- Telco will not be a growth market for Nokia said Lundmark on a Q3 earnings call today
- Instead, the CEO expressed optimism about the company’s prospects for growth in the GPU-as-a-service market
- A September deal with CoreWeave is leading the company in the data center direction
Telco is no longer the top growth market for Nokia. Instead the company has turned its focus for growth to data center, said Nokia’s CEO Pekka Lundmark on it's Q3 2024 earnings call today. "There will be others as well, but that will be the number one," he said.
The shift away from telco is a shock but not a surprise given the vendor's challenges winning major telco deals over the last year. However, the company's September deal with AI hyperscaler CoreWeave is giving Nokia a new lease on life. CoreWeave selected Nokia to deploy its IP routing and optical transport equipment globally as part of its extensive backbone build-out, with immediate roll-out across its data centers in the U.S. and Europe.
Today, Raymond James analyst Simon Leopold said the CoreWeave win was good for Nokia to gain some exposure to AI, and he wondered if Nokia had a long-term strategy of evolving customers away from its telco base into more enterprise-like opportunities.
Lundmark said, “This is obviously in the very core of our strategy.” He said Nokia’s telco total addressable market (TAM) is €84 billion, while its data center total addressable market is currently at €20 billion.
“Even though the telco TAM is expected to recover somewhat next year, we have to be realistic," said Lundmark. "I mean, telco TAM will never be a significant growth market.”
Conversely, data centers are a growth market
“The reason why CoreWeave is so important is that they are now the leading GPU-as-a- service company,” said Lundmark. “And they have now taken pretty much our entire portfolio, both on the IP side and optical side. And as we know, AI is driving new business models, and one of the business models is clearly GPU-as-a-service.”
He said that T-Mobile mentioned GPU-as-a-service at its recent capital markets day. “They are talking about an opportunity to look into GPU-as-a-service as an add-on to their business,” said Lundmark. “And then of course, there is the significant hyperscaler opportunities and smaller data center opportunities.”
He said once Nokia closes on its $2.3 billion purchase of the optical vendor Infinera in the first half of 2025, Nokia will arrange a capital markets day where it will then “do a deep dive into our growth segments outside of telcos.”
He said Nokia is already quite well-exposed to data centers on the IP side, “but then the Infinera deal will significantly increase our exposure also on the optical side.” Data centers not only require GPUs, but they also require optical networking to support their AI workloads.
Today, Lundmark said the role of optics will increase, not only in connections between data centers, but also inside data centers to connect servers to each other. “Once we get there, that market will be of extremely high volumes,” he said.