Nokia's AI Pivot Sparks 40% Rally as Cloud Orders Hit €1 Billion

Nokia's shares jump to $12.91 as Q1 earnings beat estimates, driven by 49% growth in AI and cloud orders, sparking multiple analyst upgrades and a raised full-year outlook.

Nokia has undergone a dramatic transformation in recent weeks, with its US-listed shares surging roughly 40% from an April low of $8.58 to $12.91 by month-end — levels not seen since 2010. The catalyst was a first-quarter earnings report that revealed the Finnish telecom equipment maker is increasingly being revalued as an artificial intelligence infrastructure play rather than a legacy networking business.

The company's comparable operating profit jumped 54% to €281 million in the first quarter, comfortably beating the analyst consensus of around €250 million. Revenue grew 4% on a constant-currency basis to €4.50 billion, with the Optical Networks segment leading the charge with a 20% increase fueled by orders from AI and cloud providers.

That AI and cloud business is expanding even faster, recording 49% year-on-year growth and generating €1 billion in orders during the quarter alone. It now accounts for 8% of group revenue — and the share is rising.

Management responded by lifting its full-year guidance sharply. Network Infrastructure is now expected to grow 12% to 14%, up from the previous forecast of 6% to 8%. For optical and IP networks specifically, the new range stands at 18% to 20%.

Analyst Upgrades Pile Up

The strong numbers triggered a rare wave of simultaneous upgrades. CFRA lifted Nokia from Hold to Buy and more than doubled its price target to $16. Argus issued a Buy rating with a $15 target, while JPMorgan raised its Helsinki-listed share target from €6.90 to €12. Morgan Stanley followed with an increase from €8.50 to €11, and Nordea also switched from Hold to Buy.

Not everyone joined the party. SEB Equities and Grupo Santander downgraded the stock, citing fading 5G demand and limited upside after the rally. Barclays raised its target from €5.20 to €8 but remained cautious.

The divergence highlights a key tension: the average analyst price target sits at $9.92, well below the current $12.91. Of 23 analysts covering the stock, 11 recommend buying, six say hold, and six advise selling.

Valuation and Risks

The price-to-earnings ratio based on the trailing twelve months has ballooned to 73.8, compared with a five-year median of 19.4. The market is clearly pricing Nokia as an AI infrastructure company, but sustaining that revaluation depends on delivering continued growth in optical networking.

Headwinds remain. A major US mobile carrier is replacing Nokia's radio equipment, weighing on revenue and margins in North America. The second quarter is also seasonally weak for free cash flow due to employee bonus payouts.

Dividend and Upcoming Catalysts

Shareholders have something to look forward to in the near term: a €0.04 per share dividend will be paid on May 7. Further out, Nokia reports second-quarter results on July 23. Management expects sequential revenue growth of 5% to 9% and an operating profit contribution of 12% to 16% of the full-year target.

CEO Justin Hotard has described the current environment as an AI supercycle, and the order book backs up that narrative. With the stock trading well above the analyst consensus, the Q2 report will be a critical test of whether the AI thesis has fundamental substance — or whether the market has gotten ahead of itself.