitiveness in Radio Networks, we still need to deliver stronger financial returns.

But we also fundamentally believe that while this market is flat today, this is where the next wave of innovation and opportunity will come from because ultimately, as I touched on earlier, as AI extends into the physical world, we see a tremendous opportunity for the need for AI-native networks. And this will be not only with 5G today, but ultimately, the foundation of what we believe will be 6G. And we have a unique opportunity to lead the industry with what we're doing in AI RAN to make sure that we can execute on this opportunity and capture it and lead again.

This is important because this is a fundamental tenet of this new structure. This structure gives us the clarity and the accountability that we need to not only address the near-term challenges, but to position the business for long-term sustainable growth and value. And more importantly, it aligns our business with how the customers buy, ultimately, how our customers see us and where their demand is shifting. It also gives us flexibility across both businesses to allocate capital and talent in the areas where we can create the most value and unlock operating leverage.

But this is one step. The other thing we need to continue to do is to pursue active portfolio management. And we've announced a set of steps today around taking exactly those steps, allocating capital away from areas that don't fit our strategy or don't fit our business. And so what we're announcing today is that we're creating a portfolio business segment. This segment will include 4 businesses: Fixed Wireless Access Customer Premise Equipment, Site Implementation and Outside Plant Services, Enterprise Campus Edge Solutions and Microwave Radio. I want to be clear, these are good businesses. But when we looked at these businesses in terms of the market opportunity and most importantly, against the 5 strategic priorities that I outlined, they're simply not the right fit with our strategy.

Over the past 12 months, these businesses generated approximately EUR 900 million in net sales with a gross margin of 22% and an operating loss of about EUR 100 million. We've set out a plan to improve execution in these businesses and to define the right path forward for each of them during 2026.

Our priority is to ensure continuity for our employees and for our customers. And as we all know, this is an important step, but an organizational structure is ultimately only a step in the process of execution. Execution ultimately comes down to having the right people. And that's exactly what we've been building since I started, a new leadership team to take Nokia forward. This team is a combination of existing Nokia leaders and new talent from joining outside. In fact, when you look at the existing leaders, what you'll notice is almost every single one of them has had some kind of role expansion since I started.

And in terms of new members, last week, we announced Kristen Pressner will join as our new Chief People Officer. She's joining us from being the CPO at Roche Diagnostics, and she'll start on May 1, 2026. Her charter will be to develop our culture and talent to ensure that we're prepared to meet the challenges ahead.

And as I said, not only have we transformed some of the existing members' roles, we've brought in a number of new members to the team since I started. But the key thing here is when you look at this organization and you look at the GLT, they're all aligned to the leadership structure for the new Nokia we're building. I'm excited about this because this is a team that's rich in experience, diverse in background and united in mindset and purpose. And I'm really thrilled you're going to get to hear from a number of them today. Pallavi, Raghav, David, Patrick, Marco.

And the last thing, of course, in strategy and execution is with structure, team is ultimately culture. And this is something that we've been hard at work at. We've been starting to evolve Nokia's culture. We still have a lot of work to do here, but we have a new emerging culture, and it has a straightforward approach and a simple name. We call it Team Nokia. It's -- as I said, it's a simple name, and it's actually a pretty fundamental concept. It's based on everyone having clear roles and accountability, empowerment to go execute them and the importance of while we each play our position, we all come together to ensure the shared success of the company. That's called winning together. And the reality is we're already seeing benefits of this because when we operate as one team, we move faster. We're more agile. We make better decisions, and we deliver better outcomes. When we take accountability and lean in to help each other succeed, we create results that show up for our customers, our employees and our shareholders.

A recent example of this was a customer win, a win with VodafoneThree. We won a significant market share expansion in their 5G stand-alone network in the U.K. And the reality was when you go back and look at this deal, this wasn't about one segment or one team winning a deal. It was about Core and Radio Networks teams coming together to provide an integrated solution. That's how we deliver for our customers and ultimately, how we win together. It's what the Team Nokia we're building today looks like.

Nokia changed the world once by connecting people. We're at a point in time where we have the opportunity to change it again by connecting intelligence. This is the new chapter of Nokia, focused, differentiated, trusted and already putting points on the board in the AI era. Marco will give you more detail, but I want to also summarize briefly how it shows up in our results.

First, we're using 2 key indicators, revenue growth and operating margin to demonstrate how we're unlocking the opportunity for AI, while we unlock operating leverage in Network Infrastructure. Second, we're establishing a clear baseline to position Mobile Infrastructure for improved returns while we invest in the long-term opportunity we see in the company. And third, we're driving company-wide efficiency, running a leaner center, unlocking corporate -- sorry, unlocking operating leverage across the business and ensuring strong consistent cash generation for our shareholders.

And all of that underpins our long-term value creation. It's why we believe that this is both a compelling near-term investment opportunity and a platform for long-term sustainable shareholder value. Because fundamentally, what we offer today is an opportunity to play in the AI supercycle in the near term and will deliver midterm profit expansion targeting double-digit operating profit growth through 2028. But we're not just stopping there. We're investing in areas that are going to continue to position Nokia for sustainable growth. And in doing so, we're going to be incredibly disciplined. We'll be disciplined about our approach to portfolio management and to capital allocation and driving -- continuing to drive productivity improvements. This is fundamentally a unique and compelling investment opportunity. And I'm excited for you to hear more about it from the rest of the team that's here with me today.

So with that, I'd like to introduce Pallavi, our Chief Technology and AI Officer.

Thank you, Justin. It is so nice to be here in front of all of you as part of my very first Capital Markets Day with Nokia. Now as a technologist, I have a strong eye of spotting when the next wave of disruption is going to hit, ride that wave and then be the disruptor. I was born doing networking. And then a decade back, I moved to go back and build the compute for the AI infrastructure, started with the cloud, then to the edge and then to the data center.

Now as I have been building the AI infrastructure, I can now see that the next wave of disruption is coming. And this time, it is going to disrupt the networks. Fundamentally, if you look at it, the AI supercycle, it has put an exponential growth on the demands of these networks. Now whether it is latency, whether it is capacity, whether it's bandwidth, whether it's reliability. And these metrics, they've always been vital. But today, they are increasingly becoming critical in scale and in urgency because this demands a new kind of network, networks that connect intelligence and networks that become smarter by using that intelligence. And Nokia is the only Western company which has a comprehensive portfolio, spanning radio, core, access, transport, IP, all the way up to the cloud, uniquely positioned to shape and deliver the networks of today and tomorrow. And this is why I'm so excited to have joined Nokia as the Chief Technology and AI Officer.

Now let me start by sharing my journey. I told you about riding these waves, so how I've gone about and gone through those waves, the lessons that each of the waves have taught to this industry and how we are going to use those lessons as we go about and make a leapfrog in building these AI native networks. Now Justin was talking about the Internet supercycle. That's where I started my career building networks for the early Internet. And at that point of time, networks were all about speeds and feeds. And then this industry was disrupted with software-defined networking. Now I was a core part of the team that went about and defined how the control plane and the data plane should be separated. And then a core architect to move networks from CLIs to APIs, having authored many, many RFCs. And this is where programmability became the norm.

Now next was cloud. Cloud gave users scalability, elasticity, flexibility. But to leapfrog clouds adoption, we introduced a new currency, and that was about trust and security. And then that just made the clouds fly. Now as I was building the cloud, I could see that there was a tiny little thing called machine learning, which was starting to pick up. You could see intelligent weather predictions coming in. You could see some critical drug discoveries being possible because of the technology. And I decided to ride that wave by building supercomputers for high-performance compute workloads.

Now remember, at that point of time, AI was just yet another high-performance compute workload. And as we could see the next wave of disruption was just around the corner, and that was with model training and inferencing, and that is when by building the world's first exaflop supercomputer we moved this industry from petaflops to exaflops. And all of this innovation actually made vision-based inferencing happen. It started first at the edge, it then moved over to the data center, and finally moved over to the cloud. And as I started to see more and more AI move over to the cloud, I moved over to that side to build the AI-based cloud infrastructure that has enabled the next wave of disruption, which is generative AI.

Now suddenly, you could see that model sizes started to explode from millions of parameters to trillions of parameters. ChatGPT, I think it started with about 117 million parameters. And today, it's close to about 2 trillion parameters. And today, we have entered the world of agentic AI. This is where intelligent agents interact, and there's massive machine-to-machine chatter. Now if you see, we've had massive technology disruptions in such a short span of time. And the key to this transformation was actually fueled by open ecosystems, open data, open framework, open models because openness fosters innovation and collaboration.

Now throughout this AI supercycle, networks have been foundational and networks have also gone about and changed, whether you're talking about scaling up for machine learning, whether we are talking about scaling out for generative AI or we are talking about scaling across for agentic AI. But now there is another disruption waiting to happen in this AI supercycle. And I can actually see it coming because AI is now on the cusp of the next wave of transformation, which is physical AI. This is where the boundaries of the physical and the digital worlds are going to get blurred.

Now think about it. This is the autonomous vehicles, drones, AR/VR glasses, intelligent factories, health care. This is the world where critical essential services will demand that the network should always be on, where subsplit second decisions need to be made and every millisecond matters. And with physical AI, we will have robots standing hand-to-hand with humans, with heavy machinery. And now just imagine that these robots, the safety and the motion control loops that they need, they need decisions to be taken in the matter of microseconds. Now one network slip and the robot can actually miss a safety stop. So in these environments, it's about safety.

Now let's step back and look at this whole transformation that I'm talking of. Gen AI was 3 years back. 2025 is the year of agentic AI. And now I can clearly see that physical AI is knocking at our doors. And this evolution of AI will exponentially change the dimensions of the network themselves. Now whether it is bandwidth, whether it is capacity, whether it is latency, whether it is reliability, all of these KPIs are changing with AI.

Now let me hit on a few examples and talk about how AI is changing traffic. And then what does it mean for each of the KPIs that I just spoke about.

[Presentation]

Now as you see in this video, I started with a voice call. Can you hear me? I moved over to a video call. Can you see me? And as I moved from voice to video, you could see that the bandwidth increased, the bandwidth demand increased. But still, the traffic was very predictable. The other important point to see here is that the downlink traffic is higher than the uplink traffic. Now this is the world of yesterday, as I like to call it. Let's look at the world of today.

[Presentation]

Now as you see, the traffic is bursty, the traffic is unpredictable. And what you also see in here is that the uplink traffic is higher than the downlink traffic. In fact, my teams in Bell Labs are predicting that in the new world, today, the downlink to uplink ratio is 12:1, and it's going to move to 4:1. And we are seeing more and more AI-native traffic originating from mobile devices, 48% of ChatGPT, 61% of Gemini's AI traffic is originating from mobile devices.

Now but wait, what we just saw was just 1 AR experience on one device. Tomorrow, the connected landscape will look radically different. AR glasses are going to be common, as common as smartphones. We will be using them for navigation, for shopping, for translation. 50% of autonomous vehicles will be driving by themselves. Tens of thousands of robots will be delivering parcels. AI agents will be there in every store for pricing, for merchandising, for better customer engagement. And then think about all the city edge AI factories that will be orchestrating traffic, energy, logistics, all in real time.

Now let's just start doing the numbers, multiply that across cities, multiply that across countries, across the world. The cumulative effect is staggering. We are talking of billions of devices generating AI-native traffic, streaming video, telemetry, immersive experiences, all happening simultaneously. Now to power this future, networks must also scale across 3 critical dimensions. We are talking about reliability. We are talking about bandwidth. We are talking about latency. Let's start with reliability.

Today's networks, they deliver 99.999%. Now what does 99.999% mean? It means that the networks -- there could be minutes of downtime in a year. But we were talking about robots on a factory. When robots on a factory floor are working hand-in-hand with humans, the downtime has to shrink to seconds. And we are now starting to talk about 99.9999%. 99.9999% reliability because one missed safety signal can cause an accident.

Now let's look at bandwidth. We talked about -- we showed you an AR/VR example. We have so much of AI inferencing that is happening. And all of this -- because of this, the bandwidth has already jumped 7x to 400 gigs per port. But tomorrow's network, they need terabit class capacity to feed these giant AI models and real-time video streams. Now think about all the AR glasses that are going to render 3D environments, autonomous vehicles, all of them streaming sensor data at the same time.

And now let's look at the third metric, which is latency. Today, latency is about 10 to 20 milliseconds, and that works well for video calls. But imagine, once again, the robots in a factory floor, when they are making safety decisions, we are talking of sub-millisecond latency. And when you look at these numbers, you might feel like, okay, these are some small jumps that we are talking about. But as a technologist, having done this in my life, I can tell you that in order to make these leaps, it is a lot of hard work and a lot of research and development that goes in order to make it happen. Because when the industry moved from 9.99% to 99.999%, it took us a lot of work. And now we are pushing even further to get these networks ready for AI-native traffic.

And now we spoke about bandwidth, how we have to increase bandwidth. We spoke about how we need to reduce latency. But one of the very fundamental things that we also have to do is you cannot increase the power envelope. And in fact, we at Nokia, we are constantly pursuing to go about and innovate to decrease the power per bit, not in a linear fashion, but in an exponential fashion.

Now I spoke about all of that. But there is also -- we are also starting to hit some fundamental laws of physics. Spectrum is finite, energy is finite. So the question really is, is there a smarter way? Is there a different way to now build these networks? And I feel that this is the opportunity that is in front of us. Now I joined Nokia about 2 months back. And when I joined Nokia, I already knew that Nokia had these end-to-end assets across the network. But in the last 2 months that I've been here, I have been digging very deep across our portfolio. And I have discovered that we have some incredible work going on. We have a clear road map. We have a clear road map that spans across chipsets, across software and all our assets. And I feel that all of this is going to enable us to lead through the next wave of building these truly AI native networks.

Now let's start with RAN. In RAN, our strategic asset is our software, and this is the anyRAN portfolio. And in fact, this was the very first thing that I did after I joined. We went about and forged and expanded our partnership with NVIDIA by bringing in NVIDIA's [ R-PRO ] GPUs into our radio networks. Now what this enables us to do is this enables us to bring in AI-based innovations into the base bands. Now with this, we are bringing in GPU support to our proven field-hardened software on the AI RAN platform, which now enables a seamless software-defined evolution.

Let's hit on to the core. This is where the team has actually done some fundamental really rock-solid work, as Justin was talking about, in making it fully cloud native, which means that this software has no hardware dependencies. And now this team is working on making it more AI native because in the world of AI applications, in the world of AR devices, in the world of robots, they are not going to speak 3GPP. So we are evolving the core beyond the traditional boundaries, making it programmable, making it agentic, making it service aware, making it ready for AI-native functions, functions like real-time translation, fraud detection and much more.

Now in IP routing, our portfolio is built on unique silicon. This is a silicon that we call as FP5. And then on top of it, we have some robust software, which has hardened protocols built APIs, the programmability that I was talking about. And in fixed access, we are pushing the performance frontier. We recently launched the world's first 50-gig PON. This is where we are getting ready for ultra-fast broadband for enterprises, for campuses and for AI-heavy edge sites. Now in IP networks, we delivered the fabric that ties everything together. Our new switches have actually doubled the performance at 1.6 terabits per second.

Now optical. This is where our differential comes in by owning the full stack. Now this is a market which is rapidly evolving. And this is where our innovation in material sizes is absolutely essential. And this is the work that David and his team are doing because it is work like this that helps us achieve capacities like 1.2 terabits per second, capacity like 1.6 terabit per second. It's only possible through this level of innovation. Now our 800-gig coherent pluggables, these give operators and hyperscalers the headroom that the AI era demands. And across all these domains, on top of this, we have our software, which is becoming more and more intelligent. Our EDA platform actually brings in AIOps into operations, cutting the downtime by up to 96%. And Altiplano's new AI models and automation tools are making networks more reliable and easier to operate.

Now like I shared, the KPIs that the networks of the future demand is very hard. And that is why myself, as the Chief Technology and AI Officer, I'm hyper-focused on taking all of Nokia's differentiating assets and doing the hard thing, which is harnessing the rich data, the deep insights and the domain expertise that we have built over years and bringing AI into the protocols and the algorithms that made these networks happen. Now in short, what I'm talking about is that the networks that have powered AI are now going to become more intelligent by using AI.

Now building this intelligence does not happen by chance. There are 2 foundational elements that you need to go about and bring in intelligence. It's data and it's domain expertise. By the way, this is exactly where Nokia stands apart. With more than 30-plus years of experience in digital networks, I like to say that from voice to packets over TCP/IP, we own the network from radio to cloud. Now what I mean by this is when a voice call evolves, this is like sound waves, it gets translated to analog signals to digital frames to RTP packets over TCP/IP. It traverses the radio. It traverses the transport. It traverses the IP switching domains before reaching the cloud edge. And this is where with assets spanning radio, core, access, transport, data center, cloud, we manage the full protocol stack. I like to call it from waveform to workload.

Now this means that we have unmatched visibility across the network. We have unique, hard-to-replicate data that gives us a training and inferencing edge to go about and create these AI models for the networks. And from a domain knowledge perspective, this is where decades of experience, working closely with operators around the world means that we have a very deep understanding of the full network. We understand how our customers go about and design. We understand how our customers go about and install their networks, to how they go about and optimize these networks.

Now let me give you a couple of examples to show how we will be bringing in this intelligence and why it matters. I spoke about the strategic advantage in our portfolio with our anyRAN software.

Now let's talk about beamforming as an example. So this is where the partnership that we did with NVIDIA, which is the AI RAN partnership also comes in. Now what is beamforming? Beamforming is a technique which is actually very, very foundational for model high-performing, high-frequency networks. Essentially, what beamforming does is that it allows you to focus radio signals, like spotlights, spotlights that focus users rather than broadcasting everywhere. Now for beamforming to work, it has to continuously go about and track the network and figure out where the best beam placement should be.

Now today, the way you do it is because these algorithms were written some 30 years back, the way you actually go about and do it is using brute force scanning. So the network goes about and sends hundreds of probes, measures each one of them and then selects the one which has the best signal. Now this works, but it's slow. It's bandwidth hungry, it's compute intensive. Now what if instead of brute force scanning, the network could predict where the optimal beam should be. And that's exactly what our researchers at Bell Labs have done by bringing in AI-driven patient optimization. What we've done is we've made beamforming now into a learning problem. Now what happens is every time the network sends a probe, we go about -- the AI model goes about and updates the signal landscape, which means it updates the model. And then it starts predicting where the best beam placement should be.

So now instead of scanning hundreds of probes, hundreds of beams, the network just goes about and sends a few probes and can still land within 1 decibel of optimal precision. Now the results are straightforward. We're talking of faster beam alignment, which means better user experience. You now need less spectrum overhead, which means less CapEx. And you need less compute, which means less energy, which means less OpEx.

Now when I was talking about our portfolio, on top of our portfolio, we are also building a unifying intelligent layer that we call as autonomous networks. This is a layer that is going to make the network simple to manage. This is where we are bringing in intent-based self-management, self-optimization, self-healing, self-security.

And to show you what it looks like, let me actually take an example. Now Justin spoke about how Nokia today powers the data centers that connect -- that interconnects 9 of the 10 top hyperscalers. Now what these hyperscalers really want is they want reliable optical backbone that connects these massive AI GPU, AI factories. Now this is where we are bringing in a layer of software applications called WaveSuite. It has 3 big things. First, it brings in deterministic AI to accurately model the performance of the Optical Networks and then do end-to-end optimization.

Second, it uses generative AI to explain the trade-offs to the human operator who's going about and configuring and optimizing the network. Third, with its intimate connection with the optical signal processors, it can monitor the extremely sensitive optical signal properties and can predict non-trusted activities before they affect any service. Now we are starting to talk about networks that just do not react. These are networks that are now anticipating. In fact, in a live trial with du in the UAE, we saw that by using this, the optimized performance modeling, it cuts the planning time in half, and it actually improved the design efficacy by 30%.

Now as I wrap up, I will reiterate. Our pursuit is simple. We will use every ounce of intelligence available to us, our assets, our data, our domain expertise and our partnership, our deep partnership with telcos and hyperscalers to build networks for the new era of AI-native traffic, networks that just don't carry intelligence, but networks that continuously learn, adapt, protect and improve. And as we build these networks, we will partner with the best-in-breed partners. Justin was talking about how we did the partnership with Red Hat. We will partner with folks in silicon, with folks in software, with folks in platforms to help our customers unlock their next wave of growth.

Now talking about customers, I'm going to hand it over to Raghav. Thank you.

Thank you, Pallavi. That was very inspiring. It's fantastic to be here, and good morning to all of you, by the way.

Just listening to what Pallavi and Justin have just shared with us, there are some very powerful themes that actually start to emerge in this era of what you're calling as the AI super cycle. The pace of technology change is unlike anything that we've seen before. And I think you guys already know this. Silicon is moving at a pace that is actually every 2 years, you're getting a fivefold increase in just the speeds of the GPUs. And actually, if you put that into a stack, that's about 30x in terms of improvements that you're getting. As we just heard from Pallavi as well as from Justin, AI is scaling at a pretty alarming rate. And I can tell you that whatever we predict there in terms of growth rates, I'm sure it will outgrow that as well. And what this is really accelerating is learning and decision-making and unprecedented scale. And all of this is also causing a lot of growth in the data traffic, but not just data, but as Justin talked about, was in the area of tokens, giving rise to new digital currencies.

Now simultaneously, we're also seeing this emergence of the physical and the digital world that Pallavi talked about. There are new types of devices coming out from Meta, Microsoft, other players. There's robots, drones and sensors and virtual platforms, and they're exploding in numbers, creating new immersive experiences that give rise to an entirely new set of services. And amid this transformation, the fundamental challenge that we all have is how do we keep up with this change. And the challenge that we have with the customers have is that how do they future-proof these networks and data centers to scale with the massive but unpredictable data growth. That's the biggest challenge they're facing. And the key thing for the telco customers is that you have to be able to deliver this at the improved power per bit and cost per bit, building automation into this increasingly complex systems while all maintaining 99.999% and also addressing the cybersecurity risk that we are actually facing out there.

Now about the change, it's not so much about the change. It's more about how we actually adapt to that change, how our customers do it, how do we do it and also fast enough. And those who can master this transformation are actually going to be the ones that actually create tremendous value. And this was the opportunity that actually got me excited personally. And I had to just sit down with Justin and say, listen, this is an amazing moment in time in our industry, and I wanted to be at the center of it. I knew the customers, and I wanted the role to be very close to the customers. And that's why I took on the responsibility of being the Chief Customer Officer for the company.

Now we all travel. And I've been traveling extensively, meeting our customers. Actually, if you want to send me a Christmas present this year, you can direct it to Seat 16A on United Airlines out of San Francisco. So feel free to do that. But what is really interesting is that when I meet them is that the customers are extremely optimistic, but there's a level of anxiety in them as well. And what they're really looking for is that in this journey, in this change, how do they latch on to trusted partners that actually can -- actually guide them through this journey of this enormous change that the world is witnessing. There is a second fundamental challenge that they're also facing, and that is skills, how do they upgrade the skills, where do they get new talent to adapt to this change at this speed.

Now what is interesting is that as I talk to the customers, they are actually looking at redefining the engagement bottle between customers and suppliers and vendors. And what they also have to do is they recognize that they have to partner with a much, much broader ecosystem out there. Now the traditional way of acquiring technology was to set up your requirements in an RFP, and we used to respond to those RFPs. But with the innovation cycles that we are in today, that is something that's just not quite going to work. The fastest speed that matches the velocity of technology itself is what we've got to implement.

The other area that has also become increasingly obvious is that these transactional relationships need to turn into strategic relationships and this notion of customer intimacy, and I think we heard it from Justin, we heard it from Pallavi and this powerful notion of co-creation. And what that means is it's not just about selling products, but it's actually our engineers sitting down with their technology teams and actually shaping the future, aligning the road maps, working by side by side to deliver value and outcomes. That is the journey, and that is the way, the mantra of working together going forward.

Now what is interesting is, as I talk to these customers, we have a very, very unique position. Customers appreciate the relevance Nokia brings to them. So you say, why? What are those reasons? Well, we talked about the broad portfolio. Pallavi went through it. We have a portfolio that cuts across the entire gamut of the network and also within the data centers themselves. And that is something that is really appreciated by our customers.

The second, our heritage in delivering mission-critical networks over the past multiple decades that we've been doing. And that is not easy to do. The investments that we are making that we've talked about in cloud and AI, and they see this supercycle as a very key part of what they have to play in, and they're happy to see that. And then we've talked about this, and you'll hear this again and again, it's this co-creation learning mindset, which really helps them modernize networks and data centers while ensuring 2 fundamental things: trust and security at scale. Now what they are really intrigued about is the vision. If you know the game of ice hockey, the vision really is where the puck is going to be and the journey to that position. And it's not so much of where the puck is today, and they really truly appreciate that.

Now this slide is something that Justin already showed a little bit earlier. But this is just a place as a reminder of the customer segments that we serve. The market opportunity in the CapEx is pretty large, as you can see in the segments we serve. So what I'm going to try and do over the next few minutes is to really unpack these customer segments to show you how we unlock value and actually give you examples of customers of how we are innovating with them.

So let's get on this journey for the telecommunication providers. The telcos have been a foundation of a business that we built Nokia on. You can see a whole group of logos that are out there. These are some of our strategic customers that we do business with. But here are some interesting facts that I'd like to share with you. If you look at the 5G stand-alone network in itself, 70% of the world's 5G networks as stand-alone networks actually include the Nokia core platform.

Let's look at fiber. 70% of the fiber broadband connections in North America run on Nokia Solutions. And here's another interesting statistic. Over 1 million base stations, which actually power 15 of the world's 20 fastest networks run Nokia Solutions. That's pretty cool.

Now what the AI supercycle really enables is while it creates opportunities, let's be real, there are challenges in this industry. The customers are facing issues around capital returns, monetization, ARPU slowdown, but the opportunity that the AI supercycle now presents with this explosion in traffic brings opportunity to monetize just not bandwidth, but things like AI tokens and other types of services that we will develop on top of the network. And that's where the excitement is. That's where the opportunity is.

Now this requires that you've got to transition these networks to support this large explosion of traffic. And this is where our customers are actually moving down a curve to drive fiber modernization, mobile densification and implementing cloud-native 5G stand-alone core capabilities and augmenting satellite as well to be able to provide coverage on an end-to-end basis. That's where the opportunity is. Now the most innovative telcos are leading with value. It's very, very important that that's the metric that they're setting. They're adding new offerings like security, APIs, dedicated bandwidth and laying the foundation of AI and networks to the path of 6G.

Now we heard this from Pallavi, all provisionings in their networks for the changes that she described requires the impact of uplink, inferencing and AI at the edge and enabling autonomous automation, to name a few, that they have to embark as a journey on.

