Nokia's China Withdrawal Carries a Hefty Price Tag as the Finnish Group Doubles Down on AI Infrastructure

Nokia raises restructuring costs to €800M for China exit, while AI & Cloud revenue doubles, lifting profit guidance for 2024.

The exit strategy comes with a substantial bill. Nokia has sharply raised its restructuring cost forecast for the current year, lifting the figure from roughly 250 million euros to as much as 800 million euros, with 350 million euros earmarked specifically for integrating Nokia Shanghai Bell and dismantling its mainland China operations. The scale of the charge underscores just how deep the Finnish network equipment maker is cutting into its presence in the world's second-largest economy.

Nearly all of Nokia's mainland China sites are slated to close in stages by the end of 2026, affecting around 7,200 employees across the Greater China region. That includes the research and development hub in Hangzhou, which employs 1,600 people, along with facilities in Beijing, Shanghai, Chengdu and Qingdao. The company frames the move as an adaptation to a market that has been shrinking for years, marking a decisive strategic pivot away from a region where Nokia had long maintained its own manufacturing and sales operations.

AI Momentum Provides the Counterweight

The retreat from China coincides with a period of operational acceleration elsewhere. Second-quarter net sales reached 4.82 billion euros, with comparable operating profit of 434 million euros and comparable earnings per share of 0.07 euros. The standout figure, however, was the order intake in the AI & Cloud division, which hit 2.8 billion euros — a clear signal of the growing weight of data center and artificial intelligence infrastructure in Nokia's business mix.

Revenue in the AI and cloud infrastructure segment surged 105 percent year-on-year to 446 million euros in the second quarter, now accounting for 9 percent of total quarterly sales. That growth trajectory helps explain why management felt confident enough to raise its full-year guidance for comparable operating profit to a range of 2.1 billion to 2.6 billion euros while simultaneously trimming capital expenditure guidance to between 800 million and 900 million euros. The combination of higher earnings expectations and lower investment outlays points to a sharper focus on profitability rather than pure revenue expansion.

Complementing the financial picture, Nokia launched a new AI-RAN platform built on Nvidia technology in mid-August, designed for 4G and 5G networks with an eye toward future 6G upgrades. The commercial AI-native RAN platform is intended to serve as a software bridge to the next mobile generation, positioning the company in the increasingly competitive market for AI-powered radio access network technology.

A Stock Caught Between Two Narratives

The market's response to these crosscurrents has been characteristically volatile. Shares closed Friday at 8.80 euros, up 0.7 percent on the day, but the weekly picture tells a different story: a 6.0 percent decline, with the last 30 days adding a further 3.1 percent loss. The stock now trades roughly 11 percent below its 50-day moving average of 9.86 euros.

Look further out, however, and the longer-term trend remains firmly positive. The shares are still up 57 percent since the start of the year and have gained 142 percent over the past twelve months. That puts the current price about 41 percent below the 52-week high of 14.97 euros reached in early June, yet comfortably above the August low of 3.61 euros.

Part of the recent August surge was attributed to Lumentum, the US optical components maker, whose surprisingly upbeat forecast led traders to anticipate stronger demand for optical networking equipment — a read-across that lifted Nokia's shares along with it.

Insider Buying Meets Institutional Selling

The mixed signals extend to who is buying and who is selling. Several executives added to their holdings in mid-August, with Raghav Sahgal and David Heard among those purchasing shares at 9.091 euros apiece on the XHEL trading venue on August 13. On the other side of the ledger, institutional investor Fmr Llc trimmed its position substantially, with a mandatory disclosure showing its Nokia ADR holdings down 30.13 percent quarter-on-quarter.

Analyst sentiment, meanwhile, remains constructive. JPMorgan reaffirmed its "Overweight" rating on Friday with a price target of 21.00 US dollars, arguing that the market is underestimating Nokia's revenue potential in AI and cloud infrastructure for 2027 and 2028.

The next milestone for investors comes on October 22, when Nokia reports its third-quarter results and nine-month figures. That report will offer the first clear indication of whether the AI-driven growth can offset the balance-sheet impact of the China pullback — a question that currently divides the market between those focused on the restructuring costs ahead and those betting on the AI opportunity beyond them.