Nokia’s AI Rally Hits a Crossroads: July Earnings Will Define Whether the Hype Is Real

Nokia shares have surged 177% in 12 months as AI/cloud revenue jumps 49%, but lofty valuations make July's Q2 earnings a critical test. Insider buying and analyst upgrades signal confidence.

Nokia’s transformation from a staid telecom equipment maker into an artificial-intelligence infrastructure play has been nothing short of spectacular — the stock has surged roughly 177% over the past twelve months. But as the share price hovers around €13.11, roughly 7.3% below its 52-week high of €14.14 hit on 26 May 2026, the question is whether the next leg of the journey will be powered by tangible results or by diminishing expectations. The first hard test arrives in July, when Nokia reports second-quarter earnings and must show that its new growth engine can deliver on ambitious targets.

The numbers behind the rally are eye-catching. The forward price-to-earnings ratio on a twelve-month view has ballooned to about 36 times, up from roughly 17 times at the start of the year. On a trailing basis, the multiple stands at a dizzying 109 times earnings — a level that demands massive, sustained growth to justify. Yet the relative strength index sits at a neutral 52, suggesting the stock is neither overbought nor oversold, leaving room for both upside and downside surprises.

What has driven this re-rating is a concrete shift in Nokia’s business mix. Revenue from AI and cloud operations jumped 49% in the first quarter of 2026, now accounting for around 8% of total group sales. The company has raised its full-year guidance for Network Infrastructure growth to 12-14%, with Optical and IP Networks expected to expand by 18-20%. These figures have been underpinned by two critical moves: the multi-billion-dollar acquisition of U.S. optics specialist Infinera in spring 2025, and a $1.0 billion investment from chip giant Nvidia later that year. Together, they form the foundation of a new AI-RAN (AI-enabled radio access network) technology that investors are betting will become a major revenue stream.

Management has backed that conviction with their own capital. In a disclosure dated 26 May 2026, senior manager Konstanty Owczarek purchased 37,405 shares at a volume-weighted average price of $15.9878 on the New York Stock Exchange. A separate filing from 22 May shows he bought 32,595 shares at $15.35 per share — two distinct transactions that collectively signal insider confidence at a time when the stock is coming off its recent peak. The intra-week trading action has been volatile: the shares jumped 6.3% on Tuesday, surged another 9.1% on Wednesday, only to give back 4.8% on Thursday, with volume on the NYSE hitting 185 million shares — nearly 164% above the average.

Analysts are responding with a mix of enthusiasm and caution. CFRA upgraded the stock from Hold to Buy with a $16 price target, arguing that Nokia is now being valued more like an optical networking and AI infrastructure supplier. Morgan Stanley’s Terence Tsui raised his target to €14 from €11, maintaining an Overweight rating. Argus also upgraded to Buy with a $15 target, while JPMorgan lifted its price objective to €12. UBS has taken a sum-of-the-parts approach, suggesting that investors should assign different multiples to Nokia’s AI-adjacent businesses versus its slower-growing legacy segments. Yet the average analyst price target still sits 25% below the current market price, and fewer than half of the analysts tracked by Bloomberg recommend buying the stock.

The reason for that caution lies in the legacy business. Mobile networks still account for more than half of Nokia’s revenue, and that segment has struggled with sluggish investment from telecom operators and lost contracts in the United States. Margins in mobile networks are thinner than those in the AI-related divisions, and as long as this part of the business remains dominant, it acts as a brake on the overall valuation. BNP Paribas analyst Jakob Bluestone captured the tension neatly: Nokia’s success among cloud providers has fuelled the idea that it contains a “mini-Arista” and a “mini-Ciena” within its walls, but “the old Nokia has not disappeared.”

To bridge that gap, Nokia is investing heavily. The company has raised its capital expenditure forecast to as much as €1.0 billion to expand manufacturing capacity for optical networking gear. In May, it opened an AI Networking Innovation Lab in Sunnyvale, California, in partnership with AMD, Lenovo, Supermicro, and Keysight. CEO Justin Hotard has described the opportunity as an “AI connectivity supercycle”, but the market needs more than grand phrases. Nokia says it now has roughly ten customers that have publicly committed to AI-RAN trials, with larger tests expected later in 2026. The operating profit target for 2026 stands at €2.0-2.5 billion, a range that depends squarely on winning concrete orders from hyperscale cloud providers.

With the stock up 134% since the start of the year, the runway for further multiple expansion is narrowing. July’s quarterly numbers will either validate the thesis — showing that Network Infrastructure and Optical/IP can sustain their elevated growth rates — or expose the gap between narrative and reality. For now, Nokia remains a classic story of transformation in progress, where the biggest risk is not that the vision is wrong, but that the price already assumes it has succeeded.