Nokia's AI-Driven Turnaround Gathers Pace as Dividend Payout Nears

Nokia's operating profit surges 54% as AI infrastructure demand fuels a €1 billion order book, sending shares to multi-year highs and triggering analyst upgrades.

The narrative around Nokia has shifted dramatically. Once viewed as a laggard in the telecom equipment space, the Finnish company is now being re-rated by the market as a direct beneficiary of the artificial intelligence infrastructure boom. The numbers tell a compelling story: first-quarter operating profit surged 54% to €281 million, comfortably beating analyst forecasts, while revenue from AI-specific clients jumped by nearly half.

The stock has responded in kind. Trading at €9.20 on the Helsinki exchange — its highest level since 2010 — and hitting a 16-year peak of $12.95 on Wall Street in late April, Nokia shares have more than doubled since the start of the year. The rally reflects a fundamental reassessment of the company's prospects, driven by its deepening ties to the hyperscale cloud providers building out next-generation data centers.

The €1 Billion AI Order Book

CEO Justin Hotard has described the current environment as an "AI supercycle," and the order book backs up the rhetoric. Backlog from the AI and cloud sector alone now stands at €1.0 billion, representing approximately 8% of Nokia's total group revenue. The optical networking division has been the standout performer, with sales climbing 20% as demand surges for the high-speed interconnects that link AI data centers.

Not all segments are firing on all cylinders. Fixed-network revenues contracted during the quarter due to what management described as strategic adjustments. But the overall trajectory is unmistakably positive. Nokia now expects its network infrastructure unit to deliver low double-digit percentage revenue growth for the full year 2026, with operating profit likely to land at the upper end of the previously guided €2.0 billion to €2.5 billion range.

Analyst Upgrades and Capacity Expansion

The earnings beat has triggered a wave of upward revisions from the sell side. CFRA upgraded the stock to "Buy" with a $16 price target, while Argus followed suit with a $15 target. JPMorgan maintained its "Overweight" rating and lifted its target to €12, and Morgan Stanley also stuck with "Overweight" at €11. Northland joined the chorus, raising its target to $13.

To meet the demand surge, Nokia is accelerating its integration of Infinera, the competitor it recently acquired. A second manufacturing facility in San Jose is slated to come online before year-end, allowing the company to ramp production faster than originally planned. Institutional investors are taking notice: Millennium Management added nearly three million shares in the first quarter, and Goldman Sachs also boosted its stake significantly.

Dividends and the Short-Seller Skepticism

Shareholders have a near-term catalyst to look forward to. A dividend of €0.04 per share, already approved, is scheduled for payout on May 7. That cash return comes as the company enjoys its strongest financial momentum in years.

Yet the optimism is not universal. Short interest in Nokia has actually increased recently, reflecting lingering doubts about the sustainability of the turnaround. One major U.S. mobile carrier is currently replacing Nokia equipment with rival products at scale, a reminder that the traditional telecom infrastructure market remains fiercely competitive.

The next major test arrives on July 23, when Nokia reports second-quarter results. Management has guided for sequential revenue growth of between 5% and 9%. Investors will be watching the mobile networks order intake closely — any weakness there could refocus attention on margin pressures in the North American market. For now, though, the AI narrative is firmly in the driver's seat.