Now it's time to give you some real concrete examples where I actually have the luxury and the privilege to have personally spent some time on. Let's look at T-Mobile in the United States. It's one of the industry's most innovative operators. And what does partnership mean to them? It means in practice where they work with us, NVIDIA and Dell to lead in AI RAN. And what did we do here? We combine radio expertise with accelerated computing to create networks that learn and optimize in real time using artificial intelligence.

Now I'm very, very pleased to announce that last week, we actually achieved the first live RF call that was established in an outdoor lab system using a commercial device. This is a powerful first and a great proof point of innovation in the industry that we accomplished with T-Mobile.

Now Justin spoke about AT&T, another truly innovative operator. A year ago, we signed a 5-year deal to deploy the next-generation fiber access technology to support one of the largest fiber networks in the world. And this includes a range of next-generation PON technologies from 10 gig to 100 gig, giving AT&T the choice and flexibility to optimize its network to specific business needs. And we certainly appreciate AT&T's business, and we look forward to continuing to work with them in new areas.

Now let's jump across the world and get into India. Bharti Airtel is one of the leading operators there, and they needed automation at enormous scale. Now I was personally involved in it. And when we talk enormous, we're talking about a country that has the highest population in the world. So it's pretty large. Now what we did with them is we actually sat down with their technical engineers and our technical engineers and actually co-created an appliance-based packet core innovation to manage traffic at the edge. This is really, really cool innovation, which is now actually deployed by more than 100 operators worldwide, reducing cost by 40% in global deployments. This is exactly what a clear demonstration of when we do something impactful with leading telcos, the rest of the world adopts. So it's very, very important that we co-create with the leading players in the world.

Let's jump across to Europe. Deutsche Telekom is a leading operator there. And we actually codeveloped a transition with them from the legacy to our most advanced radio platforms. What did they want? They wanted flexibility. They wanted interoperable networks, and we earned their trust to truly open standard-based suppliers of radio networks. That was also pretty cool. Staying in Europe, I still recall this early discussions that we had with Telefonica Germany. And boy, they had a desire to really embrace the cloud and do something very, very different, to bring cloud-native functions, like core onto AWS, moving policy engine on to Google. And this is another striking example of pioneering industry-first approaches.

Now telcos are something we continue to serve, but there are also subsegments of wholesalers that are growing faster than the telecom providers. One example is Zayo. We won IP there and we displaced a competitor. And we already have a long-standing relationship supporting their optical networking infrastructure with Zayo for already a while. So this is continuing to land and expand with our customers.

So in conclusion, for telcos, whether it's AI RAN or fiber builds in the United States or it's automation at scale in India or openness in Europe, telcos tell me they choose Nokia because we are the only Western company that provides a broad market-leading portfolio that encompasses radio, core, fixed, fiber, transport with complete network automation and secure.

So moving on, let's move on to one of the most exciting spaces of AI and cloud players. This is where we're seeing obviously a lot of growth that we all know about. Now I was with cloud and network services, and this is where I had personally the opportunity to lead the charge in forging strong ecosystem partnerships with leading cloud players like Google, AWS, Microsoft to transform and cloudify network functions to be running on hyperscaler platforms.

Now the scope of that relationship has now expanded, accelerated by our Infinera acquisition, which now puts us in a very, very strong position, where 9 of the world's top 10 AI and cloud companies actually use Nokia Solutions. And as you can also see, there are hundreds of more that actually continue to be our customers in this space. So this is a truly exciting space for us.

Actually, our success is just not limited to hyperscalers. We're rapidly expanding into emerging and innovators such as CoreWeave, Nscale, and these are really new providers scaling fast in the AI economy. We also see opportunities emerging in the intersection of cloud and telecom, particularly in managed optical, fiber networks that actually link data centers across the fast-growing regions like the Middle East and India.

And let me give you a few examples here where we are winning. In Optical Networks, 2 major hyperscalers have chosen Nokia's 800-gig coherent pluggables and next-generation line systems. We co-design these with our customers to actually deliver 800 gigs over hundreds of kilometers with the lowest power and cost per bit in the industry. If we look at another key differentiator that we provided here was our U.S.-based fab and packaging facilities. And this provides supply chain assurance and resilience, which is very critical in this environment.

Let's move on to IP. We secured wins here for our high-performance switching solutions with multiple hyperscalers and newer cloud players. Our super-spine platform here is the lowest power design in the industry, built for scale and future expansion. And these customers are really true partners in every sense of the word. We collaborate on multiyear road maps, tools, automation and services that will shape the next phase of the AI supercycle.

Let's go on and look on to the last segment and look at the mission-critical enterprises, which also includes defense, an equally exciting area of growth. Here is where we are actually deploying 5G networks with the same reliability and performance and security that we actually deliver to the telcos. But these are purpose-built for agencies and industries in public safety, utilities, transportation, medical care and other industries as well. Now for example, in the Middle East, we're actually co-innovating with leading partners on secure private networks. And this is for critical infrastructure, like utilities, combining telco-grade reliability with unmatched cybersecurity expertise because these networks are critical networks that have to be secured. A new growth area is in defense, where the bar actually is a lot, lot higher. Here, trusted connectivity and defense-grade performance are simply nonnegotiable.

Another reason why this sector is important for us, if you look back in time, some of the best innovations such as the Internet actually came out in defense, the DARPA net. So this is an important area where we can co-innovate and co-create new and emerging technologies. We've already delivered tactical wireless solutions in the U.S. Marine Corps and together with Telia and the Finnish Defense Forces successfully completed and conducted the world's first seamless 5G stand-alone slice handover between multiple countries in the live network, and we are proud and honored to serve the armed forces.

In short, across defense and industry, Nokia is building trusted networks that actually protect, connect and enable the world's most vital infrastructure. The future of the AI economy runs on these networks, and we are actually engineering it together.

I want to close with actually sharing with you 3 core principles that will actually guide us how we engage with our customers. And I got to tell you, top of the list is put the customer first. This is extremely, extremely important. And what does that mean? That means that every action we take must start with how it delivers value to our customers, ensuring that they sit in every interaction at the center of everything we do and the decisions we make. This is something I will take personally as a responsibility as a Chief Customer Officer. I know these customers well, and I will make sure that we actually deliver on our promise and actually a lot more.

Number two, co-create. We've heard this word, and I think you'll continue to hear this word for the future. Our co-creation learning mindset is what truly, truly differentiates us. As I shared with you earlier, when we team closely with our customers, we just move faster together. And when we get it right with the lead customer, others follow, turning innovation into scale. And quite frankly, with EUR 4.5 billion invested annually in R&D, we have the muscle to solve real-world problems and deliver measurable business outcomes.

And finally, I don't think I could get off the stage, my CFO will not allow me to do this is to make sure we deliver profitable growth together. This is really, really important. And here, we have to have laser focus on the markets and customers where we can jointly innovate, create value and drive success on both sides. The operating model that Justin outlined really reflects these principles in action. Now we've engaged with customers as multiple business units in the past, but now the path forward is to actually make sure that we come together unified to the face of the customer as team Nokia. And by aligning around all of our business groups and the value is really truly realized because when we focus on solution and needs of the customer and remove the complexity of business groups inside Nokia, that's when you win, and that has to be our focus.

Now we are also going to expand our client executive program for strategic accounts. And this is to make sure that we make it easier for our customers to access our best talent, leverage our R&D and see a faster time to value. We live in the most exciting times in this industry that actually I've known across telco, AI cloud, mission-critical industries and defense. And by putting customer first, co-creating for the future and delivering profitable growth, we bring the actual AI supercycle to life. And this is just not a concept, but a reality that we are building together with our customers every day. And this is what really energizes me about the journey that we're on.

So with that, I want to thank you, and I want to also make sure I pass it on to my friend, who will take you deeper into giving you insights into Network Infrastructure. So thank you very much.

Great job. Thanks, Raghav. I appreciate it. It's a super exciting time, the power of Nokia and its brand and that reach with that customer set as well as that ability to co-collaborate and leverage the assets that the company has and the forward-looking work of Bell Labs as an ex competitor to Nokia, boy, it feels good to have that on my side today.

For those of you who do not know me, and it's good to see some familiar faces, my name is David Heard. I came into Nokia, back to Nokia actually through the acquisition of Infinera. I was the CEO at Infinera. And prior to that, a long history in the telecommunications world. Justin mentioned that he spent his early career in 2G wireless. I started in 1G wireless with Bell Labs. I know it's hard to believe that I'm the older one.

When it comes to the network, I've been in the access network. I actually left Bell Labs running the fixed network. So I have a very good idea of what's happened there. And I'm super proud of the spot that we're in, developed switches and routers out in the field and obviously, the recent optical experience. So bringing all these assets together is super exciting.

It's also super interesting that being the ex CEO of a company that got bought, usually at this point in time, I'm a cost synergy. I'm not up on stage talking about the future. And I'm super happy that Justin has provided me the opportunity to show you that I'm a revenue synergy for the company going forward.

So I want to talk a little bit about why am I here? What excites me about the future. I've seen the move from analog cellular to digital cellular, from circuit to packet, moving into a cloudified network. Those were all great growth trends. There were ebbs and flows. This super cycle that we're talking about is something very, very different.

It is something that when we see the power of what this is putting together, Pallavi talked about that up speed. I want you to lock in your head what happened with uplink in that video call moving to an interactive AI call.

When you look at network infrastructure, I don't just want you to think about the short-term prospects of growth, wonderful wins we're having and great market position we have, but what happens in an AI inferencing model when that traffic shifts from 12:1 to 4:1.

So when you look at kind of the 4 key fundamental areas; one, there is no lack of growth opportunity here. So I'm not going to spend lots of time on this. This is a EUR 60 billion TAM, SAM, excuse me, that we're going after. So it is plenty of market. This is not -- I've been times in my career where I'm around searching for market opportunities. This is not that time. There's plenty of market opportunity in front of us.

Number two, when you -- when I'm looking at things that excite me, a great growth opportunity is wonderful, but where are we starting from? This core network infrastructure fabric that Nokia has is #1 or #2 in every single segment that it's in. And look, I've been a smaller player in an industry. I've been #7 or #8 or #6 or #5. That is a very, very difficult position to try to wander into the wild world of AI. So I feel very good about those #1 and #2 positions. I'm going to talk a bit more about that.

The other thing, the other perspective, kind of the compare and contrast from being in a smaller company is having the financial ability as well as the technical ability to execute. And when I look at our research and development investment, and Marco, it is investment, it is not spent of $1.6 billion, and I compare that to some of our competitors in the optical space, maybe in the access space, this is a multiple of what they're doing.

Not only do I feel good about the number, but the people behind it and the road map competitiveness that this lays out. Not only do we have a terrific road map today that's winning, as Justin talked about earlier, but we're laying the foundational road maps that win even beyond this strategic period.

And lastly, and I want to -- this is a careful listening moment, I think, for this audience, but it's great to have a big market. It's great to be #1 or #2. It's wonderful to have the bulk of investment to be able to leap ahead of the competition. But you want to make sure there's momentum in what you're doing. Momentum is a wonderful winning Elixir.

And what you'll see is year-to-date in orders in that hyperscale space, we have now brought in $1.5 billion of orders. That's through 6 wins with hyperscalers, 2 in optical systems, 2 in IP and 2 in a brand-new $1 billion-plus market for us in pluggables. And we are beginning to scale that. And again, that's a year-to-date number that if you look at both Infinera and Nokia together and NI a year ago, that is a 3x increase. If you look at where Nokia was in part of the strategic acquisition, that's more like a 6 to 7x increase.

So it's early days. But I like what I'm seeing in terms of the momentum in this business. It's about having the right market opportunity, the largest I've seen, the right team, the right technology to execute. And again, those customer engagements that Raghav talked about.

So let me kind of break down network infrastructure for a second. It's made up of 3 foundational pieces. If you think about the fixed network is where all the residential and enterprise comes in, we are the clear #1 in that position. Usually, when I met one of these conferences, I'm saying, well, we're #1 or #2 except for Huawei. In this case, we are #1 in the world in fixed networks. That is an incredibly strategic position when you think about it in the future. It is not a super high-growth market today when we look at what inferencing does to that piece of the network, it is an incredibly strategic position to be in.

Coming in from that kind of catcher's mitt of the network into the fabric of the network where the application meets the network, that is our IP networks for routing and switching. That historically was a $2.6 billion market. We are #1 in edge routing there. Again, I will tell you being #1 in edge routing, routing is much tougher than switching. We are now applying those assets, as I demonstrated in the last slide, into the hyperscale space.

Optical Networks, again, about a $3.1 billion. These are all trailing 12-month figures where we're #1 or #2 in every segment. Feel good saying that, because I did start at #8 in the market, and that was no fun. Climbing up now, we actually are in a wonderful position to take advantage of the AI super cycle.

Raghav did a very nice job talking about the market segmentation. So I'm only going to make a couple of key points here. Well, certainly, 9 out of the top 10 hyperscalers are there, but you're starting to see business wins and us scaling those business wins. 1,500 of the top service providers, it's wonderful. We can get into places we never -- that I never could get into before. And we have the wonderful assets of all of network infrastructure and all of Nokia to be able to pull together that value for our client base.

And then when you look at the Mission Critical segment, this is a great segment I'm going to talk about where people need trusted technologies. And quite frankly, in many cases, they want to buy from somebody in network infrastructure that has all of the pieces. And we are uniquely positioned to be able to do that.

When you look at our growth rates and what I'm going to talk about in terms of growth rates, I want you to remember a couple of things. One, if you look at 2024 results of the companies, most of our business, 80% of our business was with those telco players. And again, they're going through lots of transition, but they are not growing at a super-fast pace. So you are seeing the hyperscalers that I'll talk about growing at a faster pace, but traditionally, 80% of our business was with those telcos. By 2028, that number will be just under 60%.

So you're going to see a traversing of new growth, and it's weighted average math. We're going to continue to grow with mission critical, actually ahead of the growth rate as well as service provider, but the sheer growth, as Justin talked about, of the hyperscalers and cloud majors around the world, the people building the AI factories is just tremendous. And again, pulling forth a ton of growth.

All of these segments are looking for the same value proposition. They want to drive down power per bit, cost per bit. They want to make sure that they can scale and scale with some level of elasticity as well as drive a huge amount of agility and resiliency in their network. As Pallavi so eloquently said, the move from 5 9s to 6 9s, it's not easy. When you get both inside a data center, we -- there is no room for failure as we go.

So that's just a quick view of the overall network infrastructure business. Look, there's no doubt AI is growing in terms of traffic. One thing some people don't understand is just how important that fiber rollout is and how early it is. This is typically where I say, my doctor says fiber is good for me, but this is getting ridiculous and you kind of give the corny laugh.

2 billion kilometers of fiber will be deployed over the next 5 years. You haven't seen anything yet as the #1 player in fiber, again, at the access. The person pulling that in the network and then optical connecting it, that's a good position to be in. Infrastructure spend, again, $3 trillion to $4 trillion, there's no lack of market opportunity. I was with one of the hyperscalers a couple of weeks ago. We were in a meeting. We were talking about CapEx. I kind of chuckled, said where are you at in your CapEx deployment. They talk about quarterly CapEx deployment. So they were talking about, well, we got to deploy still this, here's what we need. We're spending $28 billion a quarter.

And if you think about that in the old days, when I used -- if you look at Verizon and AT&T and others, they were about a $20 billion CapEx for the entire year. So this is an opportunity where speed matters. I love the size that we have in network infrastructure in Nokia. And the whole point is making that move at a completely new clock speed. You make that move like a startup. And boy, that's exactly what our hyperscale customers, our AI cloud customers and even our telcos and mission critical customers want to see.

Back to understanding the growth rate. I mentioned that 80% of our historical business was with the telecommunication service providers. Again, the telcos is growing at 1% to 2%. Enterprise and mission critical is about 7% to 9%. We intend to grow ahead of that. And then where you're going to see a lot of the growth is in the pink going forward. That's 16% growth.

Remember, for Nokia, this was a new market segment. It was part of the thesis of purchasing Infinera. A lot of people ask, I can't be in Nokia Bell Labs. I can't be in a technology company without showing a nice network diagram here. Traditionally, what I would talk about is the wide area network, which I've already talked about with you, which is, hey, how access connects into the edge of the network in metro, how that connects into a long-haul network with cables traversing this planet, 10,000 kilometers underneath the sea.

What's really changed for Nokia, the real change in this exposure to the AI market that you need to be aware of is what is happening inside these data center builds. And they're not just data center builds. These are AI factories people are building. We play in the front end of the business. So that's the traditional data center, which is still a significant portion of growth. That is the leaf/spine top-of-rack architecture.

We have products that traverse in the space, again, using open merchant silicon on the switching side. I'll talk about 2 of those design wins that I talked about. One was in the front end, one was in the back end, which is where all the GPUs are clustered. All 3 of our products are applicable in the front end, including fixed. Fixed has an out-of-band solution to be able to manage the data center environment for resiliency purposes.

In the scale out and scale across networks, in the back end, again, we have products that go across this. I'll give you a case example of a win here. We have an IP switching scaling across networks as well as the pluggable wins that we have are really for that interconnect into these AI gigafactories. And I'll give you more of the technology details going forward. But again, when I talk about that EUR 1.5 billion of orders to date, right, through that Q3 period, that's a big portion of what's -- where that spend is going.

So when I talk about that recent order momentum, again, to give you a little bit more detail, I gave you the detail on the 6 wins on the left side here in terms of order intake. This is all orders year-to-date 2025. Optical Networks, it's growing quite nicely. Again, I think fortifying the investment thesis for Infinera, 40% optical growth year-over-year, year-to-date.

And then again, in the 800-gig coherent pluggables, these are shipping. These little babies are shipping out there. I know you can -- I'll pass this around, Simon. You'll be able to take a look at it. These little babies are shipping. We've won, again, 2 contracts for these that, again, are ramping or in the period of ramping. I would expect to see that as revenue, more material revenue as we get into 2026 and continuing to grow and beyond.

And then lastly, again, our switching products, rock solid out in the wide area network, a little later getting inside the data center, but boy, is the quality of what we're doing as well as the resiliency and the open nature of what we're doing, low power of what we're doing mattering. It's early innings, but year-over-year order pattern, 150% growth.

So I'm going to very quickly try to step through these. I can't tell I get a little excited about what I do. In the optical space, if you talk about what people buy, this also explains the growth rates. Last year, 100% of what we did was optical systems. When you build optical systems, you were talking about selling in terms of the optical engines that drive them, tens of thousands, 20s of thousands and 30s of thousands of units.

This business, again, was 100% of where we went -- where we've been. These applications, you'll always hear metro applications, long haul, subsea, where we're a leader, wholesalers or carrier's carrier. That's where, again, these optical systems are deployed and then interconnecting data centers in between. You need -- you use systems in many cases to be able to do so.

The 2 new businesses for us, one in the pink here on pluggables, that is a new business for us. When you are selling pluggables, both in -- with hyperscalers, the annual needs are typically hundreds of thousands. So that is an exponential gain from systems. And then in the component space, there is the ability for us to be able to sell components.

Now this is very early. We're looking at designs. It's not in our revenue for 2026. But we are, because of our foundational technology, building small components, right, that power networks that lower the power inside of data centers in between GPUs, I know you can really see this, right? There is a chip in my hand, to lower power 80% inside the data centers. When you're doing these, the chips that drive these that we build in our own fab. We're talking about 5 to tens of millions of units annually. So that is a whole new scale.

The good news is we here at Nokia have our own vertical integration. We have our own fab. 2.5 years ago, even before Nokia bought Infinera, we had the forethought to say we're going to need more capacity here. For those of you that are following it, there's a lot of people very interested in indium phosphide laser capacity. When you talk about 5 million to 10 million units interconnecting GPUs driving power down, that drives some pretty incredible demand.

2.5 years ago, we have one fab in Sunnyvale, California. We embarked on building out a second fab in San Jose to increase our capacity by 25x. Great news. These fabs, relax, Marco, relax, these are not $1 billion fabs, $2 billion fabs, a couple of hundred-million-dollar fabs. In addition, we had some U.S. CHIPS Act support. So really, really great to see the support of the U.S. government.

We then are able to package those photonically integrated circuits, which, by the way, we invented the photonically integrated circuit. We package them in transmit, receive optical assemblies. This is packaging, very intricate. This is an 800-gig package done in Allentown, Pennsylvania. Very, very strategic. The last time we had a supply chain pinch; we were able to gain share. So if they're -- again, building out the right capacity and having that super important.

Lastly, on the DSP team, the DSPs are what drive kind of the Moore's Law of the optical network. Pallavi talked about having dollar per bit, power per bit. That's what we do. And I think our biggest problem before us, we had too small of a DSP team, so we could only spin new DSPs every so often.

The typical design cycle for a telco in the past would have been new DSP every 4 years or so, 5 years would be fine. With the hyperscalers, they're looking for new DSPs for both pluggables as well as systems every 2 years. So the great news about putting together the 2 largest coherent DSP teams in the world, they're not just the largest, they're the best. That will continue to drive Moore's Law going forward for us. Again, to Justin's term, moving us at a very different clock speed.

So very exciting, back to the growth rate. So you understand how I think about the weighted average math. Optical systems traditionally is growing at anywhere from 3% to 4%. You're going to see our big growth both in the optical systems that we've now closed with hyperscalers because they're growing faster than the telcos as well as in this coherent pluggable space.

Again, full disclosure. We're in some qualification and testing, design testing. We've made test chips for this intra-data center space, again, brand-new SAM. This is not contemplated in our forward numbers. We have the capability. This is part of the beauty of Nokia coming together with Infinera. They have the resources that we've been able to apply to this brand-new field.

So a nice market, great strong position, the right assets to win. This is my favorite part of the presentation. I've never done this in my career. I've been bought, and I get to grade the acquisition of Infinera. So on the left were the things that Nokia put up when they bought us. So they said, "Hey, we want to create optical networks powerhouse. We don't want any disruption to customers. We don't want a lot of overlap."

What have we found? We put together a unified road map. The customer response has been outstanding. And overall, how have the results been? I haven't seen dis-synergies. We've actually delivered more than we expected. And how do you see that? The second piece kind of helps you there, which Nokia wanted to increase its presence in North America. Order presence there is, again, up 40% year-over-year in terms of orders.

Increasing our presence in AI and cloud. Again, I won't repeat this over, good early. That number might seem big. To me, it's still small. There's plenty of forward opportunity. We are not getting yet our fair share, but those design wins are there. And as we begin to ramp and move on in our road map from 800 gig to 1.6T to 3.2T, that is plenty of green space for us to be able to grow.

And then lastly, everybody wants to hear about the synergies. We are ahead of schedule, on track and ahead of schedule to be able to deliver those synergies. And we've got plenty of investment areas, again to be able to grow back to that revenue synergy rolling forward. So I will prove that I'm a revenue synergy.

In terms of customer use cases, I won't go through this because I think I've gone through it nicely. I'm not going to grade myself nicely. I've gone through it. You can tell me whether it's nicely or not. Those pluggables were codeveloped with 2 hyperscalers. They wanted to have a standard way to do probabilistic constellation shaping. They wanted to be able to have certain software parameters on their pluggable.

We delivered -- these pluggables can go kind of up to 1,700 kilometers, so they can be used for all different applications of -- depending on distance. Again, each win you do here is a couple of hundred million annually. The ability for us to get into components, this is not a win. This is a design example of using our component for 1.6 terabit inside the data center to lower the cost, to lower the power of the GPUs. Each deal like that could be, again, hundreds of millions annually.

What Marco really likes about this is that when we're selling that, we're selling just the photanically integrated circuit. So in terms of inventories and ease, this is a great business, all accretive to the margins for the company, which helps us with that 300 to 700-point expansion in network infrastructure.

In IP, I'm so excited because the next thing you plug a pluggable into is IP. On the access edge, this is a company that has the aggregation switching, the BNGs #1 in cell site routing that, again, this platform is rock solid, like in the optical domain where we have our own silicon or in that case, indium phosphide. We have our own chipsets here, too.

And again, the FP Series, the FPcx that helps power a huge amount of applications required as you get closer to the edge. Again, they tend to be very, very quality sensitive, very, very sensitive on the feature sets required. We then bring that into the IP Edge and Core. So these are the 7700, the 7200 series products. We have developed rock-solid software and SR OS that our customers just love.

In addition, we have the network automation, the NSP to be able to make that happen. That is where we're bringing in AI tools to help people build their networks and be able to spin up digital twins to be able to implement with ease, with high reliability out in the network.

What we've been able to do is translate that. We've taken our SR OS software. We've opened it up, developed it on SR Linux and made that applicable for the data center play, right? The most fresh software stack out in the industry built on, again, decades of rock-solid experience out in the network. And we offer that as an open platform. We've also implemented our hardware with SONiC in an open environment.

When you get into the hyperscalers, they like to choose. Our goal is build the world's best network elements that can be put together as a solution. The remainder of the platform down here, again, this tends to be -- there are some elements towards the edge where we're using merchant silicon as well. So we use the right silicon, as Pallavi said, for the right scenario. We're not going to spend lots of money spinning up our own silicon if there's a merchant approach that makes economic sense.

So you put this all together, we have applications for DC gateway, front-end switching and back-end switching. We also have events-driven automation for AI operations for this portion of the business as well. Super important as you get some of these neoclouds that are building out massive AI factories and need the ability to configure, might not have the technical expertise, so they can use normal language to be able to configure, troubleshoot a network.

In this case, just as an example, a couple of weeks ago, last week, actually, the 7220 was announced. That is our 100 and 2.4 terabit solution, 1.6T, Tomahawk 6 platform as well as I'm going to talk about our 18e design win that you're talking about 0.5 petabit of capability.

Very similarly, when I look at the growth rates for this business, again, traditional IP routing and services, that is a 2% to 3% market. Look, it's a fundamentally sound market. There's areas we're going to continue to grow there. We're going to grow again, back to that Mission Critical segment that's growing 7% to 9%. That has been a nice segment for us with health care and utilities.

You're going to see the growth, a big piece of the growth in the pink here, where we've again had design wins. Our goal here is you go land a couple of design wins, you land and expand. So we did that this year. Our plan is we've aligned our road map. We've seen a nice pull-through impact with the teams from both Infinera, Nokia Optical now working together with the IP team. And by the way, with the fixed team to be able to bring real solutions inside the data center.

So again, from that weighted average math of the growth rate, that's what you're going to see. That scale across opportunity I talked about, that we won that's -- again, this is hundreds of millions of dollars of actual implementation as you win annually.

So this is the scale across, which is our 18e, 7250. This is a 0.5 petabit with 576 ports of 800 gig connectivity. Who's got the pluggable? Yes. So go get another 575, and that completes a solution for this particular hyperscaler.

