Third-quarter net loss of 91 million euros ($125 million) compared with a net loss of 969 million euros a year earlier, while revenue fell more than 20 percent to 5.6 billion euros.
The struggling company said it sold 8.8 million Lumia smartphones, a 40 percent increase from 3 million a year earlier and slightly more than markets had expected.
But that was not enough to keep Nokia Corp. from giving a negative outlook for the devices and services unit it has agreed to sell to Microsoft Corp. for $7.2 billion.
Net sales of devices and services fell by 19 percent in the quarter, to 2.9 billion euros, and it sold 64.6 million mobile devices in the period - down from 83 million a year earlier.
Although smartphone sales were up near 9 million, they lagged well behind chief competitors Apple with quarterly sales of 33.8 million and China's Huawei's at 13 million. Even South Korean LG, with 12.7 million units, and Lenovo of China, which sold 11 million, surged past the former world No. 1 that once commanded a global market share with 50 percent. Samsung Electronics, the world leader, sold more than 88 million smartphones in the third quarter.
Without the loss-making handset unit, the Finnish phone maker can look forward to better earnings from its more profitable networks business - Nokia Solutions and Networks, or NSN, which saw 33-percent growth in net profit in the period.
It expects NSN to have a positive operating margin of some 12 percent, with "solid net sales growth on a sequential basis." Nokia announced the purchase of the Siemens half of its 2007 networks joint venture for $2.2 billion this year.
Nokia has also pinned hopes on its mapping services, known as HERE.
Neil Mawston from Strategy Analytics near London said the networks figures were "reasonably good" and would be a short term boost for the Finnish company.
"HERE has some decent prospects, and we see it as being the long term profit driver," Mawston said. "Nokia has a huge market share in maps worldwide and maps are core to a lot of the automotive and shopping experiences out there worldwide."
Mawston said he was also "relatively optimistic" about Nokia's Lumia range.
"All the arrows are pointing in the right direction," he said. "Nokia-Lumia still has a long way to go but at least they are headed in the right direction after going in the wrong direction for so long."
The company's share price jumped more than 6 percent to 5.32 euros in afternoon trading in Helsinki.
Nokia board chairman and interim CEO Risto Siilasmaa described the third quarter as "the most transformative" in the company's history, and was upbeat on the purchase of NSN and the sale of the handsets unit to Microsoft.
"Our strategy work is making good progress and it has already become clear that there are meaningful opportunities for all of our business areas: NSN, HERE and Advanced Technologies," Siilasmaa said. "Subject to the completion of the Microsoft transaction, Nokia will have significantly improved earnings profile, strong financial position and a solid foundation from which to invest."
The company repeated its target to save 3 billion euros in operating costs by the end of 2013. Nokia employed 87,000 people at the end of the period, down from more than 105,000 a year earlier.