Key Takeaways:
Nokia Oyj sharply raised its sales forecast for its networking division, signaling that an investment tsunami in artificial intelligence infrastructure is reshaping the telecommunications equipment market faster than anticipated. The Finnish company’s stock rose after the announcement.
"We are increasing our growth assumption for Optical and IP Networks and we are investing to capture accelerating demand from AI & Cloud customers," President and CEO Justin Hotard said in a statement on Thursday.
The company now sees its Network Infrastructure business growing 12% to 14% in 2026, a significant increase from its previous forecast of 6% to 8%. The upgrade is fueled by surging demand from hyperscale cloud providers, who are racing to build out data centers capable of handling AI workloads. Nokia reported booking €1 billion in orders from this customer segment in the first quarter alone. For the full year, Nokia expects its IP and Optical Networks businesses, the core of its data center offerings, to grow by a combined 18% to 20%.
This strategic pivot toward the high-margin data center market is proving successful, helping offset slowing demand for 5G mobile equipment. The company’s Q1 comparable operating profit jumped 54% to €281 million, beating the €250 million average analyst estimate. Sales to AI and cloud customers climbed 49% in the quarter, now accounting for 8% of total group revenue. The move was bolstered by its acquisition of U.S.-based optical specialist Infinera, positioning Nokia to better compete with rivals like Ciena and Cisco in the critical optical transport sector that connects data centers.
Nokia's Network Infrastructure unit saw constant currency net sales grow 6% in the first quarter, led by a 20% surge in its Optical Networks business. The IP Networks division also contributed with 3% growth.
The company is tracking "somewhat above the mid-point" of its full-year comparable operating profit outlook of €2.0 billion to €2.5 billion. The solid results underscore a successful strategic shift for the company, once known for mobile phones, as it carves out a crucial role in the global AI build-out.
This article is for informational purposes only and does not constitute investment advice.