On the neocloud side, these -- some of these are a bit smaller, but again, a bit smaller being $50 million a year. This is where we can use our entire platform. So I talk my own ear off. That's when you know you got to stop. The 7220, 7250, all of these platforms, they're using that plus EDA for these fast buildouts. So again, this 2 case examples here of wins that we're seeing out in the marketplace.

Lightspan again, is somebody I competed against a long time ago, and they beat me. They were #1 out in the space. They are still a strong #1 out in the market. They are implementing the OLTs and the ONTs out in the market to power the residential market, the enterprise market.

You heard references from Justin and Raghav talking about players like AT&T growing from 30 million subscribers to 60 million. That's a big deal. There are -- there's plenty of white space open. You see we've covered 600 million subs. 7 out of the top -- 7 out of 10 in the U.S. are ours. So this is a space we know very, very well and will be very, very important for inferencing rolling forward.

We also have the automation to be able to make this work in the home. If anybody ever had a problem in your home with your Internet, 60% of the time, that problem is WiFi. It has nothing to do with the fixed solution. By us deploying Corteca, which is an in-home software, we're able to avert 60% of those calls. We're able to make call times go down by 50% and improve the Net Promoter Score of that service experience by 20 points. This is just starting business for us, but it's a way to continue to add value to our clients and margin to the network.

Managing the OLTs out there, super important for us. We're able to do digital twinning. And actually, think about it, it's a passive optical network. How do you test active gear? We're able to do that through a digital twin through Altiplano.

There are a few new applications. I've been in the job for about 5 months. The team is really working hard off that strategic position, looking at Optical LAN. We've announced our first product there very early. The out-of-band solution for data centers came by us pulling together with optical and IP and listening to our hyperscale customers.

So again, a great business, a business that kind of the first thing we're doing is making -- continuing our leadership position, especially on that OLT side and ONT side with fiber. The second thing is, again, we're driving the margins up through software and the rationalization that Justin talked about.

And then, look, one common -- I talked about my corny joke of fiber being good for you. Look, 50% of the networks are not even covered yet with fiber. So we are not in the late innings of the ball game here. With coax, we're less than 10% of the way there in conversion. And with Optical LAN, the game hasn't started. I'm still getting the beer of trying to find my seat.

So there are lots of opportunities ahead. But right now, we're in that -- this business is a very stable business. It's always been profitable. We've got work to do to be able to drive that next level of innovation, feel good with the early insights.

So this is all very wonderful, big markets, great product categories, early wins. But having a clear plan, Justin talked about the importance of execution in driving that. Well, we've got a clear plan for networks. It is going to be to drive that systems growth with both cloud and mission critical. You'll see us ramp those pluggables, not just 800 gig, but then the next generation of 1.6T. We will enter and scale the components market. It's still early to call the ball on when that will take an impact in our financials, right? I'm sure we're going to keep everybody plugged in as to that. In IP, it's driving growth in that data center switching, land and expand, rinse and repeat, land and expand, rinse and repeat.

And then accelerating that mission critical business. That is really a great segment for us. And the big thing is continuing to take routing share in the telcos as they position themselves for inferencing and AI.

In Fixed Networks, it's about continuing to extend. This is a great team, right, in fixed networks, they've done an unbelievable job. This move to XGS-PON. They've got their own chipset as well, Quillion, that drives 6 9s of availability. They're ahead of the curve here.

That is a chipset that if you want to upgrade 10 gig to 25 gig, I don't have to dispatch trucks to go do that. I can fast provision that given we own our own chipset, which is also effective for our margins in the OLT.

We are driving our own chipsets in some of the ONTs platforms. We're driving the automation. It's early days, but that will provide accretive value to us to expand our margins. And then lastly, I mentioned, there's a couple of really, really cool areas that you can leverage off this business, but it is very early days.

So with that, Marco will go a little bit more into that. Hopefully, I've explained that 6 to 8 points of overall growth includes, again, a large degree of telco, a large degree of we're carrying over the historical systems, a much larger embedded base, fixed, it's growing a bit slower. If you pull out fixed and just look at optical and IP, that growth rate is 10% to 12%. You're going to see us driving, again, 300 to 700 basis points of margin expansion through the initiatives I've talked about.

So why am I excited? And it's not just because I have 6 cups of coffee, we are well positioned in the market. Feels great. We have a clear strategy to win. There are opportunities to open up $1 billion markets. Who doesn't want to do that. And we have the scale and the vertical integration that I don't know, 7 years ago might not have seemed as important, but seems extremely relevant. As you want to increase your exposure to the AI super cycle, it's a great place to start. And we have the business momentum with our strategic customers to make that happen.

So I hope I didn't wear you out. Hope I gave you a little bit of a snippet for what I see in network infrastructure. I appreciate your time and look forward to your insightful questions coming up.

So with that, I'm going to bring it back over to my buddy, David Mulholland.

Thanks, David. And just one clarification. Everywhere David said dollars, he meant euros. We will now take a 30-minute break. So we'll see you back here to restart at about 10:40. For those in the room, you're welcome to try and catch up with David's 6 coffees outside, but we'll intend to restart at 10:40. Thank you.

[Break]

Welcome back, everyone. I hope you managed to get a drink or a coffee over the break, maybe not as many as David. But we're now ready to resume the event. So let me hand over to Justin to talk about our mobile infrastructure business.

All right. Thanks, David. And hopefully, you got a sense of why we're so excited about NI. And I also just want to touch on this point that David talked about. He's absolutely a revenue synergy. And more than that, he's breathed a ton of energy into our MI team. And I talked a little bit about the culture of bringing Infinera into our network infrastructure business, and there's been great cultural synergies and integration, but the leadership energy and the pace that, that team is moving at now is just so much faster and much more aligned to the market, exactly what we need at Nokia.

Let me turn now and talk a little bit about mobile infrastructure. I just touched on this point about making us faster, simpler and more aligned to the market. And that's exactly what mobile infrastructure will do. And what I want to touch on, on mobile infrastructure is the opportunity we see. And I want to break it down in terms of what it is, why it matters and how we're positioning to win and create long-term value.

So as I touched on in my earlier comments, mobile infrastructure on January 1 will bring 3 connected areas, and they're connected as our customers see them and as the market defines them. We'll bring in our core software business from cloud and network services, our baseband and radio systems for mobile networks, what we call radio networks, and our technology standards business, formerly Nokia Tech. And bringing them together gives us one single integrated platform focused on mobile connectivity from core to radio to standards. It's a platform with greater scale, better leverage and now we'll have much sharper focus. And I want to be clear, this isn't an internal reorganization exercise. This isn't a financial engineering exercise. It's about simplicity, aligning our portfolio with how our customers see us today and with our vision for the future of connectivity.

And let me break down a little bit of this for you. Core software leads in autonomous and programmable networks. Today, we're giving telcos a cloud-native core with zero-touch automation and API-based monetization. Over the past 5 years, this business has outgrown the market. It's become the clear leader in Voice Core and in subscriber data management while gaining market share in Packet Core. It generates about EUR 2.5 billion in sales with 49% gross margins.

In radio networks, we provide the radios, the baseband and the associated software as well as service that powers the networks behind every smartphone and connected device. On a trailing 12-month basis, this business generated about EUR 7.5 billion in sales with 36% gross margin. In technology standards, we manage one of the industry's strongest patent portfolios and most experienced and talented licensing teams. Our portfolio exceeds 26,000 patent families, and you'll hear a little more about this from Patrik in a few minutes. But as you look at it, not only does it have a massive patent base, it has incredible duration. 70% of these patents have more than 10 years of life remaining. And as we think about standards, it's easy to just focus on the IP licensing stream, but it's also important to recognize that it's an enabler for standardization. And as we invest in 6G standardization, this is a portfolio that will continue to grow and continue to extend its duration and value.

Financially, this is a business that has an annual contracted run rate of EUR 1.4 billion and delivers an operating profit of EUR 1.1 billion. This is a foundation of durable profit and cash flow, not just for MI, but also for Nokia. As we think about the market, this is a market that we play in that's largely stable. And I think as many of you know that cover this industry, it's largely cyclical. Telco investments have been steady. They're not expanding. And as Raghav detailed out in his explanation about the customer base, in many returns for our customers, their returns are under pressure.

But we have a unique position in this market. Today, Nokia is one of only 2 scaled Western vendors capable of delivering across the portfolio, across core software, across radio networks and with a robust standards portfolio. In North America, Europe, India and parts of Asia Pacific, we're positioned to capture incremental share as governments and telcos prioritize trusted vendors and seek innovation partners.

At the same time, in markets that are open to both Western and Eastern suppliers, we're being disciplined. This is a shift. We're focused on winning share only with customers where innovation and value are recognized. And I want to be clear, we have some great customers in these markets, and we'll continue to invest and grow with them, but we're not going to chase volume for volume's sake. We need to be delivering an acceptable return on this business. And this is a clear balance. It's a balance between growth and profitability, and it reflects the discipline that we have with mobile infrastructure for managing it for sustainable returns.

This is ultimately the foundation for reshaping MI for long-term value creation. Because when we look ahead, we see a very, very different market. And if you think about today's market, today's market is centered on what is largely consumer-based connectivity. And tomorrow's will be very different. Tomorrow's market will be defined by AI-enabled industrial and mission-critical applications that will come to depend even more on intelligent, secure and programmable networks.

As the AI super cycle accelerates, networks are evolving. We're no longer just connecting people and information. We're now connecting intelligence. And as you think about this, if you look at what's happening today, today, almost every device is largely treated like a mobile phone. My phone is a phone, my watch is treated like a phone, my tablet is a phone, my connected vehicle is a phone, largely through pre and postpaid subscriptions and largely providing a consistent revenue stream for our operators.

In the future, it's going to be very different. In the future, when we have machines, sensors and distributed systems connected, the shift will be around trust, security and performance. And that's really where we're headed because we recognize that the networks of the future and ultimately, our customers' success in the future won't depend just on delivering consistent revenue streams and dealing with homogenous devices. They're going to need to deal with heterogeneous services. That is a very different world. And that is where we are positioning Nokia to lead. We're going to be leading where we can differentiate, but ultimately by delivering the innovation that we anticipate is needed for the transformation of AI-native networks. And I think this really gets down to a different business model. And this is really critical because largely, when you think about the model, the model David talked about starting in 1G, I intercepted us in 2G, but the model really hasn't changed much.

If you think about the model and the journey we've been on in this industry, our customers are largely monetizing their value through ARPU, pre and postpaid subscriptions. Our business is largely centered around hardware, a little bit of software and a heavy services content. That has been the business. But we still pack a lot of value into hardware today. Where we're headed is a very different world. In order to deliver in this AI-native 6G future, first of all, starting with our customers, the telcos, they're going to need to deliver different revenue streams.

Revenue streams will not just be about subscription. They'll also be about tokens because different platforms, different physical AI devices will require different services. And as that happens, their networks will also need to evolve. What that means as a service provider is we're going to have to change how we innovate. And ultimately, that innovation can't depend on the pace of hardware upgrades. We need to be far more software-centric. This is a simple but critical fact in how the industry needs to evolve and where we see the opportunity for Nokia to lead it.

Because in order to move more value to software, we have to commoditize hardware. Hardware needs to become simpler, and it cannot be the source of where all innovation resides. Rather, we need to leverage software and AI applications that can optimize and learn in real time and can be deployed at a far more dynamic pace. And if you think about this for us, this is a unique opportunity. This is an opportunity not only to innovate but to deliver a higher-quality business, one that's software-driven, one that delivers higher gross margins, allows us to deliver a faster pace of innovation and ultimately deliver an increased share of recurring revenue.

This will take a bit of time because as we all know, this is not an industry that transitions overnight, but it's a direction the industry has to go, and we've already started to build it. And by the way, if you just think back, I'll go back to the story of the Internet super cycle. Think about the dot-com bubble before and after. In the late '90s, the kind of hardware in IT houses, specifically around compute, were vertically integrated stacks, Sun Microsystems, Digital Equipment Corporation. In fact, they were the early winners. You look at their revenue and growth profile.

Then when you get into the 2000s, we moved into industry standard servers, general purpose silicon. We moved into areas like virtualization, optimizing the use of our hardware, so we could build more and more applications, leverage more of the hardware utilization. And over time, we moved into containers and micro services. That journey is played out over multiple different technologies. It's quite predictable. In fact, think about the storage industry as another analogy. It's an industry that went from appliances to virtualized software with a lot of purpose-built hardware -- general purpose-built hardware underneath it. This is the journey that we're on, and this is why we recognize and we've already started to build our platforms towards this. In fact, I have to give a lot of credit to the team in core software and ultimately to Raghav because under his leadership, we began this transformation 5 years ago in core.

As you -- many of you know who have been in this industry, core used to be big iron. When David and I were talking about our time in the early days of the industry, switches, base station controllers, these were big iron systems. But Raghav and his team recognized we need to be -- we needed to shift, we needed to shift of being cloud native. And we moved from the appliance-based systems and platforms like network function, NFV or network function virtualization, to committing to fully cloud-native software. The reality as we stand here 5 years later is this transition is largely complete, and it's paying off. We actually radically simplified our Voice Core, and it became the #1 platform globally, as I said earlier. But not just that, we migrated our Packet Core to a true cloud-native architecture, and we've gained 4 points of market share. And you might look at it and say, gosh, Voice is a legacy application, where is the innovation?

But we're seeing that already. And you heard a little bit of that from Pallavi and from Raghav in their talks, we're already seeing innovation in this area. We have demonstrations of immersive audio. Think of the experience you get today, sometimes if you're listening to -- you're watching a video at home, we can actually deliver immersive audio for a phone call, for a video call, leveraging some of this technology. Real-time translation, which if you're an American like me living in Finland, is probably the best solution to learning Finnish because Duolingo while I'm working on it is not helping me move fast enough. But real-time translation, another solution, the ability to identify and block robo calls. There's a whole bunch of services that will have value and tremendous duration for voice that we could not have innovated in if we weren't built in a cloud-native stack.

Beyond that, Packet Core is really a step towards this AI-native future. And actually, we've leaned in. We've embraced multi-cloud openness, multi-vendor interoperability. I touched on the Red Hat example in my earlier comments. This is giving us deployment freedom and no supplier lock-in. And Raghav touched on some of the examples of where we're lined up with cloud providers. Effectively, what we're seeing is the industry shifting. Our customers are unifying IT and OT environments through this cloud-native stack.

And when you look at our leadership, they were on the prior slide, the results are clear. We've won over 125 5G stand-alone contracts and over 25 Core as-a-Service customers running on Google Cloud, AWS and Microsoft Azure. This business has grown well above the market rate, and operating margins have more than doubled since 2022. We're not stopping there. In fact, we see a future where the network fabric needs to become truly autonomous because delivering the services in the future cannot rely on human intervention. That means it needs to be powered by agentic AI and be exposed through open APIs that allow intent-based operations to be deployed at the speed of the devices needing them and new monetization models to emerge, giving operators the opportunity to participate in this value stream.

And actually, if you look at the core market, what you see is largely a flat market in core networks, but in these areas of autonomous networks and APIs, growth. And one of the areas that we've been growing in is a place that we recognized early on, our API network as a Code platform. This was a place we invested with a principle around open source. Open source is a principle of the technology industry. We all know that open source enables more developers to get access to tools to build capabilities and create value in their networks. And we're seeing that already. We have more than 35 customers adopted globally. Ultimately, the other message here is differentiation matters more than scale. And it's very clear. Our differentiation is our software stack. Our stack gives us a competitive edge. It's zero touch, it's intent-based. It's critical to emphasize, it's not something we've built just in a lab. It's something we've co-created with our lead customers. It's AI native and it's 6G ready. It supports ecosystems beyond 3GPP.

And this open programmability, the APIs I talked about earlier, allow telcos to expose and monetize network capabilities across industries. The architecture extends across the network from core to edge, providing a unified fabric for automation, observability and intelligence. And as we look ahead to what's coming, AI-native networks in 6G, we're accelerating our development, evolving this platform for agentic capabilities, extending it to the RAN and to the cloud so we can deliver the performance, security and reliability that intelligent tokens will demand from the device itself all the way back to the host.

So let me turn and talk a little bit about radio networks. This is a place where we've had challenges. It's -- first of all, it's very clear that this is a business that has not delivered acceptable returns. It's ours. We own it. We know we need to fix it. And it starts with portfolio focus and ultimately, emphasizing technology differentiation. What I want to make sure I emphasize here is, we've actually made quite a bit of progress.

Over the last 5 years, the team that's worked on this, led by Tommi Uitto, has made great progress. They're focused on core product competitiveness and as importantly, quality and stability. And when you look at our results, our latest baseband platforms deliver up to 90% lower energy consumption compared to the previous generation.

Our Habrok Massive MIMO radios reduce power by 30% to 40%. And as critically, we've been investing in our RAN software stack. Again, we recognized that software and hardware need to become distinct in this future, and we've been investing heavily on our AnyRAN software. And the reality today is that our AnyRAN software can run both on our native hardware, AirScale and on cloud-native stacks that run on common (sic) [ commercial ] off-the-shelf servers called COTS servers called Cloud RAN. These are the servers you can buy from partners like Dell Technologies, who participated in our announcement a few weeks ago.

We've also embedded machine learning across the portfolio. So we talk about AI a lot. In fact, this is something that we worked on for -- we've been working on for a number of years. And we started with machine learning because we had the technology in the purpose-built silicon, and we continue to invest in enabling that technology. And machine learning actually delivers some of those performance results that I talked about. For example, machine learning enables 10% higher downlink throughput, 30% higher cell utilization and 90% faster issue detection and repair, meaning that our customers' networks are more available for their customers. This was an early application of AI, as I mentioned, and Nokia was a leader. But we haven't stopped there. We talked a lot about open in core software. We've also been committed to a foundational principle of open interfaces in the radio network.

And in fact, we've been a leader in what the industry calls Open RAN or O-RAN. Customers like NTT DOCOMO and Deutsche Telekom have recognized our leadership in open high-performance RAN. In fact, Deutsche Telekom recently commented publicly on the successful trials we've done with Fujitsu around an Open RAN solution in their networks. And ultimately, while open is performance -- open is important, performance is still what matters and still the key differentiator.

We've deepened key partnerships in this space. We've extended our collaboration with T-Mobile U.S., which we announced earlier this year. We've added new wins such as the one I touched on at VodafoneThree in the U.K. And earlier this week, we just announced a deal with TIM in Italy to deliver their 5G network. In fact, when you look at 20 of the world's fastest 5G networks, Nokia is a RAN supplier for 15 of those 20. We have a strong and solid base to build from. And in that context, we're building on that base in a prudent manner that recognizes the reality of the market because while we see that the near-term forecast is flat, we do believe that the transition to AI-native 6G networks presents a tremendous long-term opportunity for growth. Why?

Because if you just look at the market forecasts, they're showing a 14% CAGR over the next 10 years. Remember earlier, I said our own Nokia Bell Labs research had identified that, that traffic would probably grow at 20% a year. So we believe it's actually higher than this, but we recognize that even that will drive investment. And just think for a minute that for all of the work that's been done in 5G, we're only 35% penetrated in the market globally. That represents a significant opportunity even in this flat market.

What this does is create structural tailwinds for investment, and it also underpins the focus of our road map, focusing not on being everywhere, but innovating where we can deliver differentiation, moving from 5G advanced to AI RAN to AI-native 6G. And that's the opportunity we're zeroed in on. And this is where it's critical to understand a little bit more about our partnership with NVIDIA because NVIDIA's capabilities are central to our shared vision of AI native 6G.

And as we announced last month, we talked a lot about the partnership around bringing our AnyRan software to combine it with NVIDIA's accelerated computing stack. I just touched on earlier that we've been investing in the portability of the AnyRAN software. Those investments have positioned us to be able to deliver this capability. That's why if you attended GTC a few weeks ago when we made this announcement, you could actually see our AnyRAN software running on a Grace Hopper platform and why you hear that T-Mobile U.S. has already made a successful call using this stack. And what you may or may not understand about NVIDIA stack is that NVIDIA stack is completely portable.

So once you build on top of the CUDA platform, I'm not just locked into a Grace Hopper platform, I can deploy that over any one of their GPUs, the L4S, to their graphics cards, even to jets and the robotics platform. This is really important because it means that all of the development we've done and everything we're continuing to do will port seamlessly to NVIDIA's Aerial RAN Computer Pro platform, or ARC-Pro that they announced a few weeks ago.

And what's even as important is getting on to this platform means that you're not locked in and dependent merely on hardware upgrades for enhancements. Because for those of you that understand their stack, CUDA continues to unlock more performance. If you look at the performance, for example, of Grace Hopper or Grace Blackwell when they released versus what they're doing now in the field, they continue to improve. And this is just in traditional AI training or inferencing applications because the software continues to unlock value in the hardware. Well, that's going to be very similar for us in the RAN. The ability to unlock value through their software will be one way that we unlock value even after a customer has purchased the hardware.

The second thing is we will continue to be able to build value on top. And Pallavi talked about this a little bit in her comments, but the ability for us to use models in this AI-native stack to continue to learn and improve on the software. What that fundamentally means is there's no longer this lock between the hardware that's running the baseband software and the software that runs on top of it. So I'm no longer dependent on making a hardware upgrade to get better features and better performance. This is a tremendous shift for our industry and one that we are excited to be leading.

The last thing I'll say about this is there's a lot of talk, and I understand because of the history of AI at the edge, the potential for edge inferencing, mobile edge compute, there's been a lot of talk about how you monetize the GPU. That's not our focus with NVIDIA to start. We absolutely believe there's value in those applications. We've been co-innovating and co-developing with them and other ecosystem partners, exploring those, actually linking those back to our network as code platform that I touched on in core software as we bring this together.

But the fundamental principle of this hardware platform is to make sure that the hardware card actually functions as a pure baseband processor. And we mean that in terms of performance per watt, which is essential for this -- for our customers because if the performance and the power efficiency isn't there, it doesn't matter how compelling the application is. So not just at a performance level, but a performance per watt level. And the other thing is around the ROI because we recognize the investment needs to be something that can be available to them on hardware. And this is the shift. And finally, the last part of the announcement we made that's incredibly significant is this ARC-Pro hardware won't just go into new devices. It will also be an upgrade option for our Nokia AirScale baseband platform.

And the reason that's important for customers is many customers have told us the investments they have in AirScale, they would like to see through the AI-native transition and ultimately into early 6G. And what that means is that the 1 million units of AirScale that we have deployed globally now have an option to being AI-native platforms, which means that our existing customers can start deploying AI-native networks as soon as we move into production in '27.

This is why we had T-Mobile join us in the announcement, and they continue to collaborate and innovate with us as the clear performance and innovation leader in the U.S. and why we've also had interest from SoftBank and from IOH in Indonesia because they recognize the potential and the power of this for their networks and ultimately for their customers.

And ultimately, what this means for us is, we're moving away from a legacy hardware model to one that is built much more around software and building a software-driven business model. And what may not be apparent is that this also frees capital. This means we can invest -- we can shift investment into software and ultimately deliver differentiation and value where it matters. And this is the shift from proprietary hardware to general-purpose hardware.

So in that context, we have a set of priorities for this business that are very clear. Number one, we want sharper commercial focus. This is -- we've been chasing business at times. Sometimes our service offerings have not necessarily yielded returns for our customers. We're going to be very disciplined around share capture. And ultimately, we're going to compete where we can innovate with our customers, deliver value to them that they recognize and capture value by enabling them to do more for their customers. We're also reallocating capital with discipline, allocating capital to building a different model, one that is much more software-driven in value capture, focusing on where we can generate higher returns and reducing exposure where returns aren't acceptable.

In parallel to all of this and consistent what you heard from David and what you'll hear from Marco shortly is we're focused on driving better operating leverage. So as we grow in this business, we'll continue to get scale efficiencies. That means simplifying how we work, consolidating overlaps and embedding AI-enabled productivity across the portfolio. This, over time, means we'll have a more focused, more disciplined and more profitable portfolio with higher margins, stronger recurring revenue profile and sustainable returns. Now those of you that know and have been through recurring -- transitions to recurring revenue models, you know that it takes a bit of time to see those returns.

And that's why you see the strategic KPIs as being very balanced here. We're being disciplined around gross margin. That's our North Star for value capture, and we're being disciplined around the base of operating profit. But obviously, many of you in here know how to do math. So if you take the EUR 1.1 billion that I talked about in IP licensing and you think about the EUR 2.5 billion at 15 points of operating margin, we have a pretty strong base to start from here.

And the reason we have such a strong base is actually technology standards. And I think what gets lost a little bit in our technology standards business is how durable the revenue stream and the profit stream are because of the essential patents that we have. And as I said earlier, it's not just about the revenue and profit stream. It's about enabling interoperability. It's about enabling any device anywhere to connect to every network securely and efficiently. And this is actually really important because as you think about AI expanding and taking on greater significance, greater significance economically, greater significance geopolitically, this standard foundation becomes even more important.

It enables innovation to scale globally. It reinforces Western technology leadership, Western technology leadership in connectivity, Western technology leadership in networks and ultimately, Western technology leadership in AI. So in closing, mobile infrastructure is a business we're transforming. It's built on unique and differentiated assets. We've positioned it for stability in the near term and ultimately, growth in the long term. We believe it has the potential to deliver solid returns today and outsized returns as the industry moves into the AI native and 6G era. So simply put, our focus right now is not to build a bigger business in the short term. It's to build a better, more valuable business for the long term. And with that, I'd like to have a little bit more time so you can understand with greater depth the value of technology standards and why we think it's such a unique asset.

So I'd like to ask Patrik to come up and talk to you a little bit more about what we do in tech standards. Patrik?

Thank you, Justin. I've been with Nokia for 20 years and with the Nokia Technologies unit since it started operating. I can't remember when we would have been in a stronger position than we are today. I'm going to talk about our industry-leading activities and achievements in standards, patents and licensing. The work is crucial for Nokia's future technology leadership and also financial performance. I have 4 topics.

First, the fact that our licensing business is based on Nokia's foundational technologies. Second, our smartphone renewals ensure predictable long-term cash flow for our investors. Third, we are diversifying our revenue pools with success in our expansion areas. And fourth, we're investing in our portfolio to future-proof our business. Nokia's patent licensing business is based on the virtuous cycle of IPR.

We conduct groundbreaking research in solving the most complex technical problems with fundamental inventions. We then contribute these inventions to open standards so other companies can build on our inventions without making the original investments. The agreed compensation for the innovation are the patent royalties we received from our licensing activities of our standard essential patents. These royalties then fund our research of future key technologies, which we then again license, and so the cycle continues.

