Nokia Oyj (NOK) is hitting the reset button. The Finnish telecom giant announced a comprehensive restructuring plan aimed at pivoting from traditional 5G infrastructure toward AI-driven networks and next-generation connectivity. It's the kind of move that sounds forward-thinking on paper but has investors spooked about near-term execution risks.
The reality: 5G spending is cooling down, customers increasingly want smarter software-centric systems, and Nokia needs to prove it can compete in this new landscape. Stock fell more than 6% premarket Wednesday as the market digested what amounts to both opportunity and uncertainty wrapped together.
A Leaner Operating Model
Starting January 1, 2026, Nokia will consolidate operations into two primary divisions: Network Infrastructure and Mobile Infrastructure. Management believes this simplified structure will accelerate decision-making and focus capital where it matters most. The company also set a comparable operating profit target of €2.7 billion to €3.2 billion for 2028.
Why now? Because the 5G buildout that powered growth for years is losing steam, and demand for AI-native networks is surging. Nokia is also positioning itself as a secure Western supplier, a strategic advantage as geopolitical tensions reshape the telecom supply chain.
The Financial Blueprint
Nokia laid out aggressive targets designed to boost profitability and operational discipline. Network Infrastructure sales are expected to grow 6-8% annually through 2028, with the Optical and IP Networks segment targeting even faster growth at 10-12%. By 2028, the company wants Network Infrastructure operating margins between 13-17% and Mobile Infrastructure gross margins of 48-50%.
The company also plans to slash centralized operating expenses from roughly €350 million down to €150 million and convert 65-75% of comparable operating profit into free cash flow. These updated targets replace prior guidance and signal a harder focus on returns and financial resilience.
Five Strategic Priorities
Nokia outlined five core focus areas: expanding AI and cloud capabilities, leading development of AI-native and future 6G networks, deepening customer partnerships, tightening capital allocation, and delivering sustainable returns to shareholders. To support this vision, the company is grouping slower-growth businesses into a new Portfolio Businesses division and launching a defense incubation unit targeting secure-connectivity opportunities.
It's a lot to execute on, which explains some of the market's hesitation. Restructuring plans look great in PowerPoint presentations, but delivery is what counts. Investors will be watching closely to see if Nokia can navigate the transition without stumbling.
Price Action: NOK shares traded 6.17% lower at $6.23 in premarket activity Wednesday.