Nokia’s AI Inflection: From Telecom Stalwart to Data Center Darling, But at a Price

The market is re-rating Nokia at a pace that turns heads. The Finnish network equipment maker’s shares have surged roughly 174% over the past twelve months, leaving the stock at €12.47 to €12.51, just a whisker below the 52-week high of €12.60. Yet for all the momentum, the valuation has become a source of debate: trailing price-to-earnings sits at 91, and even the forward multiple in the range of 30 to 37 is rich for a company long seen as a plodding telecom supplier.

What changed is the narrative. Nokia is no longer selling only base stations and routers to carriers. It is pitching a full-throated artificial-intelligence story — one backed by hard orders. In the first quarter alone, the company booked more than €1 billion in AI-related contracts. The AI and cloud division posted a 49% jump in revenue and now accounts for 8% of group sales. That is still a small slice, but the growth trajectory has forced management to lift its medium-term outlook for the segment to 27% annual expansion through 2028, up from the earlier 16% forecast.

The cornerstone of the AI push is a family of autonomous software agents woven into platforms such as Altiplano, Corteca and Broadband Easy. These agents automate network operations, schedule maintenance and reduce downtime. Nokia stresses an open architecture: operators keep control of their data and can plug in external large language models. That design is winning over telecom clients who want AI without being locked into a proprietary ecosystem.

Operational metrics support the bullish case. First-quarter revenue hit €4.5 billion, with comparable growth of 4%. The comparable gross margin reached 45.5%, helped by the contribution from the Infinera acquisition. Free cash flow stood at €0.6 billion, while net cash totaled €3.8 billion, giving Nokia ample firepower for investment and shareholder returns. On the dividend front, the board has authorization to pay up to €0.14 per share; the first tranche of €0.04 has been announced, leaving room for a potential additional €0.10.

Should investors sell immediately? Or is it worth buying Nokia?

Cisco’s strong quarterly results and outlook added fuel to the sector-wide rally. Nokia shares jumped 11.7% on Wednesday alone, hitting a multi-year high. The market increasingly views the Finns as a beneficiary of the data center buildout, a far cry from the years when the stock was dismissed as a low-growth telco play.

Analyst reactions reflect the tension between improving fundamentals and elevated expectations. JPMorgan lifted its price target to €12 from €6.90 and maintains an “Overweight” rating. Argus upgraded the stock to “Buy” with a $15 target. Morgan Stanley raised its target to €11, also positive. But Barclays, while raising its target, kept an “Underweight” stance, citing the demanding valuation. At 91 times trailing earnings, the stock needs every piece of good news to justify its price.

Nokia is also cleaning house. It plans to sell its fixed-wireless-CPE business to Inseego, taking a stake in the buyer in return. The deal is expected to close in the fourth quarter of 2026 and is deemed financially non-material. Meanwhile, partnerships with Lockheed Martin, Blaize, Datacomm and Anduril open doors in both AI and defence applications, adding depth to the growth story.

Nokia at a turning point? This analysis reveals what investors need to know now.

The real test arrives on 23 July 2026, when Nokia reports second-quarter results. At that point the market will scrutinize order intake, margins and cash generation. The AI label alone will no longer suffice; the company must demonstrate that its core networking business is delivering visible profit improvements. If it can hit the 2028 comparable operating profit target of €2.7 billion to €3.2 billion, the stock may hold its gains. If not, the valuation cushion is thin.

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