Looking at our business, we have a strong execution and momentum in all of our licensing programs. In February last year, we completed our smartphone renewal cycle, locking in billions of euros in contracted revenue for years to come. This required closing 7 major smartphone deals in 13 months. Since completing the renewals, we have focused on the remaining addressable smartphone market. We signed an agreement with Transsion, the market leader in Africa at the end of last year and have signed additional deals this year. As a result, we now have virtually all of the global smartphone market licensed for our cellular technologies, something I believe no other patent licensor has at the moment.

Turning to our expansion programs, automotive, consumer electronics, IoT devices and multimedia services. We are ahead of our peers in all of these programs.

In automotive, we have 4G and 5G licenses with almost every Western car company. Many of these agreements were secured via the Avanci Automotive licensing pool, of which Nokia is a leading member. In addition, we signed the industry-first bilateral agreements with Chinese automakers last year. This year, we have made further progress and now have 4 Chinese automakers under license. In automotive, our Wi-Fi technologies are also relevant as these enable local connectivity inside the car. We now have bilateral license agreements with 7 major automakers covering the use of Wi-Fi technologies in their vehicles. The most recent was signed last week with Mercedes.

In consumer electronics, we primarily license the use of our video and Wi-Fi technologies in devices such as tablets, laptops and connected TVs. This is also an important pillar of our broad expansion areas, and we have market-leading coverage here, too.

Over the past year, we have signed agreements covering the use of our technologies in HPE's, Amazon's, Samsung's, Casio's and GoPro's products, just to name a few. We also have strong momentum in IoT devices. This is a fragmented market where we earlier simplified our go-to-market approach to vertical by vertical. This ensures we focus on one vertical before moving on to the next one.

In IoT, point-of-sales payment terminals has been our first focus area. We have agreements with all major Western vendors. And last year, we signed an industry-first agreement with a Chinese point-of-sales vendor. Since then, we have signed agreements with 3 more Chinese vendors. Again, we're ahead of the rest of the market here. Going forward, we will increase our total addressable market in IoT through controlled expansion into new verticals.

Multimedia services is, of course, also a meaningful opportunity. Nokia's inventors have contributed to the development of all market-adapted video codecs. Fast forwarding or rewinding a video by scrolling through it while simultaneously displaying the current scene is just one example of an invention by Nokia that many of us are likely using. Our work in this area has secured patents, but it's also recognized otherwise. For example, we just received our sixth Technology Engineering Emmy a few weeks ago. And again, we're leading our peers in unlocking the licensing market. We signed our first agreement with a streaming company in the summer of last year. And since then, we have signed 5 more deals. The most recent was signed last month with Starz, the U.S. pay-TV company.

The successful smartphone renewals and the momentum we have established in our expansion areas means we are well positioned for near-term stability and longer-term growth. We have more than EUR 800 million of annual contracted recurring revenue locked in each year all the way through 2030. The current annual revenue run rate from our expansion areas is over EUR 200 million. And as you can see from the chart, there are further opportunities across all of the programs.

Turning to our patent portfolio. Nokia's patent license business is, of course, based upon our industry-leading portfolio. The strong portfolio is why we have been able to renew most of our agreements without litigation. It is also why we have been able to sign industry-first agreements in automotive, IoT and in video streaming. We now have over 26,000 patent families in our portfolio, up from around 20,000 5 years ago and well over 7,000 families declared as essential to 5G.

And when it comes to the longevity of the patents, as Justin said, we are in a strong position. The vast majority of the current portfolio has more than 10 years of life left. While we do follow quantity, we're, of course, obsessed with quality. One example of the strength of our patents are the multiple court rulings in our favor. Here, our patents have been found to be valid and infringed by independent courts. For each new generation of standardized technology, there is a time-bound golden window when the standard is defined. We're currently in the golden window for 6G, for Wi-Fi and for video compression codecs.

We're making investments in all of these technologies and have updated our accounting for 6G patenting to better align the costs with the 6G revenues. We're also making strategic acquisitions to strengthen our portfolio in certain areas. As you know, we pay patent office annual fees for each of our patents. So when the size of our portfolio increases, these costs also rise. To offset this, we routinely trim patents that no longer generate value. We also take pride in operational excellence and automation to streamline our activities wherever possible to manage costs.

So in summary, we have a strong record in maximizing value from patents and a strong foundation to continue to do so going forward. We currently have contracted recurring revenue of EUR 1.4 billion. Some agreements will, of course, come up for renewal over time, but we have over EUR 800 million of annual contracted recurring revenue until 2030, giving us predictable long-term cash flow.

And with the world-leading team that Justin also referred to, we would expect to renew the agreements that are up for renewal between now and then. We also have strong momentum in our expansion areas, thanks to a series of industry-first agreements and with plenty of opportunities ahead. This strengthens our revenue mix. And to future-proof our business and further strengthen our industry-leading portfolio, we are investing in next-generation technologies, 6G, video codecs and Wi-Fi. I personally feel there has never been a better time to be part of our technology standards unit or to be part of Nokia. Thank you.

With that, over to Marco.

Hello from my side as well, and it's good to see so many familiar faces here. I've been with the company the past 5 years, and I must say that I'm extremely excited to see where we are today. And what is extremely exciting is the opportunities that we see. And perhaps you wonder what's different now? Just giving you a few examples. First of all, clock speed is totally different. We have market opportunities. We're exposed to new segments and technologies as well. AI and cloud is a good example of this.

We have much better product competitiveness today, and we are disciplined in investments with focus on growth and margin expansion. And we have been very clear now with what is core, what is noncore. And we are driving M&A and strategic partnerships to create value. And we are clear on operating leverage plans. Today, I will go through following areas in my presentation. I start with the long-term targets and our financial framework with KPIs. And then I will go to balance sheet position, capital discipline and capital allocation. And then I summarize in the end, how we are driving value throughout the strategy.

We've set a clear direction for the business going forward to create long-term shareholder value. And there are 3 principles here. One is delivering profit expansion, position Nokia for long-term growth and maintaining disciplined approach to capital allocation. And today, we are introducing a new operating profit target to show our ambition over the next 3 years. So we now target operating profit of between EUR 2.7 billion and EUR 3.2 billion by 2028. And this increase from the EUR 2 billion we have had in the past 12 months. And this means a double-digit CAGR on the operating profit side. And to improve our financial performance and deliver sustainable returns for our shareholders, we will grow and drive operating leverage in network infrastructure, grow profit in mobile infrastructure and at the group level, drive efficiency and capital discipline.

And we're also introducing a set of strategic KPIs that illustrate how we translate the strategic principles into financial focus areas. And let me now walk through each KPI and explain the underlying initiatives to reach our targets. As Justin explained this morning, our priority in NI is to accelerate our growth. And I don't think that any of you missed how excited David was about the opportunities in NI. The first strategic KPI in NI is 6% to 8% net sales growth through 2028. And we target to grow slightly faster than the addressable market in IP and optical, but we'll take a disciplined approach to fixed networks, focusing on higher-value segments. And with the actions we are taking, we expect to have higher growth opportunities beyond 2028, thanks to the better product mix.

And the second strategic KPI for NI is improving its operating margin to 13% to 17%. And there are 4 main drivers that will support the operating margin expansion. The first is capturing the synergies from the Infinera acquisition, and you heard David also said that we are well on track, growing the higher-margin products and the disciplined approach on fixed networks business mix and the fourth operating leverage, which means that our OpEx growth is lower than the net sales growth. This margin expansion might be limited during the first half of 2026 as we will be ramping up new products. But over time, we are confident there is meaningful room to expand our profitability.

Turning now to Mobile Networks. The focus in -- sorry, mobile infrastructure. Focus in MI will be increasing our value capture going forward. Our first KPI here is to increase our gross margin from the current 48% to 48% to 50% levels by 2028. And there are 3 elements that will support this. And the first one is that we will benefit from our cloud-native platform in core software and expect to have higher growth than the market with improving gross margins. The second, we will take disciplined actions and approach to radio networks, focus on profitability over top line growth. And we will continue to strengthen our technology position and differentiation to drive better gross margins.

And the third one is that we see a stable profit contribution from our licensing business in the coming years, just like you heard from Patrik recently. And the second KPI is that we further expand our operating profit in MI from the base of EUR 1.5 billion, which we delivered over the past 12 months. And in addition to the levers that improve gross margin, we will have a disciplined mindset towards investments. And we will invest to accelerate our AI RAN competitiveness, but also focus on efficiency and maintain a similar OpEx base. And we are not providing an explicit guidance and target for the net sales as we, for example, make decisions for the future about the investments in AI RAN, and this could result in a more focused and more profitable player as we move from a hardware-centric to a more software-focused business in radio networks.

And this will be a gradual transition with a largely stable market outlook, but we expect similar trend for the net sales in the coming years for MI. We are also taking steps to make our corporate center operations more efficient. We started at a cost level of EUR 370 million and reduced that now to about EUR 350 million. We will save about EUR 50 million in 2026. And by 2028, we target a corporate center cost about EUR 150 million. And to accelerate this, we are allocating about EUR 120 million of costs in the segments effective of January 1, as these are largely operating-related costs.

However, I want to be clear here that we are tasking the segments to reduce the G&A expenses by this amount and deliver an additional EUR 30 million reduction at the Group Common by 2028. As you can see on this slide, we are now targeting EUR 1.2 billion in gross cost savings between 2023 and '26. And this is an increase from our earlier target of EUR 1 billion, reflecting our commitment to accelerate the efficiency and value creation across the group. The cost restructuring -- or the cost for the restructuring program is planned to be about EUR 1.2 billion, as we've said earlier, that usually the cost is at the same as the annual savings. And to date, we have already achieved about EUR 800 million in savings, demonstrating a strong momentum and discipline in our approach.

And these savings are being delivered in part through a reduction of our workforce. And at the start of the program, we had 84,000 employees. And now we target to have -- or we target to reduce that by 14,000 in total, of which 9,000 have already been reduced by September this year. So the additional 5,000 headcount reduction, half of that already has been communicated. And just a note here that these data points exclude now Infinera and ASN divestment as these were unrelated to this program. And to improve the operating leverage is one of my absolute key focus areas. And now when I've taken over the IT organization, we can drive further efficiencies by AI implementations and process simplifications. We are also implementing a continuous improvement culture in the company throughout the whole group.

And in summary, we are moving decisively to reshape our cost base, ensuring Nokia is leaner, more agile and better positioned to capture value. And we will continue to update on the progress on our cost savings programs. In recent years, we have seen some volatility in conversion of operating profit into cash, which has been mainly from 3 reasons. First of all, we had some significant project ramp-ups that consumed and then released working capital and the India ramp-up is a very good example here.

And the second that we had supply disruptions, as you remember, in 2021, 2022. And then, of course, the third one is that we have some timing differences related to prepayments in our licensing business. Occasionally, we get questions from you guys and others about our use of some off-balance sheet items like sale of receivables. And I want to be very clear here now that within Nokia, we do operate with a very modest level of sale of receivables. Currently, the level is the lowest since we acquired Alcatel-Lucent. And it is mainly used to mitigate risks like FX risk, country risk and credit risks.

Additionally, we aim to recover the cost from our customers, and we disclose also the net cost for Nokia in our annual report. And the impact to the balance sheet where the cost is not being covered by the customers is currently about EUR 0.5 billion, and we expect to keep that level considering the geographical mix that we have in our sales. Going forward, we expect to move to a more stable framework for cash generation in the business. And now we target free cash flow conversion from comparable operating profit in the range of 65% to 75%. But there can be some variations year-by-year due to the customer payment dynamics.

In the next couple of years, we will have higher CapEx as we invest in additional fab capacity in optical, which we see as a significant value-creating asset for the company. And we are investing over EUR 100 million in the optical fab capacity, as David mentioned earlier in the presentation. And the main deltas that we have between operating profit and free cash flow are CapEx and tax items. And restructuring costs will fall after this program that we currently have. What comes to our balance sheet, we have a very strong balance sheet, and we had, by the end of quarter 3, about EUR 3 billion as a net cash. And I would say that there are 2 items that I want to bring up that will impact our net cash position.

The first one is that, as you know, we have exercised the call option in our Chinese joint venture, Nokia Shanghai Bell and acquiring the remaining 50% of the shares. And we have estimated that value on the balance sheet to be around EUR 0.5 billion, and we expect the deal to conclude in the next quarters or so. And this will negatively impact our net cash position with the same amount. And why we're doing this, this deal will give us much better ability to simplify our operations and operational structure in this region. The second item is that we have now received the funds from the NVIDIA investments.

Then going over to the portfolio businesses. And this was based on the detailed strategic review that we decided to move the number of businesses into new unit. And the review focused on our market positions, the margin profile of each of the units and the strategic fit. And these are good business just like Justin mentioned earlier, but then these are not deemed to be core to Nokia, and thus, we are not the right owner.

Over the past 12 months, these businesses have had a net sales of about EUR 0.9 billion and an operating loss of EUR 0.1 billion. And now we are assessing the best path for each of these businesses and owners as well and expect that we will have a solution by the end of 2026. And when we complete this transition, it means that we will be much more focused on our core businesses. When it comes to our capital allocation priorities, those remain unchanged. So the first priority is organic investments in R&D and other investments where we can create value, just at that fab investment that I mentioned earlier. The second is that we remain open to acquisitions that could accelerate our strategy execution. And here, we are looking both minority investments like we did with Nscale and potential bolt-on acquisitions. But the main thing is that in all M&A, it is extremely important that we remain disciplined around the strategic fit and financial rationale.

And all M&A activities must create clear shareholder value. Just like Infinera, we believe, is a good example of that. Third is dividend. So we target recurring, stable and over time growing dividend that takes into account the financial position and the business outlook.

And finally, the fourth one is that if we deem that we have excess cash, we continue to consider share buybacks as an approach to return that cash to shareholders. Justin talked about these 5 strategic priorities earlier. And the strategic KPIs that I've talked through now are the financial outcomes that we expect from this and let me leave you with 3 key points here.

The first one is that we are focused on delivering growth and operating leverage in network infrastructure. The second that we will focus on increase of value capture in our mobile infrastructure business, underpinned by our technology standards and core software while we transform the mobile networks. And the third one, we will continue to execute with discipline and actively manage our capital going forward. So ultimately, we believe this will all lead to a double-digit operating profit expansion for the business through 2028.

So I hope you will join us on this journey. And now I will welcome David back on stage so we can start the Q&A.

Thanks, Marco, and thank you to all of the previous presenters that we had. We will now move to the Q&A session. [Operator Instructions]

With that, let me welcome the presenters back on to the stage, and we'll get started. I think we'll take our first question from Simon.

Simon Leopold with Raymond James. I'll ask my 2 together. So we don't have to go back and forth. So the first one is, I think, a broad topic that really didn't get addressed today. And that's in the past, we've talked about these opportunities of Huawei swaps. There's been more recent news in Europe about potentially pushing out some of the high-risk vendors. So it wasn't addressed. I understand we want to be conservative, but I'd like to hear your thoughts about that particular opportunity, how you're thinking about it, how you'd size it.

The next question, probably more oriented towards David Heard, is we've heard more about this newer architecture of scale across, which I think some people may confuse with data center interconnect, which has existed for many, many years. Could you discuss how you see these opportunities in scale across? And is this factored into the forecast? How do you size it? What are you thinking in that particular application?

Yes. So I'll take the first one. And David, I'll let you have some with scale across. So first of all, as you look at -- we put up a geo map, Simon, for a reason, which is we think the markets -- it's pretty clear if you look at the direction of travel that the markets are going to continue to bifurcate. There's going to be markets that only permit Western vendors, markets that strongly prefer Eastern vendors and markets that have a clear strategy around having both.

And if you look at Europe, I mean, right now, core networks is largely executed. Europe has already implemented the 5G toolbox for core networks. Look, we're optimistic that the commission is making progress on this. But the reality is, for those of you who know the history in the industry, is this has been talked about for a long time and very little has been implemented.

If you think about the TAM without giving you a hard number, if you were to look at the opportunity today, you just -- you take -- I think you take something around the EUR 2 billion to EUR 2.5 billion of opportunity right now, if there was a radical -- if there was a more aggressive replacement, an accelerated replacement in the market just based on Huawei's share and the size of the market. So that's a little bit how we think about it.

The key thing for me is it's really easy for us to execute on the capacity if the demand comes in, but I'm not going to run the business expecting it to happen. Now do we talk about it with the European Commission and governments? Of course, and our advice to them also is, look, this is something you need -- if you commit to, you got to actually go fund the -- you got to go fund. And so when we have this conversation, if you're going to go enforce the EU toolbox, it's got to come with capital because if I think about it from a customer's perspective, there's no justification to upgrade a network in terms of their investor base without some kind of capital return. So unless that capital is offset, why would I have an incentive to replace it.

So that's how we think about it. We think it's -- obviously, we believe it's important. I also think it's important more broadly, which is just the principle of -- this is Europe. The 2 major players are European companies. It's kind of incredible that from a balance of trade perspective, Europe is allowing this dynamic to persist. I think the U.S., the U.K., India have all shown a very clear direction. And by the way, the U.S., the U.K. and India are all showing investment in networks and performance in networks because ultimately, a race to the bottom is not a value-creating experience for anybody. It's not better. I know people get excited because maybe the ARPU to the customers is lower, but that's not better for operators. It doesn't -- you don't get better service in those markets when you look at it as a customer. Those are the places that aren't as deployed for 5G.

And if you think about the economic impact of what's coming, you're not going to be able to invest to get the kind of innovation and development and ultimately, economic development and GDP growth per capita that you'll get if you invest in connectivity as a core asset. So I think there's a lot of opportunity. I'm optimistic, but I'm also pragmatic. And when we see that opportunity, we'll be very aggressive about pursuing it, but we're not going to run the business anticipating something that we're not in direct control of today.

And then, David, scale up, scale out, scale across. That's something that used to be close to my heart, but I'll let you talk about it.

Go ahead. Simon, so yes, certainly, metro DCI, over 50% of the investments are still going on in that front end data center today. So that business and by the way, when I look kind of at the early success we had in hyperscale, that was it. It was DCI interconnect at again, those high data rates, carrying all that traffic. So that will continue.

What we see growing at, let's say, that exponential rate is, again, the scale across just the sheer magnitude, as I mentioned, of the port, both the overall switch capacity required and then the port densities that people are looking to go connect. That is a sweet spot for us. That, again, by landing and expanding, I'm seeing a, call it, larger average deal size than what we saw in the DCI interconnect.

And again, just not to bore you with speeds and feeds. But again, in the case we gave with the 18e, you're talking about full chassis, full 7-foot racks, with 0.5 petabit and again, 576 ports that require thermally efficient 800-gig pluggables traversing. That market has a long way to go. I mean, it's early innings, so feel great about that. And then as I mentioned, when you look at Broadcom's release plan for Tomahawk 6 and when you look inside the data center, port density is right, the switching has not yet moved to 1.6 yet. So there's still a lot of 800 gig to go as well as that move to 1.6 first in the data center followed down below in the back end. So I know I probably didn't give you the SAM split up that you would like. But what I would tell you is that deal size is a multiple of the average DCI deal size.

And I would say the thing to add that I'm not going to say excited because all you guys keep saying I'm excited. So what I will say is what I am feeling good about is, look, we get the switch and the pluggable, like we have both. We have the solution to be able to do that. And you can do some unique things, like we are very open. Everything we do is open. But when we do, do it together, there's some power management things we can do like in the wide area network, we're doing that where you can take power down 19% or 21% on a per application basis. That's a big deal.

Yes. And maybe what I'm excited about since I must have stolen your coffee at the break, what I'm excited about in this is look at the pace of innovation, right? I think that's -- for me, the thing that's compelling about scale across is, okay, AI factories, we've got a power constraint. How are we going to solve that? We're now going to interconnect data centers, right? And this is the pace at which this has changed because we were talking about 10, 15, 50-kilowatt racks, like those were a big thing. Now we're at 400 and even more, and now we're talking about the footprint being constrained, so we're solving AI factories.

And I think both Pallavi talked about this from a technology perspective, David has done a great job of breaking it out in terms of a business opportunity for us. But that pace of innovation, that's what's coming. And that's also -- when you think about the broader opportunity for us, that's why the agility, the clock speed, the shift in the company. And I know you guys would love for us to probably lean in a little more on the opportunity, but I'm much more focused on how we're acting internally. And that's why what I see from the team in terms of responsiveness, coming out from very far behind to catching up on 800 gig to launching the shipping. I mean that's the kind of pace that we're moving at to being in a position to deliver 1.6 to meet the market. I think that's the change in clock speed that we're all talking about and why we are excited about the opportunity, even if we're measured on what we're showing.

Yes. One thing -- I'll add a third question for you to ask me and then I'll answer it for you. No, the other impact that has just on optical systems that I didn't cover in my rapid talk is that we can connect these things, again, direct -- via direct pluggable -- direct coherent pluggable into these big switches or we are still seeing, right, the traditional optical systems growth happening. Like we're not fighting a religious war here, we're on both sides.

But to give you just a little bit of an insight into what's happening, these line systems used to be, right, single fiber pair, right, single rail. You're seeing now because of the power requirements, and if you look out in the huts where you're amplifying in the wide area network, you're seeing demands for things that are multi-rail line systems where you're now looking to put 128 pairs, 160 pairs, and Pallavi covered this. Traditionally in a hut, you're talking about 3-kilowatt. You can't go out in some of these locations and add more power, right? So that's all, again, nice opportunity in optical systems, switching and in this pluggable demand. Sorry to ask your third question, sorry.

We'll take our next question from Terence.

Really an advantage to sitting in the front of the room.

Those lights are interrogating.

It's Terence Tsui here from Morgan Stanley. Just another question on optical and IP and exploring that the target that you have for revenue growth of 10% to 12%, which you're clearly very excited about. However, your largest peer is talking about 17% growth. So I just wondered if you can do a bit of compare and contrast and talk about the known parts of the market where you think you could be like better represented.

You got it.

Yes. Yes, you see I twitched when you did that. Yes. No, I mean I would -- from a day where 10% to 12% was pretty good at these things. But yes, look, I think we had a later start as a company into the hyperscale space. As I said, the EUR 1.5 billion, not dollars, of orders that we brought in, in terms of the total spend, it's a great start, but that isn't where we need the destination to be. So when you compare me with maybe that particular competitor that you're talking about, a couple of things to note.

They do have a larger exposure into the hyperscalers, number one. Number two, they were earlier, although not vertically integrated, into the pluggable space, including 400 gig. We're really intersecting at 800 gig. Number three, when you look at where a lot of their business comes from, it's where either Infinera nor Nokia had any real big presence in optical. The major carriers here in the United States in terms of, you can think of their names, right? That was a very large when you look at a percent of the revenue.

Now the beautiful thing about what's happening in the network, again, I'm talking my ear off, is these are insertion points where we're focused right now. And so as we get those wins, when I looked at that carrier space growing to 1 to 2, if you're not in those large carriers, it's very, very hard to, again, grow ahead of that. That's all green space for us. That is not a space we've been in, and we intend to get there. Did that answer your question?

We'll go to Felix.

Felix Henriksson, Nordea. Another NI question from me as well. So you presented the 6% to 8% revenue growth target today. To me, it doesn't sound like it sort of factors in much tailwinds from items such as AI inferencing and fixed, the optical components business or the NVIDIA partnership. Is that a fair assessment? And what do you consider as the biggest upside risks to your targets?

Yes is the answer to the first piece. Look, I think in the rest of the business, again, I think Justin mentioned it, for us, it's execution. The opportunity is there. We have the critical platforms. We've gotten through typically acquisitions, no matter how much somebody paints them. We're hitting the objective, but it's not easy. That's hard work, right? So we've got the focus and the road maps to go intersect. So to me, the #1 risk is execution.

I think the other thing too, and just to call it for what it is, because obviously, if you do the math, we're pretty conservative on fixed networks. I think we're very optimistic on the business. The reality of what we inherited, I'll use David and I inherited in that was a portfolio that was focused on chasing what I would say is low calorie revenue. And that's why we made the decision we did in fixed wireless access CPE. Again, it's a good business, but it doesn't fit our profile. It's not a place where we can differentiate, we can add value. And we're going to be more measured on that side of the business.

And to be frank, I think the business hasn't consistently focused on where it's differentiated. And you look at a couple of customers. I mean, certainly, we talked about AT&T today. In earnings last quarter, I talked about Frontier, 2 U.S. customers where our technology on the OLT and the systems and the associated service side, where when we deploy, we're delivering tremendous value. But I think that for us is getting the business refocused. And so you've got a little bit of that capacity that we're building into the profile. And that's the math, I think that you're probably trying to -- you're seeing a little disconnected.

Yes. I would also add that in the past, I think that business was held to a bottom line operating income very strictly where optical didn't have the scale and wasn't contributing. So there was a little bit of taking from pockets with different areas taking a different tilt to innovation. Across the 3 businesses, we're investing. As Justin mentioned, the -- whether it's AT&T moving from 30 million subscribers to 60 million, that's pretty profound. On top of that, Japan is going through the entire -- if you look at what's happening standards wise, there's a move from EPON to XGS-PON, where we're the leader. So there are pockets. But again, as Justin said, we're focusing that business on growth and on margin expansion and on preparing for the inferencing. And to your point, I think it just would be way too early to put anything down that says, okay, here, it's the financial metrics. I think we have enough to deliver in front of us and execution is the key.

Sandeep?

Sandeep Deshpande, JPMorgan. Two questions, if I may. Firstly, on the mobile infrastructure business. I mean, you've talked about this transition to a software-based architecture going forward. But I mean in terms of the customer base, you've talked about 15 of the 20, I think, global telcos you are in, 2 of the biggest U.S. telcos you're not in. I mean is that going to change over the next 3 years? Clearly, not in the 3-year horizon you've given on the estimates, but is that a target? Or is that not a target because that could change the operating margin of the business very substantially if you were able to get into one of those big telcos as such?

And then secondly, back again to network infrastructure. In switching, I mean, Nokia has been behind the curve, but now gaining share. So what is it that is making Nokia gaining share in that business? I mean, there have been existing players in that market, is it your software? Is it your silicon? Is it something else? So maybe I'm trying to understand what is it going to make Nokia going to be a bigger player in that market? Clearly, optical, you're already there, but in switching, that is the question.

Okay. So on the first one on win backs. Look, I mean, obviously, if we had news to announce, we would announce it. I think right now, our focus is on building the best portfolio that we believe is going to enable differentiation for the customers that value it. And look, they're important customers for us. By the way, if you think about those 2 telcos where we don't have presence in the radio networks today, we've got presence across most of the rest of the portfolio. So they're important customers for us.

But right now, our focus is delivering for the customers that are partnering with us innovating, and you see that, obviously, with the announcement on AI-RAN and making sure we're pivoting the business for the future. And I think there's tremendous opportunity for us ahead. And I think Simon touched on one, obviously, with his question earlier in Europe. I think there's the potential with high-risk vendors for growth vector. Obviously, this is another place where there's potential.

