Network vendor Nokia reported its fourth quarter financials this week, with the company once again highlighting its focus on opportunities to support the data center market.

It follows a repositioning of the vendor last year, when the Finnish vendor announced plans to split its operational model into two primary operating segments, Network Infrastructure and Mobile Infrastructure.

CEO Justin Hotard, who was brought in to replace the ousted Pekka Lundmark last year, said the company made progress on its expansion into data center switching in 2025.

Since taking charge, Hotard, a former Intel data center executive, has outlined the importance of pushing AI investments and put a heavy focus on data center services.

During that time, Nokia has secured a $1 billion investment from chipset giant Nvidia, continued its integration of networking company Infinera, which it acquired last year for $2.3bn, and refocused its mobile infrastructure priorities.

For the quarter, Nokia reported revenue of €6.12bn ($7.29bn), up two percent year-on-year (YoY), while full year revenue was €19.88bn ($23.69), up three percent from 2024.

"We believe AI is a long-term structural shift that is expanding the role of networks as intelligence moves beyond data centers into real-world systems," said Hotard. "Networks will require performance, security, and reliability to support everything from large language models to intelligent agents, augmented reality devices, and autonomous robots."

For Q4, Nokia reported that its Network Infrastructure business delivered seven percent net sales growth in the fourth quarter, which included 17 percent growth in optical networks. Overall, Nokia posted revenue of €2.4bn ($2.86bn) for the quarter, up 19 percent YoY.

The company's Cloud and Network Services revenue dropped 11 percent to €837 million ($997m), while Nokia Technologies 17 percent to €384m ($457m). Overall, net profit dropped from €813m ($968m) to €544m ($648m).

A lot of this opportunity centers around AI, notes Hotard, who said he expects this to drive a "much more mature and larger optical market, driven by the AI infrastructure build-out than we've seen in the past."

During the company's earnings call this week, Hotard mentioned that Nokia is already thinking beyond the 800-gig optics routing it currently offers.

"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," said Hotard.

"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." As these speeds increase, he said that there will be more opportunities for coherent optics within the data center for Nokia.

Data-center focused appointment

On the call this week, Hotard also confirmed that Nokia now has a new head of IP networking in Greg Dorai.

Dorai, who joins after a decade more than a decade at Cisco, will replace Vach Kompella. Kompella, who has been with the vendor since the early 2000s, is retiring.

"But part of that in bringing in Vach's successor was looking for someone that had deep data center experience," said Hotard, once again suggesting where Nokia's focus lies.

Hotard does suggest it won't be a quick success, warning it will take time to ramp up.

"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," he added.

"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."

Hotard: Constraints are normal

Nokia's CEO also addressed concerns around potential constraints as part of the AI data center build-out era.

He refers to these constraints as a "consistent thing," noting that there have been power, connectivity, silicon, and, more recently, memory constraints.

"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," Hotard explained.

"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."

Still mobile

For all the data center and AI focus, Nokia is still very much a mobile network vendor too.

The company highlighted this in its earnings report, posting an increase in net sales for its Mobile Networks division by six percent in the final quarter.

Despite this quarterly growth, net sales remained flat for the year, while revenue for Nokia's Mobile Networks group dropped two percent YoY to €2.5bn ($2.98bn).

From the start of this year, Nokia's Mobile Infrastructure segment brought together Core Software, Radio Networks, and Technology Standards.

"This structure is designed to sharpen accountability, improve profitability, and position the business for long-term technology leadership. While near-term demand is driven by 5G technologies and we see promise for Open RAN, we are also investing to lead in the transition towards AI-native networks and 6G," stated Hotard.

Hotard said the company's partnership with Nvidia is something that Nokia anticipates will support this transition towards AI-networks and the next "G." He told investors that the company is on track to begin trials and proofs-of-concept on AI-RAN later this year as part of its Nvidia partnership.

The ever-changing political landscape has also bolstered Nokia's focus on the defense sector, something that the vendor focused on last year with a refresh of its 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," said Hotard. "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."