What I can just say is from a -- if you think about hardware, the capacity constraints to be able to deliver hardware manufacturing, obviously, software resources to be able to go deliver capabilities. Those are areas where I feel really good when -- if and when the opportunities arise, that we'll be ready to support those for customers. But again, we can't run the business expecting those to happen. And that's the way I would think about it.

And then look, on IP networking, I think the first answer to your question is David happened, but I'll let David explain what he's doing about IP switching.

So again, I don't want to get into religious war on this, but routing is really, really difficult. And I'm not saying switching is easy. But I think the first instance is if you think about hyperscalers and their first applications and workloads is the workloads are now becoming way bigger and way more complicated. And the networks they operate are now becoming way bigger and way more complicated. And they have never -- they need diversity in their supplier base.

And so I think, one, we were not there early enough, like listening, co-collaborating. This is not do a binder of a spec and then go, as Raghav alluded to in the presentation, things have changed. This has put a bunch of engineers in a room and start working heavy, heavy on both network workload all the way down to the switch. So I think there was an absolute need first for the rock solid software I mentioned. And because we were able to pivot SR OS into SR Linux with some heavy listening, that rock-solid nature, people can take -- and the team that does that is just awesome. And so you can take our -- an alpha version of our software, and we found our customers like, holy hell, this is like we can't take an alpha version of our competitor software. So I think the bar is raising in terms of complexity and reliability on the software side.

And obviously, on the hardware side, they need rock-solid hardware. We have a history, not just of doing our own FP and FPcx chipsets. But on the edge of the network where you're using some of Broadcom's open chipsets and some others in the industry, we know how to integrate that, and that's what's given us the opportunity. And I mentioned to you that 18e, when you're talking about 0.5 petabit, there's not many people that can do that. And in the speed we did it is probably the thing I'm proudest of.

Yes. I mean, I think when I -- just to add to that, when I first came into the company, it's very apparent to me, this just wasn't a focus. I mean -- and by the way, it's hard to criticize, Nokia. If you look at the 3 players that were delivering telco class routing and 2 of the players that were doing enterprise networking, they largely missed the transition to cloud, right? That's why there's -- Arista has been so wildly successful. Nokia was one of those, just being very blunt about it, and it wasn't considered a strategic priority. And I think what we've reprioritized now is SR Linux as a critical OS, that's a differentiator, as David said, the discipline of being time to market with Broadcom silicon, which is very important for the industry, and we know that.

And so it's just getting focused on this is, hey, this is a market where the left edge of technology is getting developed. And then by the way, that doesn't mean we're not going to focus on telcos. We're very focused on that core customer base, as David highlighted, but you have to recognize the market transition. And the reality in switching is that started in cloud, and we missed that, and now we're getting back at it. And we think because of the pace of change in AI factories and what's happening within the data center, there's opportunities for us. And that's being reinforced by customers. But there's still -- there's a lot of strong competitors. There's a lot of incumbency. And that's also why, again, we're being measured about the progress that we're making.

Yes, I'd say, if you look like maybe even as soon as 5 or 6 years ago, if you missed a cycle with a telco or a mission-critical, you were out, you were in the penalty box for 6 years. The great thing about the hyperscalers, cloud majors and these folks building these AI factories is price performance, cost per bit, power per bit, reliability, look, there's insertion points all the time.

And I'll also add automation because especially in our switching portfolio, David was talking about SR Linux. What comes on top of it is our EDA tooling. Now especially when you're looking at switching. These are your leaf-spine switches, configurations can actually become very complex. So with the EDA tooling that we bring in, we're getting very positive feedback from customers.

We'll take our next question from Sami.

Sami Sarkamies, Danske Bank Markets. I have 2-part question related to recent NVIDIA Corporation. First part goes to David, who was excited about the number of things but didn't really mention NVIDIA in the presentation. How do you see the opportunity for network infrastructure? Are you able to size that opportunity together with NVIDIA?

And then second part to Justin. If we think about the implications to mobile networks, which will be included in the mobile infrastructure, how do you see the financial impact from NVIDIA Corporation? If you think about '26, '28 time frame, you probably need to hike investments, but we'll not yet see much revenues from those new products.

Yes, you want to take a minute. I mean, I think we've said most of what we're going to say on NI, but I don't know if you want to -- there's something else...

Yes, you just -- I mean, thank you. You've covered a weak point in my presentation. Hats off. I didn't mention NVIDIA, I didn't mention Nscale. I didn't mention Supermicro. They were 3 things I should have mentioned, just only so much time and my mouth gets running and my brain doesn't catch up. So partnering is key to what we do going forward. I think all of those are wonderful partnering opportunities. I see that impacting our road map in optical and IP going further and actually potentially even in FM. But it's too early to unpack that. I will say I'm excited about the opportunities those provide but would be reckless to put anything out there in the near term.

Yes. And then to your question on AI-RAN. I think we've been pretty clear on the revenue forecast, proof of concepts in '26, early deployments in '27, broad commercial deployment in '28. One of the -- one thing that maybe wasn't obvious in the presentation today is we're going to reallocate capital. And that means stopping doing certain things and investing in places where we see value. So I think as you think about radio networks, because remember, mobile networks is a slightly different portfolio. It included microwave. In radio networks, we see opportunities to reallocate capital. And one of those things that we're investing in is AI-RAN because we see it very strategic.

Also, we're not starting from 0. We've actually done a ton of the work to cloudify the anyRAN stack to do the initial trials with NVIDIA to validate this technology worked well before the announcement. So the development work for us is incremental, and we'll trade that off against lower priority opportunities. And the reality, again, in this business is when you look at the business, there's a lot of product investment that hasn't generated return. Ultimately, if you guys do the math on the return on investment in what was previously mobile networks and even if you can click into radio networks, what you'll see is the business hasn't generated its cost of capital. So we're going to be very disciplined about making investments that we believe can generate excess returns. This is one of those things.

And by the way, it turns out when you look at our biggest customers and the customers that we support and serve and those customers we don't have that we see as incremental opportunities, they largely give us the feedback and the road map on where we want to invest. Core, I think we did a better job of -- over the last few years of being able to deliver against those requests and the results speak for themselves. The reality in radio networks is we're executing that pivot aggressively now, and we have been for the last couple of quarters. But it's going to take a little bit of time to show up in its results.

And I think for the prior question on the U.S. operators, you don't just flip a switch overnight. It takes time to deploy into these networks and grow. But we -- I just -- I fundamentally believe where the market is headed. If you listen to Pallavi, we talk about this a lot. The things that are happening in the market, the devices that are being deployed, robotics, autonomous vehicles. I mean, I'll get back to this. I use this simple example for folks. Living in Helsinki, you've got -- we've got delivery robots today. You've got -- we're going to have autonomous vehicles because Finland is both connected and advanced. Autonomous vehicles, AR/VR glasses, all these things are coming.

What you're going to need is a performant network because the reality is while these devices are intelligent and autonomous, they can't be disconnected. There hasn't been a point where we've gone through technology where we determine we need less bandwidth and less connectivity. And then when you think about these devices, why in the world would you allow them to run on an untrusted network, untrusted radios, untrusted core networks, untrusted transport, simply not going to happen for many markets.

And then the third thing is when you have all of that, you need a network that performs because those devices can't be sitting there waiting for an extraction as Pallavi articulated in her presentation. So that change will happen. And I think we're in a position here much like we were in core 5 years ago to be a leader and drive a model shift and an innovation shift in the industry.

Well, I'll shake things up and go to the back. We'll go to Rob.

Yes. Just a quick question for David on the indium phosphide fab. I think when you announced the Infinera deal, that fab was quite lowly loaded, maybe only 35% loaded. But now you've announced a major expansion quite recently. Could you just talk about how fast that ramp is looking and how the utilization sits today?

And the second question would just be around for both sides of the business, just around potential supply constraints, whether it's memory or passives or there seems to be quite emerging tightness in a lot of key component areas. I'd love to get some clarity on that.

Yes. So I'll do a job of bridging the last question. So the one thing I didn't mention is when I was at Infinera, well, we've done some things with players like NVIDIA. The power of Nokia opened up a major partner door, which when you get inside that door and look at some of the quantities and the need, it makes me feel good about filling the utilization of the fab. So the great news is 2.5 years, we started that fab. It will qualify at the end of this year, and we'll be actually producing. We already have one existing fab that, let's just say the utilization is going up.

And I will just tell you that this components business, it was in green in my presentation, and I said don't put it in any number because it's way too early. I believe it was 283%, some crazy growth number. Look, the core capabilities in that fab and building high-power lasers, building arrays for co-packaged optics. That's where we came from. We invented the photonically integrated circuit. Our first PIC of like real, like the ICE-3 PIC was a -- if you think about it, it was a 12 by 100 arrayed solution. Well, if you think about what's taking power down, it's moving electrical lanes into an optical array.

So while the religious wars in the optical of what you hear will go, well, co-packaged optics or linear pluggable optics or you know what, we don't -- we've got both, and it's all off that same fab. So that will qualify. We've also -- again, when I said 25x capacity, it's 25x capacity. Some of those applications that we're talking about have much better yields. So I expect even a better view of that. But it's way too early. I'm encouraged by now the doors open at places like NVIDIA. And again, we're not going to probably report our fab utilization. Marco, doesn't want me to do that, nor would I.

No. I mean, I think the one thing to say is just in that, and I'll let you comment is we're going to be prudent on capital allocation. If we're investing in fab capacity, it's because we see demand.

Absolutely. No, absolutely. So extremely disciplined on securing that we get the returns. And in this field and this fab, we are very confident that this is a good investment. And also that it's a North American, it's U.S.-based fab, which is extremely big deal here now.

I'll take our next question from Artem.

Artem Beletski from SEB. I would like to ask on your #1 strategic priority, which is really to accelerate growth when it comes to AI and cloud. So this business represented 6% of revenues in Q3, where it could be by, let's say, 2028. You're talking about addressable market growth of 18%. David spoke about quite nice growth in terms of orders. Could you maybe comment on this topic?

Yes. As we said, Q3, 14% of NI, 6% of group. I think NI is probably the better metric because the reality is that's where the exposure is. If you do the math on them, kind of what we shared, we think that -- we think it could double, we think the business could be -- we think the non-telco business could be up to 40% of our overall NI mix. That includes mission-critical, but that's just at the rate that we're seeing the growth. I mean, obviously, if we see the market accelerate faster, we execute better than what we're assuming, obviously, that penetration becomes higher. I think our planning assumptions when you look at it are the telco is quite predictable in this period, right? So we've got -- that's largely fixed. So the real variable here is how much. And periodically, we'll give you an update on this number on the mix in NI to have a sense of how we're doing. So we'll do our best to give you a view of where we are.

And I think the other piece here, and David, unpacked a lot of this detail in the presentation is the business model is evolving, right? If you think about -- and he touched on this in his talk that we started in systems. We're now going to pluggables. You just touched on the fact that we could be in components if there's an opportunity and an opportunity as we go into a linear packaged or co-packaged optics. So the business model will change. The discipline for us is making sure that in each of those cases, we're generating -- we're delivering differentiation, we're generating a return.

And for me, that's the other thing that we're really looking at internally with Marco and David is making sure we're lined up to capture those opportunities. We're giving ourselves the flexibility to make sure we have the right business model because the miss here would be to be too attached to pluggables if components are an opportunity or too attached to systems if pluggables are an opportunity, right? We need to follow the market, leveraging the unique technology we have, and that's what we'll continue to do. And like I said, we'll update you as we make progress.

We'll take the next question from -- I can't -- Paulo, you can pick someone from down there. Maybe Andrew, I can't quite make out faces with the lights.

The mystery asker is Grant Lenehan, Appledore Research. For everyone's knowledge, I'm the square peg in this round hole. I'm an industry analyst, not a financial analyst. And I want to start with what's been going on in the industry. If you look at the telecom service providers and you look at how their spend every year is broken up, actual network capital is about 12% to 17% of the total. And the rest is operations. It's people, it's controllable expense. We also see service complexity rising, volumes going up, technological complexity, configuration complexity rising and you've made a real argument that you want to bring together businesses to provide differentiated capabilities and better technology.

Yes, what I didn't hear much about, though kudos to David for talking about Altiplano and NSP and all of those things and your talk about AI in the RAN. But didn't talk about how you were going to bring all of the software together to address that other 85% of the money and help your customers transform their business to make you successful. And I may be a bit of a software nerd, but I'm dying to hear about that either now or another time.

Well, maybe what we'll do is let Raghav and Pallavi talk a little bit about that. That was really what we touched on in the core networks space in the MI overview. But Raghav, maybe you can talk a little bit about what you're seeing and then really what we've been doing in this space because this is a problem we recognize. And then Pallavi, maybe you can add.

Yes. I think one -- when you go and speak to the customers themselves, I mean, you think about the things they talk about these days. These networks are getting extremely complex. And you just can't run them just by humans by themselves. You have 2G, 3G, 4G, 5G. These networks have become extremely complex from that perspective. And automation is one of the key things that the customers are now asking for. And automation is a very big word. So you -- and there's industry definitions of that by the TM Forum that you go from the L2 plus that the industry is at to L4 and then eventually into L5. So this is going to be a journey, but this is very clearly front and center of every customer in the telecommunications company that they're looking for. And this is where we are building the autonomous network fabric that will really allow the journey from where they are today that as you get into 6G, you're going to have these autonomous networks that are self-healing, self-provisioning, self-managed networks with a little bit of human augmentation of critical activities. So this is a very key area of our investment cycle in terms of what we're investing in, and this is a very key requirement.

The other area that's very, very specifically that they're looking for is making sure that the networks are secure because as you disaggregate getting into cloud-native capabilities, this disaggregation allows a great amount of automation, but it also opens up the fabric where you can have many more cyber attacks. So in this whole autonomous network piece, security is a very, very key part of how to make sure that you drive that into the fabric itself and into the architecture as you go forward. And that's another area we continue to invest heavily in. And in this particular area, we're also bringing the generative AI capabilities to be able to make sure that we can act as a copilot when these security incidents actually happen.

So this is very, very key, and I think you raised a great point. I think Justin covered it a little bit on the autonomous piece as well as Pallavi, but I'll let her add more comments to it.

Yes. I think 2 vectors to look at this. I mean, Raghav, you covered everything from an automation point of view. But when we are looking at autonomous networks, we are looking into not just how customers are managing their networks but right from the time when they start planning their networks, how do we go about and enable them to optimize the planning process, how do they go about and design, how do they go about and deploy, then when they have actually gone about and deployed the day-to-day. So I like to call it as a day minus 1, day 0, day 1 and then the day n. So those elements are what we will actually -- you're very focused on looking into how we bring in the autonomous network layer.

The second point that I'll say is every customer, every operator is in a very different stage of automation. This is what Raghav was talking about, the TM Forum having definition of L2, L3, L4. And the way we are building up this automation is through APIs. So depending on which stage the customer is in their journey of automation, they can plug in into what we are providing.

Maybe 1 last comment I'll make on this, and then we -- just to move on, so we leave time for a couple more. The last comment I'll make on this is in MI. The -- if you think about that business, core and radio, we were investing in these things in parallel. And we brought them together, Raghav led some of the -- or led this effort with a couple of key customers to start bringing them together because we recognize and our customers recognize that we can't just build an autonomous layer for one part of the network. It needs to be across the entire network. Now I think that will extend into fixed because obviously, as you think about transport and backhaul, there's opportunities. But we see that linkage, and we're going to be very customer-driven in this space because the risk here is we start building capabilities that our customers don't want.

And so the key thing here is building it with a fabric and a platform, as Raghav touched on, thinking end-to-end from the device to the -- obviously, to the network edge, which we -- the access network edge, which we manage and then all the way back through to the host. And that view for us is really where we're taking this. Particularly in MI, it means bringing these resources together. That's already really started ahead of the announcement because it's just logical. You can't deliver a network slice or intent-based networking in the core if it doesn't actually go and deploy to the radio. And ultimately, you need to be -- some of the things, Pallavi, was talking about with dynamic traffic patterns, you need to be reallocating the RF in the area to make sure that you have the bandwidth available to deliver the experience or if it's an encrypted service, making sure that's following as the device is moving. So there's a lot more complexity here.

The last thing I'll say here is this is fundamentally a multi-vendor environment. We recognize that the work we're doing in this space is multi-vendor. That's why APIs are important. It's also why extensibility matters because you can't assume that I'm going to have one technology provider in 100% of the network, you need to design for diversity.

It's Tim Savageaux at Northland. Since you guys reported, which seems like a long time ago, given all that's happened, we've seen a lot of indications across especially the supply chain and optical of a pretty dramatic uptick in demand, kind of a step function in real time, a lot inside the data center, but also a lot outside. David, given your comments on the order strength, I wonder if you can provide any color on how that's continuing into Q4 or a general sense of the momentum you may be seeing there? I have a follow up.

Yes, I just -- you want to talk about orders or supply chain? Orders...

Orders.

Okay. You can talk about orders...

Yes. So obviously, I don't want to provide any update to any guidance, and we don't guide orders. But let me refer back to something I said, Tim, and I know you know this, in terms of -- in the traditional days, if you're shipping subsea, maybe it's 10,000 transponders a year, right? I think what's being realized now is as you're getting into these AI giga factories and you look at kind of Metcalfe's Law, the number of just ports you have to connect. When I talk about moving from 10,000 in subsea to 5 million in a GPU ecosystem interconnecting GPUs, people are getting nervous. They're looking for high-power lasers down the road map for CPO.

So what I would tell you is people are looking to secure design partners for the future. Now what I love about that is it's not a binder and an RFP process and then I wait because we can kind of see things coming as we get design wins, then we can start to say, great, here's the business in front of you. But yes, look, I've seen pieces written, I heard things from clients that say we're worried about the tightness in the optical component market around the ability to get enough lasers to be able to make what's going to be required in this next cycle of build.

And just to follow up briefly. On the MI side, it looks like the plan or the aspiration is to grow from EUR 1.5 billion, but the guidance seems kind of flat. And that's one of several areas that seem conservative, whether it's service provider down in network infrastructure, fixed down, and I know you're being more selective there. But am I looking at that right? And to what extent are we looking at a baseline outlook here versus an aspirational outlook? And that's it for me.

Yes. Look, I think clearly, we've got to focus on where we see opportunities in the market. You're making a lot of changes. If you think about the changes from the time that I came in, this is a pretty dramatic shift for the company. The other thing we have to acknowledge is historically, this is not a company that has delivered predictable results. And a lot of one-offs in earnings, good and bad and a lot of inconsistency. And while I'm pleased with the start of the operational rigor and the forward visibility that we're seeing, and I'm pleased with where we're going, I think we have a much better handle on the business as a team than we did when I started.

I also recognize that we're a couple of quarters into this journey and these things don't change overnight. So I think we're being prudent in the guidance based on what we see. David tempered -- he talked to you about why we've tempered the growth forecast because we're starting with such a heavy mix of telcos in NI. We also recognize we're going to go through some portfolio transition in MI, particularly around radio networks, and we want to be disciplined.

But obviously, we feel like this is prudent. We think it's a great platform from an investment perspective. I'll talk a little bit about that at the end. But we also think it's prudent. And what I want to see, and I've talked about this a little bit in earnings and certainly in other forums, I want to see us be predictable and stable in terms of execution. And that for me is important because I think that's a part of -- an important part of investing in us and seeing us as a valuable option of where to put your capital.

I think we'll go to Andrew.

Andrew Gardiner from Citi. Another one on fixed. If I look at how you described the addressable market growing, yes, less than switching and optical, but still it was a high single-digit growth number. If I sort of back out the fixed assumption within your guidance between the 6% to 8% for NI and the 10% to 12% optical and IP, you get to sort of down mid-single digits. So there's a big delta when you compound that over 3 years. You've talked about sort of pruning and being a bit more selective, but it seems a much bigger step in terms of the seeding of market -- sort of choice to seed market share there. Just how bad was the problem within fixed in terms of taking low-margin business previously that you've got to make such a big step in terms of seeding market share in that division?

Yes. Look, I think we have a very healthy market share in OLT. And as David said, right, this fixed was kind of used as the way to find marginal profit to offset some of the other businesses and sometimes define top line. So we're going to be disciplined about it. We have a very strong portfolio, but we also need that business to go through a portfolio transition.

A great example is just look at the impact of the business. If you look at -- and you'll see it in the numbers, if you look at fixed when you back out FWA and SIOP, you see some of that. So I think we're giving ourselves a balanced view to be able to go grow in the core business. Ultimately, I think this is a very good market for us. We're a clear leader. We're investing in this space. We have differentiated technology in Quillion. However, some of the revenue there we've had is what I would call low-calorie revenue, and we just need to be disciplined about it.

I think we'll take our last question from Emil.

Emil Immonen from DNB Carnegie. Maybe one last on mobile infrastructure. Could you elaborate maybe the long-term thinking because I think Pallavi described pretty well that kind of the network requirements are changing. So is the target of having this almost flat in the next 3 years just because we're in the middle of the 5G transition. So then the growth comes when we go to 6G?

Do you want to make a comment, at least on...

Yes. So the way we are seeing it and especially the AI-RAN portfolio that we have, it is going to be 5G ready. And then for us, 6G is just a software upgrade. The way we look into it is like some of our leading operators are the ones who are actually going to take up the AI-RAN and that's where we are actually co-creating with them. And then the rest of the industry is actually going to go about and latch on because that's -- as you go about and develop this, and we were talking about it, this is where we start creating value for the operators. Those values can come in into simple examples of node slicing, for example, right? How you can take care of different customers, different segments in a different way, how you can actually bring in all these better user experiences, whether it is in terms of connected cars, AR/VRs and all of that stuff.

Yes. I'd add 2 things, Emil. Just in terms of thinking about the business, you have 2 things happening at once. One, there's parts of the portfolio, parts of the services portfolio, product portfolio where the businesses don't generate a return, and we're just putting simple discipline around the business, right? And that's what we touched on. So that puts a headwind on growth, right? That's one element.

The other. If you think about what we're doing, we're basically going through a hardware-centric transition to a software-driven business model. And I touched on this a little bit in my comments, but storage is probably a good analogy to think about as another technology segment that went through this or core networks is obviously a very close one for us. But as you think about that, what you have is the hardware commoditizes. So you see top line pressure on the hardware because you're not going to -- you're not trying to pack value into the hardware. And then the software goes from being a -- either embedded in the hardware or a term license depending on the model with the customer and the model to being a subscription recurring revenue model. And so that means that it's recognized ratably.

So those things put some pressure on the top line of the business and a little bit on profit, obviously, because you're making that transition. So that's why we're being prudent and disciplined. And that's why when I said the comment I made before, if you just think about the core business and Patrik's business, you have a very stable profit base, and that's what allows us to make this transition.

But ultimately, again, if you look at this industry and you look at the 2 big Western players after all of the consolidations, it's -- this hasn't been the most attractive investment. And I believe we're going to go through an interesting cycle. Now is the time to change the model. When I look at what's happened with core, I think the opportunity is to do something very similar in radio. Also, I just -- everything Pallavi's shared technically, the market will need it because if we just deliver the same radio networks with faster bandwidth, this won't actually work for the market that we're in. It won't work to bring industrial AI and physical AI into the world.

So I think it's a -- I'm sure it's challenging to see the -- kind of see the logic and the math, but we actually feel like we've got a lot of opportunity here. We've done -- as I said, we've gotten started on this for some time. Now it's just about focusing and executing and seeing that trajectory.

The last thing I'll say is remember that the early deployments of AI-RAN are a hardware upgrade, right? 1 million units of AirScale units, 1 million units of AirScale deployed in the market, that installed base is the first place we anticipate upgrades. And so -- and T-Mobile talked about that in the announcement we did with NVIDIA. So again, that's not a huge -- the big revenue sweeps come from the radio. If we're upgrading to 6G -- or sorry, 5G AI native to 6G with just an upgrade to the baseband hardware, a slide in the baseband hardware, that's also a lower revenue performance because most of the top line really comes when you deploy a large radio network. So it's a little bit to unpack, and we'll look to continue to talk to you about this and explain it as clearly as we can as we go through it because obviously, it's important.

And no one asked questions of Patrik, but I think hopefully, you got a good picture today of the fact that he's got a portfolio and a revenue stream that's incredibly stable. We're investing for the future. That gives us a strong base, but when I think about the comps in his market, he's a significantly larger and compelling business. And I think that positions us well with the cash flow and the stable profit to make this transition.

Long term.

Always important to have an ATM.

And longevity is extremely important. And I hope that Patrik could convince you as well that this is not some business that is just in a good level now and then it's going down. This is something we continuously continue investing to new standards, new innovations to secure that we create that cash flow and profits.

Thank you, Justin, and all the presenters, and thank you all for joining us. I think I'll hand back to Justin just for a couple of concluding remarks.

Yes, yes, yes. Look, first of all, thank you for taking the time to be with us today. As I touched on, and there was a question in the room, I thought it was a good one. So I'll just -- I'll reanswer it again, which is all of this opportunity, fairly conservative forecast. It's a balanced forecast. Again, this is -- Nokia is a company that has not consistently executed. And in some cases, we haven't consistently delivered a compelling return on investment. That's a part of the journey of what we're changing.

What I'll also share is this is more than just the GLT you saw up here today. This is the set of leaders. In fact, over half of our employees contributed their feedback and input to our vision and strategy and where they want to see us differentiate. Over those half, they all talked about the core of being an innovative company, partnering better with our customers and empowering our team to lead by connecting intelligence. I think we have a clear North Star for the company now. We have 5 key strategic priorities that are informing our decisions. And I think we have a reasonable platform, which will deliver both top line growth and ultimately, midterm profit expansion, targeting double-digit operating profit CAGR through 2028.

In addition, I think that -- this time period over this 3 years sets us up to being a far more profitable and far more compelling growth story down the road as the markets we're in, both continue to grow in the case of NI and return to growth in the case of MI.

Thank you, and we look forward to seeing you soon.

Hello, ladies and gentlemen. Welcome to this call to discuss the investment and strategic partnership that was announced today between Nokia and NVIDIA.

On the call with me today, we have 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 forward-looking statements that include risks and uncertainties, and 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 on the Risk Factors section of our annual report on Form 20-F, which is available on our Investor Relations website, along with the stock exchange release that we published today.

In terms of the agenda for today, Justin and Marco will go through the key messages from the announcement, and then we'll move to a Q&A session.

With that, let me hand over to Justin.

Thank you, David, and thank you all for joining us. Today, we announced a strategic partnership with NVIDIA to accelerate the development of AI native networks. NVIDIA will also invest USD 1 billion in Nokia, becoming one of our largest shareholders. This partnership marks a turning point for our industry, particularly in telecommunications because the next leap in telecommunications isn't just about 5G to 6G. It's about a fundamental redesign of network architecture.

Let me provide some context. We are at the outset of the AI super cycle, and AI traffic is growing exponentially. In fact, if we just look at ChatGPT, nearly half of their over 800 million weekly users access the service via mobile devices. That means networks are already carrying AI workloads, workloads that are more variable, more uplink intensive, that's the connection from the device to the network and more computationally demanding than ever before.

The networks of the future must process intelligence, not just move data. That's exactly what AI-RAN will deliver. By unifying AI and radio access workloads on a software-defined accelerated computing-based infrastructure, we will boost performance, efficiency and reduce energy consumption while creating a smooth and cost-effective path to 6G.

Together, we are accelerating AI-RAN innovation and paving the way to AI-native 6G by combining Nokia's leadership in mobile and network infrastructure with NVIDIA's expertise in accelerated computing and full stack AI.

To put it simply, the shift we are leading together is from connecting people to connecting intelligence. If the smartphone put the Internet in everyone's pocket, Nokia and NVIDIA will put an AI data center there and into autonomous vehicles, robots, smart glasses and across the intelligent connected world.

The partnership will enable our anyRAN software to be AI-centric, integrating NVIDIA's ARC-Pro platform into our AirScale baseband hardware and into Dell PowerEdge servers. While also expanding collaboration between the companies on AI networking for the data center. AI-RAN will be first available for 5G networks, and we believe this partnership will ensure that we collectively have a leadership position for 6G. In short, it strengthens our ability to deliver networks that learn, evolve and continuously improve, building networks for AI and deploying AI for networks.

T-Mobile U.S. will be one of the first to collaborate with us to drive and test AI-RAN technologies as a part of their innovation and development process as they look ahead to ensure America leads in 6G. Trials are expected to begin in 2026, focused on field validation of performance and efficiency gains for customers. Dell Technologies is driving innovation in Nokia's AI-RAN solution with its state-of-the-art PowerEdge servers, enabling Cloud RAN and delivering scalable no-touch evolution from 5G to 5G advanced and 6G.

Together with NVIDIA, we're taking the next leap in telecom and building AI-powered connectivity that extends from the data center all the way to the intelligent device. This is the beginning of the AI native wireless era. And Nokia, together with NVIDIA, Dell and T-Mobile, is proud to lead it.

With that, let me hand over to Marco to briefly comment on the investments.

Thank you, Justin, and hello from my side as well. We have entered into an agreement with NVIDIA that will see them make a $1 billion equity investment in Nokia at an effective purchase price of $6.01 per share, which is equivalent to EUR 5.16 per share. This means that NVIDIA will own about 2.9% of Nokia.

We intend to use the proceeds from the investment to accelerate Nokia's strategic plans to advance trusted connectivity for the AI super cycle, along with other general corporate purposes.

With that, let me hand the call back to David for the Q&A session.

Thank you, Justin and Marco. We will now begin the Q&A session. We would ask you to kindly limit yourself to one question. And we would ask that you keep your questions focused on the announcement that we've made today. Operator, can you please give the instructions and start the Q&A session.

[Operator Instructions] The first question today comes from Jakob Bluestone with BNP.

Congratulations on the deal. I had a question around the exclusivity of the deal. Is this an exclusive partnership? Or can NVIDIA sign similar transactions with the likes of Ericsson?

Sure. Thank you, Jacob. It's not an exclusive partnership. It's -- and in fact, I think that's part of what is important because I think the best partnerships are where we co-innovate and collaborate, but it does not become something where there is a view that we're beholden to each other because of restrictive covenants.

And I think if you look at most of the partnerships that are successful in technology, there because there's mutually aligned interest, shared opportunity in the market, complementary technology and a shared mindset of innovation, and that's what we have in this partnership today.

The next question comes from Janardan Menon with Jefferies.

I just was wondering whether you could flesh out the comment you're making about NVIDIA incorporating Nokia's data center switching and optical technologies in its future AI infrastructure architecture. Just wondering in what shape and form that can happen? Is that an architecture which has already been announced and defined? Or is that something that's to come in the future? Any color you could give there would be great.

Yes. There was nothing we shared in terms of specifics other than just continued collaboration.

The next question comes from Simon Leopold with Raymond James.

Presumably, NVIDIA would like to see Nokia invest the $1 billion in technology. So I'm wondering how we should think about the implications on Nokia's operating expenses, as well as wondering if this would essentially create a disincentive for Nokia to continue to buy back its own stock, essentially putting a preference towards R&D or other investments.

Yes. Basically, as we shared, we expect to use the proceeds to accelerate our strategic plans to advance trusted connectivity and other general corporate purposes. I think that was the specific language. I'll let Marco comment in here in a second as well if he's anything to add.

But philosophically, we're going to set out -- as we go to CMD, we'll set out a view on the long-term trajectory of the business. and certainly what we expect from an operating -- a financial model for the business. So, on that side, I think what you should anticipate is there's nothing about this that is implying we're going to shift to the organic investment profile outside of what we're already planning to do.

Where I do see opportunity is obviously to continue to invest where I think it's prudent in capital that I think accelerates the return for our shareholders. And that will continue to be the discipline in the North Star, which Marco and I use in line with the capital allocation framework we have.

Marco, do you want to provide any additional comments there?

Yes, I can just give you the capital allocation framework. So we've been very clear on that we have different steps and priorities on that. And the first priority is always organic investments where we believe that we can create more value for the shareholders. The second is selective and bolt-on M&A opportunities where we see those arising. And the third one is then dividend, which we believe should be stable and over time growing. And then the fourth is that whenever we cannot find investments in these three first mentioned areas, then we might consider in the cases where we believe that we have excess cash that we could do buybacks, just like we have done in the past as well, and you've seen that as well.

The next question comes from Sandeep Deshpande with JPMorgan.

Could I -- I try to understand what AI for RAN, RAN or AI on RAN actually will involve in terms of Nokia making changes to its mobile equipment? And how -- I mean, in terms of monetization, are you saying that this will happen in 2027 in terms of monetization of this AI, AI-RAN?

Yes. Absolutely, Sandeep. If you think about our stack today, today, we have a solution called AirScale. What we don't always talk about is AirScale is really two things. It's a hardware platform and a software stack that sits on top of it. We call that software stack anyRAN. With this announcement, we'll be making anyRAN AI native. And that means a few things. So, first of all, it means that we will run on an accelerated computing platform, the NVIDIA ARC-Pro platform that they've announced today. And that will provide an alternative for customers. We believe that, that's a compelling alternative because we can now use AI to drive performance improvements, spectral efficiency gains potentially and create new applications and opportunities leveraging AI.

In addition, that stack over time can become completely AI native. Today, it's largely deterministic in terms of its architecture. This will allow it to use AI in multiple layers in the stack. And that's what we believe is the power of this partnership.

The other key thing for us is this means that we can start to deliver more value in software because now our customers don't have to take -- necessarily take hardware upgrades or work through a process like they've traditionally had to when we were in the -- in an appliance business model, which, of course, is the legacy of all network providers. Now we have a software -- more of a software-driven model.

And of course, the other benefit we get is we get to ride NVIDIA's product and performance cycle. So we start with Blackwell, we go to Rubin, we continue on. And that cycle, we believe, is also virtuous because now we're on a more accelerated platform. So this gives us a lot of flexibility.

And we think for customers, it gives them benefit because now we're talking about a purpose-built hardware. Jensen talked about this as being a new market they're entering into with a new platform. And that -- we also see that similarly that this is a new platform that they can then deploy.

The next question comes from Richard A. Kramer with Arete Research.

Justin, following on from my question on the earnings call about end-to-end versus discrete products. How closely do you intend to align Nokia's go-to-market with NVIDIA's given that they have deep relationships with all the hyperscalers that you're targeting as customers? And do you envision NVIDIA is going to become a channel for Nokia to win larger deals?

Yes. Look, I mean, I think the focus of this right now, and obviously, a lot of the discussion today is around mobile networks. And certainly, there's opportunity for collaboration and partnership. And that's again why, as I said in the comments I made about the structure of the partnership, when you have a shared vision for the future of networks and you have a complementary set of technology stacks, it's quite easy to partner. And so that collaboration, I fully anticipate will show up in customers.

And in fact, you see that in one customer today in the announcement that T-Mobile U.S. who has supported this announcement. So we see this as a very complementary relationship in terms of go-to-market.

On the data center side, I won't comment because, obviously, the focus of the announcement today was really around the mobile network.

The next question comes from Didier Scemama with Bank of America.

I just wanted to understand one thing. I can totally see why it's great for NVIDIA. Are you suggesting that by sort of modernizing telco networks using their GPUs, there's going to be a more -- a quicker upgrade cycle or replacement cycle of base station. Is that the idea?

And then related to that, are you going to use the proceeds primarily to buy NVIDIA GPUs?

Yes. So I think we were clear on the proceeds, and I didn't comment on buying NVIDIA GPUs. So that's -- I understand that there's other deals they've announced like that. That's not the structure or construct of this deal. I think I was clear before on the use of proceeds as was Marco.

Regarding the upgrade cycle, I think it's a bit of a different model that emerges, and it's more in line with what we see on cloud and what we see certainly in AI, which is we will continue to be able to improve the software, the application, which is the AI -- the anyRAN for AI application stack. And therefore, that -- the continued enhancements in performance will happen. It will be for the operator's choice to determine when they want to upgrade the hardware and what features they want to take advantage of.

But a key thing here as we look ahead to 6G is if you think about the networks of today, largely what we're doing is treating every device consistently. There's a little bit around network slicing, applications for public safety or other priority services. But largely, we assume every device is some variant of a mobile phone. In the future, with all these intelligent connected autonomous devices and these different use cases and applications, we can't just treat the devices as homogenous. And that means we need to think about the network differently.

And of course, as I touched on in my comments, the traffic patterns are different. It's no longer just streaming content or streaming rich media down to a device that's the driver of bandwidth. It's now about integrating location services, upload speeds, uplink performance and of course, trust, security, availability and transparency because for some of these devices, the connectivity is going to be essential for them to carry out their link, and that's very important.

The next question comes from Robert Sanders with Deutsche Bank.

I mean we met your main competitor at MWC. They mentioned that AI-RAN can lead to instability, complexity, higher cost. So what gives you the confidence that AI-RAN is actually ready for prime time? And are you proposing that basically the baseband is now virtual? Or is there a future for hardware baseband development?

Yes. I mean I can't comment on what competitors will say. Our experience is that accelerated computing provides incredibly reliable and stable performance. And certainly, the testing and the development work we've been doing today at GTC here in Washington, D.C., we're showing actually a layer 3 call for those of you that are more technical. We're actually showing a layer 3 call happening over this stack that we've developed with a prototype from NVIDIA. And so we're quite confident of its capabilities.

And then I think, again, if you talk a little bit about vRAN or traditionally Cloud RAN, of course, AI-RAN builds on that, right, this virtualization stack. And that's why we felt it was important to both talk about the support -- the continuity of support we provide for the AirScale platform so that every existing installed AirScale has an upgrade path with the NVIDIA ARC-Pro and the option if customers want to go to a more common off-the-shelf server, we've got a robust solution from Dell with PowerEdge. And we think both of those are options depending on the customer and the profile.

And look, I think, again, as I've said, it's easy to look backwards, but we need to recognize that as an industry, we need to be innovating and looking forward because the applications of tomorrow are very different than the applications that we've been delivering to date.

The next question comes from Felix Henriksson with Nordea.

Congrats on the deal. I wanted to ask where does this transaction sort of stack Nokia in terms of being a preferred data center switching and optical networking partner for NVIDIA in terms of the pecking order, given that some of your networking equipment vendor peers also have partnerships with NVIDIA?

Yes. And as I said, we just talked about we're going to continue to expand our collaboration on AI networking for the data center. So no further comments today on that specifically.

The next question comes from Tim Savageaux with Northland Capital Markets.

Congratulations on the deal. And by the sound of this call, I guess, plenty of room for sentiment to improve here. But I too had a network infrastructure question. But you mentioned just in the previous answer, continuing to expand on your collaboration on AI infrastructure. In that context, can you talk about the nature of that current or past collaboration on the infrastructure side? And maybe in a broader sense, how long this deal has been in the works?

Yes. I think a couple of things. Obviously, we've been working with -- what I will share is we've been working with NVIDIA for some time. Obviously, you saw the AI-RAN Alliance announcement last year that we were a part of. So there's been an active partnership. As I came in and looked at our -- looked at the market, looked at the opportunity, I felt this was an important decision point for us in terms of investing for 6G leadership. And so from my standpoint, this was an opportunity for us to really lead. And I think we also have to remember, we were just talking earlier about one competitor, but the competition here is about global technology leadership.

And as I've said before, and I've certainly said multiple times publicly, including today, I think winning in technology in the West means doing what you're best at and partnering like crazy for the parts that others are best at and partnering for best-in-breed. And there's no question in my mind, NVIDIA is the market leader in accelerated computing. And so as we looked at options to build future AI-ready and AI-native networks in the future in mobile networks that they were the obvious partner.

And then on the data center side, look, I would say we're not disclosing any details, but we work -- we work closely with NVIDIA. They're a great partner. You saw that we jointly invested in Nscale, which we announced last quarter. And I think I realize we're leaving you to piece things together a little bit, but that's certainly a part of our portfolio we're very pleased with, and we continue to see growth, and we're pleased to support partnerships in that area and continue to build on the broader relationship with NVIDIA.

The next question comes from Terence Tsui with Morgan Stanley.

I just wanted to explore a bit more around the financial opportunity and whether you think the announcements today generally changed a generally cited view by industry consultancies of a flattish total RAN market up to the end of the decade, i.e., are we about to see a big boom in AI-RAN to more than offset a decline in non-AI-RAN? Or is the opportunity more about Nokia potentially winning more market share?

Yes. Look, I mean, I think it's probably best to ask the analysts on their perspectives on the market. I think this is a market that needs innovation. It's going to be necessary to have innovation. And in fact, if you look at 5G and where innovation has happened in 5G here in the U.S., certainly, T-Mobile, our largest customer here, this is a company that has invested in their network, invested in 5G leadership, invested in technology leadership and their performance in terms of every metric, subscriber growth, profitability, market cap, the results speak for themselves.

From my standpoint, there's parts of the industry certainly that haven't invested in 5G leadership. And I think those results speak for themselves. again, as we look ahead, I think it's quite easy to look at where we are today and not realize what a tremendous shift is going to happen. As Jensen said, these things can't happen on WiFi, autonomous vehicles, robotics, AR/VR glasses that are just -- that are with us as we go through our daily lives.

All of these applications and use cases need AI-ready networks. And that's why I believe that these investments position us and this partnership positions us for significant success to capitalize on that. And by the way, I think it's important for the West. I think it's important for Europe. I think it's important for the U.S. because this kind of innovation in networks is something that has been lacking and just being very objective against our competitors in China.

Next question comes from Emil Immonen with DNB Carnegie.

I still want to push a little bit on the network side and on data center switching. Could you elaborate a little bit as you mentioned in the announcement that expert running Nokia SR Linux software on the NVIDIA Spectrum-X platform. So is that something that is already being done today? Or is this something that you're developing right now?

Yes. We haven't talked about that at all in terms of this announcement. What we did announce in earnings was that we're running SR Linux on Supermicro's platforms.

And look, I think this is an ecosystem, again, back to the principle I touched on earlier, where we have believe we have great technology, robust technology with broad customer adoption in the SR Linux platform. We believe there's differentiation there, and we'll continue to look for partners where we can leverage that innovation and differentiation.

The next question comes from Fredrik Lithell with Handelsbanken.

My question is really around the timing. And if you could sort of describe a little bit more how we should see this in time. You say you will sort of accelerate your investments with the USD 1 billion -- is this a 4- to 5-year plan before we see actual results? Or do you intend to have something earlier than that? So some elaboration on that would be interesting.

Yes, absolutely. I think what we shared and what we've talked about is that we will -- we're demonstrating some early functionality at the show today. We anticipate having field trials in early 2026 in the first half of 2026. And then, of course, in -- we said by late '27, we expect to be in commercial production. Of course, that will be 5G based, but we believe that's reasonable for the AI-RAN, AI-RAN solution that we announced today, both our anyRAN software and NVIDIA's ARC-Pro hardware.

This concludes our question-and-answer session. I would now like to turn the conference back over to Mr. David Mulholland for closing remarks.

Thank you, Betsy. Ladies and gentlemen, this concludes today's call. I would like to remind you that during the call today, we have made a number of forward-looking statements that involve risks and uncertainties. Actual results may, therefore, differ materially from the results currently expected. Factors that could cause such differences can be both external as well as internal operating factors. We have identified such risks in the Risk Factors section of our annual report on Form 20-F, which is available on our Investor Relations website. Thank you all.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good morning, ladies and gentlemen. Welcome to Nokia's Third Quarter 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 Wiren, 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 Factors 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 Q3 report and the presentation that accompanies this call are published on our website. The report includes both reported and comparable financial results under reconciliation between the 2.

In terms of the agenda for today, we will go -- Justin will go through our key messages from the quarter, and then, Marco will go through our financial performance. We'll then move to Q&A.

With that, let me hand over to Justin.

Thank you, David. Overall, we delivered a solid performance in the third quarter, in line with our expectations. We grew net sales by 9% with all business groups growing. Order intake was again strong, particularly in optical networks and IP networks driven by AI and cloud customers. Our profitability in the quarter was as expected. Network Infrastructure gross margin improved sequentially, that was impacted slightly by product mix. Cloud and Network Services had a strong gross margin in the quarter. Product mix impacted the gross margin of Mobile Networks with a lower mix of software revenue.

Our operating margin declined year-on-year due to a one-time benefit seen in the prior year from a loss provision reversal. Without which, our operating margin would have been flat. The broader demand environment remains healthy as we move into the fourth quarter. We have seen some improvements in CSP expectations along with the strong order intake I mentioned in AI and cloud. In fact, entering the fourth quarter, our backlog coverage is stronger than in recent years.

We're also pleased with our progress on the Infinera acquisition. We are ahead of schedule with the integration timeline and with synergy expectations. The acquired business contributed strongly through both our net sales growth and order intake growth in Q3.

So after a solid Q3 and continued strong order intake, we are well on track to achieve our full-year outlook. We expect the fourth quarter with net sales growing sequentially and slightly above our historical seasonality of 22%. We are currently tracking towards the midpoint of our operating profit outlook range.

Let me now share a few highlights across the business from the third quarter. For our network infrastructure business, the key highlight has been our progress in the AI and cloud customer segment. In Q3, this segment accounted for 6% of our group net sales. Breaking it down, it was 14% of our network infrastructure business, and more specifically, 29% of optical networks.

In Optical, as mentioned, our 800-gig ZR/ZR+ coherent pluggables became available in the quarter and shipped to our first hyperscale customer. Our pipeline in this space is growing as customer investments accelerate and data center architectures evolve.

Q3 also saw us announce strategic partnerships with both Nscale and Supermicro. With Nscale, we are now a preferred partner for advanced networking technologies across our NI portfolio. Supermicro is adopting our SR Linux network operating system for their 800-gig Ethernet switches, providing expanded footprint for our network operating system. Finally, we secured 2 new design wins for our switching platform in the quarter with hyperscalers.

The market is growing rapidly. And while I'm pleased with these initial signs of progress in IP networks, clearly, we still have a lot of work ahead of us. In our fixed network business, we launched our new 50-gig PON offering. With our unique solution built on our Quillion chipset, operators can easily evolve from GPON to XGS 25-gig and 50-gig PON on the same fiber.

Ready with encryption for the post-quantum era, Nokia solution also provides enterprises with the bandwidth, security and reliability they require. Customers like Frontier Communications in the United States are already using our unique PON technology to seamlessly introduce 25-gig PON.

Now, I want to turn to our mobile businesses, starting with Cloud and Network Services. The team has delivered strong network -- net sales growth and operating profit growth, as it continues to focus on autonomous cloud native architectures. In Voice Core, we became the market share leader in the first half of 2025, as reported by Dell'Oro. Approximately 70% of 5G stand-alone core network deployments outside China use a portion of Nokia's 5G core stack. And network penetration is still less than 30% for 5G stand-alone core.

In Mobile Networks, we continue to see the market stabilize. We recently announced a deal with Vodafone Three that will see us enter their new combined network in the U.K. as a major RAN supplier with approximately 7,000 sites. We are focused on improving the returns in the business over time, delivering for our customers and differentiating through innovation.

In Nokia Technologies, we secured several new agreements in the quarter. The team continues to be disciplined on productivity and operating leverage. While we are now entering the heightened investment phase for 6G standardization, we continue to see stability in our annual operating profit.

In Q3, we completed a strategic review of our venture fund investments. We have decided to scale down our passive venture fund investments. Over time, we will substantially reduce the capital deployed in these areas. As a result, our venture fund investments are now reported within financial income and expenses. Going forward, we will consider targeted direct minority investments in companies that help us to accelerate our strategy. An example is the investment we made in Nscale alongside the strategic partnership that I referred to earlier.

Because of this change, we are making a technical change to our operating profit guidance, increasing it by EUR 0.1 billion, which is related to the negative impact the venture funds had on our operating profit in the first half. However, operationally, our guidance is unchanged. After a solid Q3 and with recent order trends, we are well on track to achieve our full-year outlook for operating profit.

As I mentioned before, we expect fourth quarter net sales to grow sequentially at slightly above our historical seasonality of 22%. And we are tracking towards the midpoint of our operating profit range of EUR 1.7 billion to EUR 2.2 billion.

At our Capital Markets Day in New York on November 19, we will share our strategy to unlock the full potential of our portfolio and the steps we are taking to focus the company to deliver ongoing growth and operating leverage. The AI supercycle is accelerating demand for providers of advanced and trusted connectivity. Nokia is uniquely positioned to be a leader in this market.

With that, let me hand it over to Marco to discuss our financial performance.

Thanks, Justin, and hello from my side as well. In quarter 3, we saw net sales increase by 9%, and we are pleased to see growth across all our business groups. Gross margin for the group declined 150 basis points year-on-year, and this was largely as we have expected. And this is because of the product mix within both network infrastructure and mobile networks. Operating margin was 9%, 220 basis points below the prior year, although this was mainly due to a one-time impact from the reversal of loss allowance for trade receivables in the prior year. Without this, the operating profit -- operating margin would have been flat year-on-year. And we generated EUR 429 million of free cash flow and ended the quarter with EUR 3 billion of net cash.

I would like to update you on our cost savings program, which we introduced in 2023. We expect to get about EUR 450 million savings in 2025. And going forward, we will focus on delivering operational leverage through continuous productivity improvement, IT simplification, digital instrumentation and organizational efficiency rather than using large restructuring programs. Ultimately, this means a cultural shift towards consistent cost discipline and efficiency to help us deliver our strategic calls.

Turning to business groups now, starting with Network Infrastructure, which had another strong quarter with 11% growth. Optical Networks was the standout performer with 19% sales growth and continued to see strong order trends with book-to-bill well above 1. IP Networks also saw a strong growth in orders in the quarter as we start to see an increased traction with AI and cloud, as Justin mentioned.

IP Networks sales grew 4% and fixed networks grew 8% in the quarter. Gross margin was impacted by product mix and declined 190 basis points, although it did increase from the level we had in quarter 2. Operating margin declined because of lower gross margin along with the increased investments in R&D and the acquisition of Infinera. In the quarter, we see -- did see a small positive contribution to operating profit from Infinera, as we start to see some initial benefit from synergies, along with the growth in the business.

Cloud and Network Services sales grew by 13% in the quarter, as we continue to see strong demand for our cloud-based core platforms. Gross margin increased 380 basis points, as we improved cost of delivery, along with the operating leverage benefit of higher sales. Operating margin also increased by 250 basis points with some of the gross margin strength partially offset by higher R&D expenses.

And Mobile Networks net sales increased by 4% year-on-year, driven by growth in Vietnam and Middle East and Africa. In quarter 2, we said we expect Quarter 3 gross margin to be lower than normal, reflecting a lower software contribution, and this was indeed the case. Year-on-year we saw 370 basis points decline. With respect to operating margin, although operating expenses declined, the reversal of loss allowance in the prior year meant that operating margin declined. Without this, the operating margin would have only slightly declined despite this being a quarter with a low software contribution in the mix.

Turning now to Nokia Technologies. Net sales grew by 14% in the quarter, and we signed several new deals in quarter 3. Our annual net sales run rate remains at approximately EUR 1.4 billion. Operating expenses in quarter 3 saw some timing benefits, and therefore, will increase slightly in quarter 4. We continue to expect EUR 1.1 billion operating profit for the full year in Nokia Technologies.

Now, let's look at the net sales by region. In North America, we saw strong growth in Network Infrastructure and Cloud and Network Services, while Mobile Networks declined slightly. In APAC, India sales grew in Network Infrastructure, driven by strong demand for fixed wireless, while Mobile Network sales returned to some modest growth. Outside of the benefit we saw from Nokia Technologies, Europe was stable in quarter 3.

Now, turning to our cash performance. We ended the quarter with a net cash position of EUR 3 billion. Free cash flow was positive EUR 429 million, consistent with our profit generation and well-managed working capital. We continue to target 50% to 80% free cash flow conversion from comparable operating profit for the full year.

Thank you, Justin and Marco. Before we turn to the Q&A session, you should already have received an invitation to register for our Capital Markets Day, which as Justin mentioned, will be held in New York on the 19th of November. We hope as many of you as possible will be able to join us at the event.

As usual, for the Q&A session, as a courtesy to others in the queue, could you please limit yourself to 1 question and a brief follow-up.

Kelly, could you please give the instructions?

[Operator Instructions] I'll now hand back to David Mulholland.

We will take our first question today from Artem Beletski from SEB.

So my question would be relating to IP Networks and switching business on that front. So how do you see the progress on that front in general? And you have also set a target 3 quarters ago, when it comes to year 2028, so are you well tracking on it?

One second, could you start your question again, please? We had a slight technical issue on our side.

Yes, no worries. Can you hear me now?

Yes, we can hear you.

Okay. Great. So I would like to ask a question relating to IP Networks and your initiatives when it comes to data center and switching business. So you mentioned that you have some new design wins during the quarter, so how you're tracking against your target for 2028? And also, should we anticipate some contribution to revenues looking at upcoming quarters?

Yes. So, Artem, I think as I've said in a couple of forums, but maybe just to share here, I think when we talk about EUR 100 million incremental investment, the reality for me is that's a small portion of our overall capital. And so I don't think you'll see us focus on that metric going forward. What I will say about the business is, I was pleased with the wins, I'm pleased on the book-to-bill in IP networks overall. But the reality, as we all know, is that we're still a fairly small player in this space, well behind some of the market leaders. So we're at the start of a journey. But the announcements we've made, I think are positive. The metrics are positive. It's much more work to be done longer term.

Did you have a quick follow-up, Artem?

Yes, absolutely. So maybe more general question. So looking at your growth opportunities when it comes to AI and cloud, so it was 6% of sales in the quarter, so increased compared to Q2. But in general, looking at the next couple of years, where do you see the biggest growth opportunities looking at different customer segments? So whether it's like hyperscalers, enterprise or sovereign side, where you see the biggest opportunity for you?

Yes. I think, first of all, the biggest opportunity is clearly -- it's clearly in a -- is in the hyperscalers and the neocloud. So that's driving most of the demand. Obviously, the partnership with Nscale is a good example of our focus in this area. We've made other announcements in the past. And we also believe that sovereign clouds will present a significant opportunity for us over time. As we've talked about before, we're optimistic about the work that's being done in the EU as well as in other regions. So we think that these are all important growth segments for us. But clearly, the demand today is largely coming from the hyperscalers and some of the larger neoclouds.

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

Appreciate it. So nice to hear about the progress in the hyperscalers. I want to dig a little bit more deeply here in that more recently, we've heard about an application refer to a scale across for optics, which I think of as basically data center interconnect on steroids. Could you talk a little bit about what this means for Nokia in particular? And how you see that as an opportunity?

Yes, sure, Simon. And I think it's something that's been around, obviously scale up or what's been talked about as scale across has been in networks for -- in data centers for a long time in certain parts of the market. So this isn't a new technology. But what is happening is as we push bandwidth demands, which obviously the AI data centers are driving, it's creating new demand for innovation in that space. And I think this is where the assets we have, I think, are well positioned. It's not a place where I can tell you we can point to it and say, we've got material revenue today. It's still early days. But I do think if you look at our assets here, particularly what we're doing in Indium Phosphide with the fab, the ability to build optical components down on the Indium Phosphide silicon and innovate and packaging in these areas, we think we've got technology that can be relevant here.

But obviously, as bandwidth demands continue in networks, both scale across and scale out, which is what we typically call -- we typically see in top-of-rack networking and IP switching, both of those create tremendous opportunity for us. And the way I would dimensionalize the opportunity in optical is -- we'll share more of this at CMD, is that every time you get to the next unit, if you go from the long-haul networks to the metro networks to the data center, inside the data center, then inside the rack, each one of those has incremental opportunity at a volume level. Of course, there's a performance and cost delta you have to hit as well because what we build for long-haul networks is obviously going to be significantly more expensive than what you'd have to build to fit inside of a server inside of a rack. So there's a part of this that will require us to continue to innovate in this space. And you'll hear more about it in our discussions at CMD.

Did you have a follow-up, Simon?

Sure. Yes, I presume we'll talk about the long-term strategy, of course, at the Capital Markets Day. But I'm wondering if you could provide us a few thoughts on how Nokia's plan is regarding 6G mobility investments. Have you started investing? Is that in the R&D today? Is it something that starts in '26? Or is it something further out in time? I'm just really focused on modeling for the moment because I expect we'll hear some more at the Capital Markets Day next month.

Yes. So on technology standardization, which is obviously very important, relevant for tech, that work has already started and the investment is ongoing. And as I touched on in my comments, we're going to go through a bit of an investment -- you go through a bit of an investment cycle in that space. So that ramp is happening, and we obviously reiterated confidence in the -- on the ongoing profit outlook for Nokia Technologies as a part of that. So I think that gives you some indication from a modeling standpoint.

For MN, we are -- we've talked about this publicly. We're doing work on -- early on 6G pre -- I'd say pre-standard 6G radio technology. There's more work here. I think the thing for me in this space is, and Simon, I've talked about this a little bit in comments as well is I think there's a lot of focus on -- for obvious reasons on the G transition, the 3G, 4G, 5G, 6G. I actually think what's more important for us is what we've done in Cloud and Network Services, which is the pivot to a cloud-native core.

And then you look at the results and the performance on share capture and revenue growth, I think that's a good indicator for how we see the -- we're going to start to think about the opportunity in RAN, which is as we go into AI and in MN, yes, there's going to be a new generation of radios in terms of -- hopefully, frequencies with spectrum approvals, and of course, 6G capabilities in terms of spectral efficiency. But there's a lot more to do in terms of radio capabilities and features.

And we've got -- this is why we announced things like the AI-RAN Alliance previously. It's where we see opportunity with our work in Cloud RAN, for example. And I think that's where we'll continue to invest. What will impact for you is that these are things that we need to focus on and invest and innovate, and of course, continue to work closely with customers. So we'll unpack that for you at CMD as well as how we're approaching that. But I wouldn't assume that we haven't -- it's a binary thing where we haven't started. It's a part of ongoing investment.

We'll take our next question from Alex Duval from Goldman Sachs.

Yes. Thank you so much for the question. Firstly, just dovetailing off the last question, I'm very much looking forward to hearing more about the long-term tech strategy on wireless. Just in the short term, you talked about a measure of stabilization there. I wondered if you could give a bit more color as to the extent to which that's driven by the RAN market in your most important geographies versus progress you've made on your product.

And then secondly, it was interesting to hear in your prepared remarks about how you will focus on cost control by ongoing steps like digitalization rather than large restructuring programs, wondered if at this point you could talk a bit more about what motivates that shift and the benefits this brings?

Maybe start with the second part, Marco. Do you want to talk about that? And I will...

Yes, absolutely. And when it comes to cost savings, just like I mentioned in my introduction as well, so thinking is that operational leverage is extremely important for us and continuous improvement is something that we want to get in our genes that every entity basically continuously find ways, how can we continuously improve and do things more efficiently. And of course, here comes quite naturally in the new technologies, utilizing AI and other digitalization opportunities that you can find, and that's why IT simplification is extremely important in this and securing that we can actually get the benefit out of those different installations of AI that we have and continuously work on the process simplification and find ways how we can make the processes more efficient continuously. And it's not a one-off action. It's something that you have to do continuously.

Yes. And then, in terms of the market outlook, first of all, I think you're pretty clear from what we've been saying that if you think about the AI and cloud market growing rapidly, the CSP market broadly has been quite stable. So as we think about that, when I look at our results, I think stabilizing in MN in terms of our performance being predictable, there's always puts and takes. There's going to be ups and downs in the quarter and variance based on a given customer's volume in 1 quarter. So we'll see a little bit of that. But when you look at the longer-term trends, I think we're feeling better about a stabilizing environment. And then, on Cloud and Network Services, as I touched on, we believe that -- we believe we're growing above market rates at this point.

Thanks, Alex. We'll take our next question from Sami Sarkamies from Danske Bank.

Could you please elaborate on the factors that drove the positive surprise in the third quarter as you had anticipated similar sales and margins as in Q2? And when we think about Q4, you also mentioned a strong order book, but do you have still uncertainties related to timing of deliveries as you chose not to narrow the guidance range down?

Yes. Thank you, Sami. And what comes to them -- if you look at gross margin development in different businesses, you can see that we had a very good development in Cloud and Network Services. And here, as you understand, this business has been quite frequently so that you get a big part of the profits in quarter 4. Now this year, we have been working actively to try to actually balance that distribution of profits more equally between the different quarters. But at the same time, you see also that we have increased our gross margins, and there's a few reasons for this.

One is, of course, that we've seen a good traction on 5G stand-alone core implementations, where we have been very successful in gaining market share. And then, of course, we've been working quite a long time in the CNS as well to clean up the portfolio. And this, of course, giving result as well.

And the third point I would say as well is that also in our core business, CNS has been working heavily to take cost out and make things more efficiently, and by that, improving the margin levels.

Do you have a follow-up, Sami?

Maybe a detail question on the 6% exposure to AI and cloud in the third quarter. I think you mentioned 5% hyperscaler exposure at Q2. These are different metrics, right?

These are comparable, Sami. So think of the 5% -- 6% as Q3.

We'll take our next question from Richard Kramer from Arete.

Justin, when we look at your competitors into the various NI divisions, many of them are point solutions in one or another of the fields of routing, optics or fixed. In the current hyperscaler and tech, are these areas being kept separate? Or do you think that the end-to-end promise we heard about so much from both of the prior CEOs at Nokia is finally being realized at least within NI?

Well, I think a couple of things on this, Richard. So first of all, for me, clearly, fixed access is its own business, and the technology and innovation there is coming out of a few markets. I mean, the largest one for us, obviously, is in the U.S., but there's other markets where we're seeing technology and innovation opportunities, and so, I think that's almost its own trend. And I shared -- obviously, I shared the discussion around the 50-gig PON, but this capability that we have to allow you to add new technologies in line in your terminals, we think is a true differentiator.

We hear that from customers, the customers using it, believe it gives them value because they can -- they don't have to invest in a complete infrastructure upgrade to overhaul. The key message there is we're competing on the technology's merits itself. And I think if you look at IP switching and certainly in optical networking, I would say the same. We've got to win on the technical merit themselves. I mean, we've got very capable customers across our portfolio, AI and cloud as well as CSPs that want to buy best-of-breed technologies and enable their solutions and execute on their strategies and deliver value to their customers. And our focus has to be on doing the things that add value to them.

And where I think there's leverage and synergy for us is being able to see what's happening across these markets and bring greater scale and innovation to them. But I think that, for me, the term isn't end-to-end. It's -- you've always got to have best-of-breed products, best-of-breed technology, and then, you've got to be able to leverage the ecosystem so that you're -- obviously, you're better together, but it's not something that we do that soon we can have a deficiency in one area. That's certainly not how we think about it.

And just building over Justin, a sense that, of course, the compatibility is very important. So that's a benefit that we can get compared to competition, which only go with one product. And when we come with several products, and they are best of breed, and customer wants to buy those, that those actually work well together.

Did you have a follow-up, Richard?

Yes. Quick one, quickly for Marco. We saw a reduction in your forecast restructuring cash outflows from EUR 450 million to EUR 350 million, and an increase of EUR 50 million in gross cost savings. Is this Nokia finally transitioning from what's been a decade-long restructuring to maybe being able to focus more beyond '26 on just growth?

Yes. I would say that the important thing is that we want to avoid this large-scale restructuring programs going forward and more get this into our DNA as continuous improvement and cost focused and secure that we continuously find ways how we can take out cost in our fixed cost basis and our operations and utilize all the digitalization opportunities that could bring instead of doing this large-scale cost-cutting programs. So that's our focus going forward.

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

Good to see Infinera turning positive on operating profit contribution. And I wanted to ask about that, that in light of the progress that you made on integration, do you see the EUR 200 million in run rate operating profit synergies for 2027 as conservative? And are these savings something that you will have to reinvest in the growth in the optical business, kind of what you're doing in the IP side of things?

Yes, multiple questions in there. So let me sort of answer. First of all, yes, we'll provide a full update at CMD on our view. But I would say, certainly well on track on our commitments as we've talked about on the cost synergies, clearly, with the growth that we're seeing ahead of our expectations on topline synergies. And then I think in terms of investment, what I would say is we'll talk more about that in CMD, but we're going to be very disciplined in capital allocation. Obviously, you saw one dimension of that with our decision on venture funds this quarter. But this is a place where if we see the opportunity to accelerate or enhance returns, we'll make continued investments. But right now, I think, again, pleased to be on track on the cost synergies and thrilled to be running ahead of expectations on revenue.

We'll take our next question from Rob Sanders from Deutsche Bank.

I just had a question on Mobile Networks. This -- some speculation that the EU will apply pressure on some member countries to accelerate their swap out of Chinese vendors. So I'm just interested in that. And how you think about that given your recent public statements? And then, of course, I just want to talk a bit about OpEx, how you're thinking about OpEx into next year given you clearly wanted to invest more in these growth areas?

Yes. So Rob, thanks for that. First of all, I mean, obviously, we're -- we would love to see regulations in the EU that create the market opportunity you're talking about. And I think it's important from a high-risk vendor standpoint, it's also important from a -- just from a sovereignty perspective in terms of having the 2 largest providers of networks, in the West being European. I think that's important. We're optimistic that we would be able to obviously grow in that, capture some portion of that market if it was available.

Number two, in terms of the OpEx question was really just around operating leverage, I think our -- my push is really specific on this is I want to see us drive operating leverage, something Marco touched on in his comments, but the reason for that is because I want to be able to maximize returns in terms of capturing value from the business we have and then deploy capital in areas where we think we can win, things like incremental R&D if there's demand in the market, things like increasing factory capacity and optics to the extent that we see opportunities there.

And it's important we talk a lot about the fabrication facilities. These are far smaller than you think of a fabrication facility in silicon. And actually, the investment sizes are much smaller. And again, we'll unpack more of that for you at CMD. But those are the kinds of things I want to be able to deploy capital into, obviously, incremental sales coverage where we're seeing growth in AI. But I would think of all of this as driving enhanced returns, not something that's going to -- not going to dilute our performance, and that's key.

We'll take our next question from Andrew Gardiner from Citi.

I just had one on gross profitability, please, both I suppose on the positive side and what you've seen in CNS, and then, perhaps on the more negative side with Mobile Networks. We're seeing quite a lot of volatility quarter-to-quarter. CNS clearly driven nicely in 3Q by the mix towards 5G core. Is that mix sustainable? And so high 40s gross margin for CNS is what we should be anticipating? Yes, perhaps with some quarterly fluctuation, but perhaps not to the extent that we've been seeing, right? Can you sustain gross margins around that level?

And then similarly, on the other side with Mobile, 41% in the prior quarter, down to 35% in the current quarter. Yes, I understand again, software mix has changed, but quite dramatic moves. What do you think is sort of a more normalized level given the revenue run rate that you're at in Mobile? What's a more normalized level of gross margin for MN at this point?

Yes. Thank you. If I start with the Mobile Network side, there is variability, and that's why we usually see that Mobile Networks would be better to look on an annual basis of 4 quarters because you have always some product mix fluctuations. The level of software has a big impact on gross margin, and that you see also between quarter 2 and quarter 3, while we see this fluctuation between those quarters where you have more software in quarter 2 and less in quarter 3.

And I would say that if you look on a longer-term or annual basis, then you can see the levels of Mobile Networks gross margins and get an understanding of where it is and how we are tracking compared to previous year.

And then, when it comes to CNS, I mentioned already a few points there that are the reasons for the improved gross margins. And we definitely believe that it is sustainable. And this has been a multiyear journey to get the improvements here, cleaning up the portfolio, focus on cost out on the different products that we have. But also, we see the market support here. It took for a while before the 5G stand-alone core started to get traction actually from our customer side and CSP side. Now, we've seen in the past 18 months that it actually have been quite positive, and we have momentum there. And thanks to our cloud-based solution that we have, we have actually gained market share and been able to improve our market position.

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

Congrats to the strong numbers. I actually would like to continue on that question, I heard the same more or less. On the Mobile Networks, the software upgrades on stand-alone seems not to be in tandem, at least, with the CNS on the 5G core. So should we expect to have a little bit of an upgrade in the baseband software, radio unit software or ahead of us on back of the 5G stand-alone core now being litigation on?

Usually -- I can start, and Justin, if you have anything you can add as well. What usually happens is in the new generation is that you first install the hardware basement and radios, and when you see that the demand increases on the customer side, then you actually implement the core as well when you see that actually you need those features that the new generation can offer. And this is exactly the same example here in 5G.

In the beginning, the 4G core was still functional quite well and on the early 5G installations. And now, when there's more opportunities to slice and dice the network, you need actually a 5G stand-alone core to be able to capture those opportunities and offer those services to a customer base.

I would just add a couple of things. I think we're -- we want to make sure we're clear on that the Q2 to Q3 margin impact in MN is timing because of how we release software in this portfolio, which is we release an upgrade, we then recognize the revenue of those upgrades as they get deployed into customers, and they -- largely customers take their release. And so that's the timing dimension between Q2 and Q3, but also realize that the MN baseband software, which is the majority of the software revenue we have in Mobile Networks today, is still largely in a legacy -- what I would call, more legacy appliance model.

Cloud and Network Services or our core networks have moved to a cloud model. And that means you have much -- we have more subscription-based pricing, we have more ratable deployment. That means customers will be paying on a recurring revenue basis for an ongoing support and service. So whether it's subscription-based models there, it's a very different -- it's a different business model in that dynamic. Obviously, we think that's the long-term direction of travel in Mobile, but that's not where the market is today. Today, our Cloud RAN business is fairly small.

Did you have a quick follow-up, Daniel?

Yes, please. Yes, just a question on -- a little bit on your work -- already in Q2, you commented to unify corporate functions, simplify work, et cetera, and more change culture a bit to unlock the operating leverage. And then you've seen quite a large changes, especially in the new CTO office. And my question is on the Nokia Bell Labs organization. Should we expect this to be more focusing on AI data center than on the Mobile Networks and Radio Access Networks ahead given the departure of Nishant Batra?

Yes. Look, I think for me, a couple of things. First of all, I talked about functional excellence, which was the purpose around the corporate functions. And I think having a leader that is the Chief Technology and AI officer that's focused on technology and AI, key areas of our platforms, AI, security, cloud, all of those elements that we're touching on or talking around on this call today is very important. And having someone who's excellent in that, but also understands fixed -- our fixed network infrastructure business and mobile infrastructure.

And if you look at Pallavi's background, she has a career where she's done both across Juniper, HPE and then also at Intel. And then the other thing was focused around corporate development, and that was not just out of the strategy organization, but also bringing together some of the corporate development folks we had within the business groups and also within the finance organization. So for me, this is all about -- around functional excellence and aligning accountability and having cleaner and simple functions.

And then obviously, we also moved the digital office or the IT organization into finance, which really ties back to the focus that Marco touched on in his comments around driving ongoing improvement, ongoing productivity and enabling that through digitization, through AI, through simplification around processes. And obviously, IT is an important part of how you both simplify and standardize and realize those benefits. And so we felt like that was a natural alignment. So I think that's the way I would think about it.

I think it's important we have 2 compelling assets in both our network infrastructure business and our mobile portfolios. And we had a CTO that can look across all of that and also make sure that we're thinking about the right long-term investments in Nokia Bell Labs, whether it's from a research or from a near-term innovation standpoint.

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

Can you hear me?

Yes, we can hear you now.

Yes. So I wanted to maybe ask a little bit on the demand in Europe in general. So on the revenue decline on some parts in NI and also in Mobile Networks in Europe, do you see that this is more, let's say, structural? Or would you say that this is temporary in the way that Europe is just not investing right now. How do you see this developing going forward?

Yes. I think in terms of CSPs -- I think that I would say telcos, it's stabilizing demand, and we think that's a good thing. Obviously, we talked about the potential of upside in Europe over time if there's regulation that addresses high-risk vendor status. But I think overall, that feels pretty good. And then look, we're excited about the potential of AI and data center business in Europe. We're certainly excited about the opportunity we -- the partnership we have with Nscale and the opportunity for other companies to invest in Europe. And so we like the trends of what we're seeing. But the reality is the majority of the investment today is happening in the U.S. And so, as you look at our revenues and you look at our profile, the demand is coming from the U.S., and I think that's important. So that's how I would net it out.

Did you have a quick follow-up, Emil?

Yes. Maybe quickly touching on the private wireless side. The customer numbers grow nicely, but you haven't really discussed it at all in terms of revenue or anything. Could you say how is that part of the business going?

Yes. Just like you said, we've seen a nice increase in number of customers. But remember, we are still in a very early phase of this journey. And even if growth rates are pretty good, but it will take some time before this will be a meaningful business. So it's worth focusing more about that.

Yes. And I would just add, I think if you look at where we are today, I think Marco summarized it well, I would tell you that where I see our biggest opportunity is in focused vertical markets -- vertical market use cases. And so there's some examples in railways, for example, and utilities is the other, right? So if you look at those, those are the places where we've got opportunity. But again, this goes back to that message of focus.

Our next question from Sébastien Sztabowicz from Kepler Cheuvreux.

Coming back to Mobile Networks. Your business is going back to moderate organic growth in the third quarter, but to remain close to breakeven level those days, how do you plan to return to more decent margins in the coming years, maybe not double digit, but maybe high single digit? Is it more cost cutting? Is it more to support your revenue with more growth opportunity?

And the second question is also linked to Mobile. We have heard some comment that the Chinese government could be looking to push the network vendors in Europe outside the Chinese market. Is this something that you already see in your order intake in China? Or is this not something that you see already in your business?

Yes. Absolutely. I mean, I addressed this a little bit in my comments. I mean, I think on Mobile Networks, we're absolutely -- one of my priorities right now is on improving the returns. And I think we do that in a couple of ways, continued tight focus and tight engagement with customers. It ties a little bit to the second question you asked, which I'll address in a minute, but tight focused engagement with customers, particularly those customers that want to co-innovate and collaborate with us. Because I think differentiation for us longer term comes through innovation and technology leadership. That was historically where the market was.

I would say that obviously, if you go back 5 years, the business -- the company's business was in dire straits because we weren't in that case. We've now stabilized the portfolio. But as an industry, and I think certainly as a player in this industry, we need to continue to innovate. So that's as much of a preview as I'll give you to CMD, but I'd encourage you to attend. But I think absolutely, that's the line of where we're headed.

And then in terms of China, this is one of the places where we largely -- were largely not exposed. The revenue in China has come down massively over the last few years. So I -- the reality is it's a fraction of our revenue today, and our market share is fractional in Mobile Networks in China. It's not a core market for us. So the communications from the government, obviously, we follow those closely. We respect and support their decisions. And the reality for us is we're going to focus on markets where we believe there's significant opportunity and customers where we believe we can collaborate and innovate. And I think there's more opportunity ahead for us.

We'll take our last question from Didier Scemama from Bank of America.

A question for Justin really. You've been in the job now for a few months. I just wondered if you could share your thoughts about the direction of the business strategically, especially when it comes to the Mobile Networks, the core activities and also IPR, which are vastly different, I guess, from your day-to-day activities, which presumably are focused on getting those AI and cloud contracts. So that was my first question, and I've got a quick follow-up.

Sure. So, Didier, look, I think probably nothing I haven't shared in my comments. I think we have 2 businesses, Network Infrastructure and Mobile businesses in the portfolio. I mean, obviously, if you look at the comps, there's 4 major providers of mobile infrastructure. They all have 3 things. They have core networks. They have radio networks, which was what we call MN, and they have IP licensing, which is what we call tech.

So I think we've got a pretty clear -- it's pretty clear you need the full portfolio. If you look at the players that have not had the full portfolio, they've all struggled to innovate or sustain a foothold. And so I think that's for me number one.

In terms of the difference, look, as I've said before, I think connectivity is going to be an area where performant, reliable and trusted providers are going to be very valuable. And the reality is we have a portfolio that plays across all of those core elements of connectivity.

What we're seeing today with AI, and I think the thing that -- candidly, we weren't capturing as historical Nokia prior to the Infinera acquisition as much as we could have was the fact that in our Optical and IP businesses, the market -- the technology investment or the technology leadership had shifted to cloud and now AI and cloud. So now we're starting to capture some of that. Like I said, I'm pleased with the progress there. And I think that same -- I think you're going to see those same trends happen and roll into Mobile over time. Because ultimately, if you think about some of the compelling uses of AI, autonomous vehicles, robotics, smart glasses, virtual reality, augmented reality, they all need mobile connectivity, and I think that will be favorable.

But I don't know if the answer I think -- I don't think the answer is going to be doing the same thing we've always done. I think we have to continue to innovate. And that's why I like what we've done in Cloud and Network Services with setting up autonomous cloud-native core stack, and I think there's more opportunity for us ahead in Mobile Networks. Again, it's going to require the things I talked about: focus, collaboration and co-innovation with customers and an emphasis on best-of-breed technology and strong partnerships.

Did you have a quick follow-up, Didier?

Yes, completely unrelated on the Nokia Technology side. So I mean, Nokia sold their phone business to Microsoft, what, 10 years ago or so. So I just wondered how is the innovation pipeline in the IPR business for the nonstandard essential patents? Is there a risk of a cliff at some point as you're not in the phone business? Or are you confident that you can continue to monetize the SEPs and non-SEPs at least at the current level?

Yes, absolutely. I mean, I think this is a good question. So just back to the comment I just made, again, every player of scale in mobile infrastructure has a strong IP business, what we call tech. With the changes -- I didn't touch on this in my earlier comments, but with the changes we made in the CTO office, we've also now really tightly aligned the standards team into tech. But we see -- one, we see very good, stable revenue in the business.

We are -- we've said already, we're starting to invest in 6G monetization. That's important for us. And we see other -- we also see other emerging revenue streams in other segments. So I think the business is very healthy. The team is doing an excellent job. They're also doing, I think, probably the best job of any of the businesses right now in pushing on operating leverage so that they can continue to deliver the performance they need to. And you'll hear a little more about that in CMD. So that's the last plug I'll make for CMD. But we'll talk about some of that as well there.

Thanks, Justin, Marco, for the comments.

Ladies and gentlemen, this concludes today's call. I would like to remind you that during the call today, we have made a number of forward-looking statements that involve risks and uncertainties. Actual results may, therefore, differ materially from the results currently expected. Factors that could cause such differences can be both external as well as internal operating factors. We have identified such risks in the Risk Factors section of our annual report on Form 20-F, which is available on our Investor Relations website. Thank you for joining us.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good morning, ladies and gentlemen. Welcome to Nokia's Second Quarter 2025 Results Call. I'm David Mulholland, Head of Investor Relations. 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 forward-looking statements regarding our future business and financial performance, and these statements or 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 Factors 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 Q2 report and the presentation that accompanies this call are published on our website. The report includes both reported and comparable financial results and reconciliation between the 2.

In terms of the agenda for today, Justin will go through our key messages from the quarter and then Marco will go through the financial performance, and we'll then move to Q&A.

With that, let me hand over to Justin.

Thanks, David, and good morning. During my first quarter as President and CEO, I've spent significant time engaging with our stakeholders, and it has left me with 2 conclusions.

First, I have increased optimism about our future opportunity. It is clear to me that connectivity will be a critical differentiator in the AI super cycle. That is true not only for the hyperscalers where it's visible today, but also for communication service providers and increasingly in areas like defense and national security.

With our portfolio in mobile and fiber access, transport and data center networks, Nokia is uniquely positioned to be a leader in this market transition. We are investing to capitalize on this opportunity, and we are already starting to see success today in areas like optical networking.

Second, our customers expect us to engage with them as one integrated company, as the majority of them partner with us across our portfolio. We benefit greatly from the financial accountability our business group structure gives us. However, we also need to evolve how we work so we can move faster, improve productivity and focus on what brings value to our customers.

As a result, we're unifying our corporate functions to simplify how we work and to build a more cohesive culture to help unlock operating leverage. I'm looking forward to discussing our strategy and full value creation story at our Capital Markets Day in New York on November 19.

Turning to our second quarter results. Our performance was mixed. Good growth in both Network Infrastructure and Cloud and Network Services was offset by a decline in Mobile Networks, primarily related to the accelerated revenue recognition seen in the prior year quarter. Our profitability was impacted by currency fluctuations, particularly the weaker U.S. dollar, which was both an operational headwind and a headwind in our venture fund.

We had a EUR 50 million noncash negative impact from our venture funds in the quarter, which included a EUR 60 million negative impact from currency. Excluding currency, our profitability in the quarter would have been in line with our expectations, and we continue to make investments in longer-term growth opportunities.

The second quarter was first full quarter since we acquired Infinera. The combined Optical Networks business has been performing well with a book-to-bill well above 1, showing continued strong commercial momentum to our growth, though our growth was tempered somewhat by its supply constraints, and we're on track to achieve our committed synergies from the acquisition.

Looking forward, the demand environment remains broadly consistent with what we said last quarter. Customers are largely continuing with the plans they laid out at the start of the year, and there has not been any major impact from geopolitical uncertainty. As a result, for the full year, we continue to expect strong growth in Network Infrastructure, growth in Cloud and Network Services and largely stable net sales in Mobile Networks. In Nokia Technologies, we still expect EUR 1.1 billion of operating profit.

Let me share a few highlights from the quarter across our business groups. In Network Infrastructure, we continue to see a strong demand environment in Optical Networks and a positive reception to the Infinera acquisition from customers.

Two deals I'd like to highlight in Optical, our first award from a hyperscaler for 800 gig ZR/ZR+ pluggables and a deal with a large U.S. communication service provider. Overall, hyperscalers are one of the biggest drivers of our order intake in the quarter and remain a significant growth opportunity for our Network Infrastructure business. Across the whole of Nokia, hyperscalers accounted for 5% of net sales in the second quarter.

In IP Networks, we continued our leading position in the market, remaining #1 in edge routing and #2 in total routing. We continue to see a long-term opportunity in AI infrastructure and are investing to accelerate growth. Recently, we've been an active participant in consortiums that are bidding to benefit from the EU's EUR 20 billion program to build AI gigafactories in Europe.

In Fixed Networks, we still expect strong growth this year, and the appetite for fiber among Tier 1 CSPs remain strong. The past 12 months have seen us strengthen our market leadership position in the operator premise equipment, OLT, and we are continuing to invest in innovation in Passive Optical Networks.

Turning to Mobile Networks. At the start of the quarter, we signed an extension to our RAN agreement with T-Mobile U.S., which we announced in our Q1 earnings. We also announced 5G deals with Elisa in Finland and Optus in Australia. We continue to see good overall commercial momentum, and the competitiveness of our products is resonating with customers. We are optimistic about the potential 3GPP technology we can bring into the defense sector.

In Q2, we announced a partnership with blackned in which Rheinmetall owns a majority stake, and we now have delivered Banshee Radio units to the U.S. Marine Corps through Nokia Federal Solutions.

Finally, Cloud and Network Services had a strong quarter with new 5G core wins and deployments, including across India, Europe and the Middle East. We're continuing to progress on our OpenAPI journey, with 57 partners announced for our Network as Code platform, including Telstra and the Bridge Alliance in Asia. We also announced a partnership with Verizon in the U.K. to provide private 5G networks across multiple Thames Freeport sites.

Finally, let me turn to our outlook for the full year 2025. As we announced on Tuesday, we decided to take the prudent approach of lowering our full year outlook from EUR 1.9 billion to EUR 2.4 billion to a new range of EUR 1.6 billion to EUR 2.1 billion. The change has been driven by 2 factors that are largely outside of our control.

The first impact is currency. When we issued our -- first issued our guidance for 2025, the euro-dollar rate was 1.04, and it has now moved significantly to 1.17. Altogether, this currency movement is posing a EUR 230 million headwind to our operating profit outlook for 2025, of which EUR 90 million is related to the noncash currency impact in our venture fund portfolio. Marco will provide you additional detail on this in his comments.

The second is the tariff situation. For the full year 2025, we now expect to see an impact of between EUR 50 million and EUR 80 million tied to fulfillment of preexisting customer orders. The underlying performance across the business is in line with our expectations at the start of the year. Therefore, it is these 2 factors that lead us to change comparable operating profit outlook. Our guidance for free cash flow conversion remains unchanged at 50% to 80% of comparable operating profit.

With that, let me hand over to Marco.

Thank you, Justin, and hello from my side as well. I will start by discussing our overall growth performance.

Quarter 2 net sales were at EUR 4.55 billion. That's a 1% decline on constant currency and portfolio basis. Our gross margin was stable versus the year ago quarter at 44.7%. Mobile Networks and Network Infrastructure gross margins were broadly stable, while Cloud and Network Services delivered an improvement of 520 basis points, driven by top line growth.

Operating margin declined to 6.6% as a result of the negative currency impact to our venture funds as well as the impact of tariffs, which were within the EUR 20 million to EUR 30 million range we had expected. Assuming existing tariff rates, we now expect an impact to our full year operating profit of around EUR 50 million to EUR 80 million. And we generated EUR 88 million of free cash flow in the quarter and ended the quarter with EUR 2.9 billion of net cash.

Now turning to our business growth performance. Network Infrastructure delivered 8% growth, and each business unit grew, with Fixed Networks having a particularly strong quarter, growing 17%, Optical Networks grew 6% and IP networks grew 3%. Optical Networks' growth was hampered by some modest supply chain constraints and could have grown over 10%, and we expect these issues to improve in the second half. Gross margin was relatively stable, despite the 110 basis points impact from tariffs, in line with what we have expected.

Operating margin declined slightly by 70 basis points year-on-year to 5.7%, and this was mainly the result of higher operating expenses associated with the Infinera acquisition as well as increased investments into growth opportunities. It is worth noting that the ex-Infinera business was dilutive to operating margin in the quarter, although the integration process continues, and we are moving quickly to deliver on our committed synergies.

Net sales in Mobile Networks declined by 13% in the quarter. As mentioned, much of this decline was because of the EUR 150 million in accelerated revenue recognition from a contract settlement that benefited the year ago quarter. Regionally, we saw mixed trends in Mobile Networks. The pause in rollouts impacted India. However, we did see some growth in Europe.

Mobile Networks gross margin was 41.1% in the quarter, a 70 basis points decline year-over-year as favorable product and regional mix helped to offset a difficult comparison related to the settlement that benefited the prior year. These factors led to operating profit and margin declining despite lower operating expenses.

As we look to quarter 3, we expect gross margin to be below the normal run rate level as we expect an unfavorable product mix shift in the quarter. For the full year, Mobile Networks gross margin should remain in the normalized 37% to 38% range when excluding the onetime impact we saw in quarter 1.

Cloud and Network Services net sales grew by 14% in the quarter, reflecting continued momentum in Core Networks. From a regional perspective, CNS saw growth, driven by North America and Asia Pacific and Japan. The higher level of net sales from strong expansion in both gross and operating margin, which improved 520 and 850 basis points, respectively.

Nokia Technologies net sales increased by 3% on a constant currency basis. We signed several new agreements as we continue to make progress in our gross -- in our growth areas of automotive, consumer electronics, IoT and multimedia. Our net sales run rate remains approximately at EUR 1.4 billion.

Now let's look at the net sales by region. We saw a decline in North America, although this reflects mix trends. Mobile Networks declined because of the settlement in the year ago quarter, while we saw double-digit growth in both Network Infrastructure and Cloud and Network Services.

Within APAC, India sales were flat, reflecting a pause in investment in Mobile Networks, which was offset by growth in Fixed Networks within Network Infrastructure as well as Cloud and Network Services. And Greater China continued to decline as expected based on the current market trends. We saw strength in Europe with growth across all businesses.

Now turning to our cash performance. We ended the quarter with a net cash position of EUR 2.9 billion. You can see on the slide that working capital was well managed in the quarter, as the expected payment of 2024 related incentives was largely offset by a strong collection in receivables.

Free cash flow was positive EUR 88 million, leading to over EUR 800 million of free cash flow in the first half. As Justin noted, we continue to target 50% to 80% free cash flow conversion from comparable operating profit for the full year.

The last topic I want to cover is our currency exposure, as I know there have been some questions following our announcement on Tuesday. First of all, we typically generate about 55% of our net sales and have 50% of our total costs in U.S. dollars, but we report in euros. We have said in the past that we have a high degree of natural hedging with our operating business protecting our operating margin, but we still have an impact on an absolute basis when you convert USD profit back to euros for reporting purposes. Then on top of that, we have a hedging program, which helps to shield us on a short-term basis.

So what happens this year? When we first provided our guidance in January, the euro-U.S. -- the rate was at 1.04. Now the currency rate is around 1.17, and our guidance is assuming it remains there for the rest of the year. That is a significant USD 0.13 movement. There has also been significant strengthening in the euro against other currencies, including the Indian rupee.

Assuming currency rates remain at the current level for the rest of the year, the currency movement compared to January is a 6% to 7% impact to our net sales outlook for the full year. We do have a modest imbalance between net sales and total cost in our operating -- operations, meaning a strengthening euro has a slight negative impact on our operating margin, which is then largely offset short term by hedging.

When you combine all of these together, we see a EUR 140 million operating headwind compared to our expectations at the start of the year. And we hedge on a rolling 4-quarter basis, just that the first 2 quarters, net U.S. operational exposure is quite well hedged. And then the degree of hedging drops the third and fourth quarter. And this means that at the start of the year, we still had exposure to currency fluctuations for the second half, but that at this point of the year, we are now largely operationally hedged.

Finally, we have currency exposure from our venture fund investments. A lot of these assets are valued in U.S. dollars. These are illiquid investments that are only revalued when there is a capital event. However, under IFRS, we need to mark-to-market for currency each quarter, and this is creating a EUR 90 million impact currently for the full year. Considering this is both noncash and nonoperational telco businesses, we don't hedge this.

Through the rest of the year, and including the venture fund impact for modeling purposes, we estimate that every USD 0.01 movement in the euro-USD rate could have about EUR 10 million to EUR 15 million impact on our operating profit in 2025.

Thank you, Justin and Marco. Before we turn to the Q&A session, one date for your diary. We recently sent out a save-the-date confirming that Nokia will hold its Capital Markets Day this year in New York on November 19. We will be sending a formal registration shortly, and we hope as many of you as possible will be able to join us.

[Operator Instructions] Darwin, could you please give the instructions?

[Operator Instructions] I will now hand the call back to Mr. David Mulholland.

Thanks, Darwin. We'll take our first question today from Richard Kramer from Arete.

Justin, I asked last call about what you thought was required to win large hyperscaler deals. And in your prepared remarks, you mentioned potential integration of business operations, even though a lot of those hyperscaler deals are for products that mostly sit in NI.

Given the big increases we've seen from hyperscale CapEx, I mean, what is the unlock -- or what do you see as the key issues for Nokia increasing materially that percentage of sales to hyperscalers that you've got now and moving towards double digits and beyond?

Yes. Richard, thank you for that. I think a couple of things. First of all, the functional changes are -- that we're making are really around functional support organizations. I think there's plenty of companies that have their operating models aligned functionally like we're doing. And again, just to reiterate, if you look at our organizations, our legal team -- legal compliance and sustainability was actually operating this way already. And the other functions, we're operating in a slightly different manner. So we're just driving consistency within the company.

Separating that, let's talk about 2 things that are important for hyperscalers. One is a customer -- is the customer relationship and customer intimacy. This is where the BG structure and specifically the sales team we have in NI, including the team that we've integrated from Infinera is very important. And it's understanding those customers, understanding they're predicting -- able to work with them around product design, forecasting, planning and, obviously, supply chain execution and delivery as well as negotiating terms and all the things you would expect.

As I think about this, for me, the biggest opportunities for us right now, one, is continuing to focus on building the intimacy with those hyperscale customers through that team; and two is really the portfolio. And I think if you look at just the progress that we're now disclosing in the second quarter with a book-to-bill that's above that and an award that's not in the second quarter, I think we're making good progress.

We need to continue to gear our products and portfolios to exactly what those hyperscalers are looking for and then continue to work with them on a very close and intimate basis. And I think we've made progress. There's still work to do. And obviously, we're coming from a position of not having as much exposure there as you rightfully noted. So we're in a bit of a challenger mode, and that also requires just investment in time, as I think I commented on last quarter.

Okay. And just a quick follow-up. I mean, the area that we're hearing a lot about expansions from big U.S. telcos is in their fiber build programs. Is that something you see accelerating into 2026, where these large announcements that have been made by the 2 largest U.S. carriers to increase fiber builds is something Nokia can directly address?

Yes. So this is a place where we have a very healthy portfolio, as you rightfully pointed out, Richard. And I think the other comment I would make is really encouraged by the announcements. I think it's very positive sign around the Big Beautiful Bill in the U.S. that was enacted into law earlier this month, that there's going to be continued investment. And I'm also cautiously optimistic that there's going to be investment in Europe as well.

I think for this -- for us, this is 2 things. One is, obviously, opportunity for accelerating growth with our core OLT portfolio, the operator line terminals, but also opportunity for us to really think about innovation, how can we continue to help these customers. And back to my macro comments, I think it's -- I'm also hearing from customers that we have opportunity to partner with them in a more complete solution area in this space. And that's part of why I commented that we're investing in innovation in this area.

Thanks, Richard. We'll take our next question from Fredrik Lithell from Handelsbanken.

I have one. We saw yesterday, AT&T came with their report, and they talked about their CapEx for the coming years. And we also know Trump's Big Beautiful Bill Act. And it seems like operators in the U.S. are getting some tax advantages here. Can you talk a little bit about what you see there on the CSP place, if that will be a driver for you?

Yes. And I think, Fredrik, I just answered this, but absolutely, we're optimistic about this. I think anything that's -- it's enabling investment in infrastructure is a positive for us and really encouraged by the comments out of some of our major customers in the U.S., including specifically AT&T, where we're a key supplier today. But having said that, I think that doesn't mean we can sit on our hands. We have to invest in innovation, which is why I made the comments.

Do you have a follow-up, Fredrik?

Yes, maybe a follow-up. If you could sort of expand a little bit on Europe. It looked quite healthy in the quarter. Is it really broad-based? Or could you sort of take 3 drivers behind the good momentum you saw in Europe?

Yes. This is Marco. And we actually saw a quite broad-based development in Europe in all businesses, and it was quite healthy and welcomed as well, considering that Europe has been a little bit muted in the past. And of course, we hope that we can see some more development in Europe going forward, just like Justin mentioned that, hopefully, the fiber investments also in Europe will take off more, but also the whole macroeconomic environment would give some improvement here.

Thanks, Fredrik. We'll take our next question from Ulrich Rathe from Bernstein.

I wanted to ask about the guidance revision 2 days ago. Just to clarify, so you are halfway through the year, but I know that the range was still EUR 500 million as it was at the beginning of the year. So does this mean uncertainties have increased quite materially, doubled essentially? Or is there any other reason to keep the range?

And then in this context also, why did you not just indicate the lower end of the prior range, but actually lower the midpoint of the range because the range was pretty wide, the downside sort of fits in that, and you could have just said it's now at the low end of the original range? A bit more explanation, that would be helpful.

So Ulrich, thank you for that. A couple of comments. So first of all, if you go back to Q1, Marco and I both highlighted that we -- given the onetime charges we had in MN and then the tariff in Q2, which largely played out as expected, the EUR 20 million to EUR 30 million that we called out, we thought we'd be at the -- we thought that the top end of the range would be challenging. And then obviously, now we've incorporated a full year look on tariffs. And then, obviously, this currency shift, significant EUR 90 million of it in operational with the impact of venture funds.

So with all of that in play, we felt it was prudent to lower the range as we said. What I would highlight is -- what I would highlight in addition to that is that underlying it, I think we feel pretty good about operations because what you probably noted is we did not actually call down an impact from the onetime charge in mobile. And I think that's actually -- that actually probably underscores a little bit of optimism outside of currency and tariffs, which we just felt that it was not prudent to assume we could absorb and still meet the guidance range.

Did you have a follow-up, Ulrich?

No, just to come back to part of the question. But why is the range still EUR 500 million when you have 6 months now reported?

Yes. Maybe just another point I'll make, and I'll let Marco comment, is in the second -- obviously, if you look at our first half versus second half and particularly in Q4, other than '23 and probably '20, which disruption from COVID in '23, we had a significant shift in CapEx from the -- on the Mobile Network side, if you look at the business, we're historically very back-end loaded. And as we talked about, we had expectation this quarter that we'd see more demand from India and Mobile Networks that did not happen. So we feel very back-end loaded, and we want to be balanced and disciplined in our forecast because so much is in the second half.

Marco, anything you want to add there?

Yes. Just to add as well that we are still a little bit on the fly when it comes to tariffs. So now we have assumed situation as today. But as we all know that we don't exactly know how these tariffs will land in the end. And that's why we want to keep the range a little bit wider. So we have flexibility there.

Thanks, Ulrich. We'll take our next question from Sami Sarkamies from Danske Bank.

Could you provide a bit of color on Network Infrastructure performance in Q2? And how do you expect things to develop during third and fourth quarter for NI? When we look at Q2, we see a bit weak growth at IP and Optical combined with gross margin weakness.

Sami, thanks. Yes, a couple of comments from my end. I think, first of all, if you look at us against our U.S. peers, obviously, we're showing constant currency. There's a benefit that you have to also consider for currency tailwinds that they're reporting. So that's one balance that we didn't enjoy.

The other thing I would just highlight, and we talked about this, was we had a bit of a shortfall due to supply chain constraints and an increasing demand environment. I'll make 2 comments on that. We would have expected to double -- just on that alone, on a constant currency basis, we would have expected double-digit growth, and we fulfilled that demand to a more consistent historical level.

Second comment I would make is even with that, we'd have a strong book-to-bill. And then again, that's without the award that I touched on in my comments. So we feel quite good about the opportunity in terms of the second half. But again, this is largely driven off of any -- of what we see as an increasing mix in hyperscale and AI data center customers.

Did you have a follow-up, Sami?

Maybe a quick one. You talked about the need to have a more integrated, fast-moving leader in Nokia. Can you elaborate on this a bit further? And will you be communicating related changes in the near term?

Yes. So we announced changes today around a single functional organization. Maybe the one I didn't touch on as explicitly but we shared a few weeks back with the team is in response to customer feedback, we also announced -- or reinforced the position of the executive account manager. So within each of the businesses today, we have specialist sales forces. But we had -- we made the change a couple of years ago, we did not have a top accounts function. So we've built a little bit of that capability.

I think this is really important because our customers are not organized by unified -- by product line. And while there are differences in each of our product groups and they're important, and they're important not only because they touch areas of technology we invest in, the business model and how we monetize the technology, think of Core versus Mobile Network with radio and RAN versus Optical and IP, let alone broadband and fiber access networks.

While that's important, it's also important to understand that our customers are thinking about things on a more integrated basis because they're also considering their customers who are -- they are -- many of our customers are increasingly addressing them in a more integrated manner.

And then strategically from a technology road map perspective, we need to be thinking about it end-to-end. And if you think about things like security, obviously, platforms and services, AI and automation, there's clear opportunities. And I've heard that from many of our customers, both strategically and tactically, and that's all very important. So better service for customers, number one.

And then underneath that, I think if you look at some of the industry players, certainly, some of our partners, I spent time studying our partners as well, and if you look at some of our partners that have announced continued operating leverage opportunities, both using AI for their operations, many of them are focused on productivity and agility as the key North Stars.

And so for us, I feel like it's similar that we need to have that kind of mindset of functional excellence. And so we talked about this quite a bit as a leadership team and made the decision that this was the right step for the company, a consistent operating model across the functions and a mindset around excellence, so that we can improve agility and unlock operating leverage.

And just what Justin said, we believe that it's important that all the businesses will have the P&L responsibility. And our ambition is not to increase the headquarters. If we want to do something, it's actually decreased the number -- the cost level of headquarters. Just to be clear here as well.

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

So Justin, you've been at the firm now for roughly 100 days and you've talked a little bit about sort of priorities, but I guess what I'd like to get a sort of understanding of here is, having had sort of this period to learn and adjust and you've talked about some organizational shifts, how do you characterize your priorities going forward versus what you thought when you first took the job and started?

Yes. Thanks, Simon. I think a few -- probably a few key learnings and maybe I'll talk about them across, customers, technology and then operational and financial execution. I think, first of all, from a customer perspective, I think there's a real opportunity to partner and to co-innovate with our customers. And certainly -- and obviously, every customer has a slightly different strategy and value position and how they compete. But there -- I think there's been a number of conversations where I've been really encouraged about the opportunity to be innovating with our customers in a way that perhaps we haven't.

On the technology side, look, I think what's important here is we have a lot of great technology and great people in the organization, particularly within our engineering and R&D teams. I think what we have opportunity to do is continue to be better members in the tech ecosystem. And what I mean by that is partner -- externally think outside in and collaborate more with what's happening in tech and across the industries that we play in.

And then I'll make the other comment of just focusing, and not only the comments I made at the top around mobile and fixed access networks, transport and data center, but also as you think about in the stack, where does it make sense to partner versus where does it make sense to invest in core technology.

Last comment I'll make is just around financials and operations. And I think this is maybe the thing I haven't emphasized in the comments I just made on function -- on the functions that Marco and I touched on is that, specifically, I think we have an opportunity also to be more predictable and more productive. And I think that's one of the objectives I have is that -- is not only to drive growth but to drive a level of predictability and growth because, obviously, when you look back historically, as you all well know, we haven't been as predictable as certainly we would expect ourselves to be.

Do you have a follow-up, Simon?

As a follow-up -- yes, please. At the end of June, there were some press reports suggesting that Nokia might be taking some actions to reduce headcount and to do some cost cutting. I know it sounds like a little bit of reorganizational efforts on your part, but it doesn't sound like there were any major initiatives. Could you update us on really what you're thinking about in terms of any initiatives around staffing, cost structure that might be related to those press reports?

Yes. Thanks, Simon. I'll just make a couple of comments there. I think, first of all, we had a major restructuring program in '23 that we announced that we're still executing. So I think that's important to understand, and we set some targets around that and obviously a range around the restructuring charges at that time. We're still within that point of execution of that program. So we're still within the window there.

Second comment I would make is that I'm not -- having been in this situation before, I don't think, going forward, our objective should be to announce a big program, but also -- but much more building the muscle and the capability around driving productivity and operating leverage as a discipline.

So there's nothing new to update today on our restructuring program. But in addition, I think if you look at best practice, it will be around making announcements around continuing the productivity. And I think you'll see that in our results over time versus me telling you it's going to happen.

Marco, do you want to...

No. I think just -- what you have just said several times is continuous improvement is something that we have to have in our genes. And this is something that every part of the company has to work on that thesis as well. And this is something that we will focus on very much and hopefully see improvements in our efficiency and productivity in the company.

Thanks, Simon. We'll take our next question from Rob Sanders at Deutsche Bank.

Justin, can you discuss your view of the Mobile Networks business? I mean, is this a business where you're okay being relatively subscale and threading water? Or do you have strong ambitions to build back scale and recover share in 6G?

I guess, another way of asking this question is relative to your 5% of sales that's hyperscaler-led, how much of your R&D budget is going to go towards hyperscalers? Because I'm just trying to see -- trying to understand how you're going to orient the business going forward.

Thank you. So first of all, sort of 2 questions there. So let me -- you're asking I think an implicit capital allocation question as well. So let me answer the Mobile Networks business. I think, first of all, I believe this is a unique and highly strategic asset. There's 4 scale players in the world, 2 are in the West, us and Ericsson.

What I think is important, and I've said this consistently, is I don't think it's just about Mobile Networks. I understand how we report, but I think you have to look at Mobility Co. Every one of the scale players, including the 2 and -- the 2 competitors we have out of China have the Core Networks business, the Mobile Networks assets, radios and RAN and a robust IP portfolio. And I think you have to look at the business in totality even as you report the segments. And so I think, first of all, that's really critical.

Second, I would say, when you look at our customer base, it's very clear to me, and I hear from my customers, that we have opportunity to do more with them.

And then I would just say, third, as I've said before, I believe the AI super cycle is going to drive a refreshed wave of investment in this space. It's not there today, but I think we have to be -- we have to have a view of -- over the longer term of whether it's smart glasses, drones, autonomous vehicles, obviously, innovation that I think we'll see even in the traditional mobile handset business.

There's going to be a set of innovations that drive opportunity for us and opportunity for our customers. And this is where also being a thoughtful partner to our customers, as I touched on earlier, is going to be important.

In terms of capital allocation, I think what's happened in NI, and I would just emphasize this is one of the reasons I think Infinera was a very, very good acquisition for us is the market has shifted to cloud and AI driving the investment and the innovation curve on Fixed Networks. And used to be, a lot of this innovation was out of transport networks that's now more and more -- transport networks and data center driving the left edge, whether you think about Ethernet switching speeds or obviously optical technology, what's happening with pluggables inside the data center, which we just talked about.

The innovation curve has shifted. So by default, our R&D has to be invested in that areas. But it's not just in that. I think if you look at the hyperscalers and public cloud, they set an expectation for security. They set an expectation for ease of use and deployment of technology and performance. And so there's a number of areas where I think we -- as we're targeting those customers in NI, we have opportunity to enable them -- to enable advantages for us across our customer base in that portfolio. And that's been reconfirmed with some of my customer conversations.

And then back to the core and mobile, if you look at the portfolio on the mobile side, many of those cloud players and those hyperscalers are partners for us on mobile. We've been out -- we talked about announcements in our core business as we've moved much more to a cloud-first strategy for core in terms of the tech stack, but also in terms of where we run those platforms.

And I think, over time, we're going to see some of those things move even into RAN. And I think we need to be a partner there. So as I look at the -- as I look at capital allocation, that's one element. As I think about these partners as being broad partners across our business, I think there's significant opportunity.

Did you have a quick follow-up, Rob?

Just quickly on the fixed wireless access rollout in India. How long can this last in terms of being a tailwind for your business?

Yes. Do you want to talk about this, Marco?

Yes. Thank you. I would say that many operators globally are looking into opportunities to utilize fixed wireless access whenever they -- especially areas where they see that the mobile networks is not utilized fully, which is usually outside of the city centers, and there's one way for them to capture more opportunities and customer base.

And if and when there would be any fiber connection later, then they have already that customer connection, and they can just swap all of that customer from fixed wireless access into fiber customer. And different operators see these opportunities coming on different time lines as well. But right now, we've seen that Indian operators have been quite active and seeing this opportunity to capture the customer base. And that's why we're seeing the tailwind there.