Nokia’s Dual Engine: Military 5G Deals and AI Cloud Growth Propel Shares to Fresh Peaks

Nokia shares hit new highs as strong AI-driven sales, a EUR 0.14 dividend plan, and a Lockheed Martin 5G partnership fuel a 163% rally, despite valuation concerns.

Nokia’s stock is on a tear, and the Finnish telecom equipment maker is giving shareholders a reason to celebrate. On Thursday, investors will receive the first tranche of the company’s 2025 dividend, a payout of EUR 0.04 per share. The payment, approved by the board last month, marks the opening salvo in a distribution plan that could see up to EUR 0.14 per share handed out over four installments this year. With three more tranches still to be declared, the board retains full discretion on timing and amounts.

The dividend is just one piece of a broader capital-return strategy. Nokia has also authorized a massive share buyback program, allowing it to repurchase up to 550 million of its own shares by autumn 2027. The market has rewarded this shareholder-friendly approach handsomely. On Tuesday, the stock closed at EUR 11.48, a new year-to-date high, and it has more than doubled since the start of 2025.

But the rally isn’t just about financial engineering. A strong operational performance is providing the bedrock. In the first quarter, net sales rose 4%, driven by a standout performance in the artificial intelligence and cloud solutions segment, where revenues surged 49%. That unit is gaining heft within the group and boosting overall profitability. Nokia generated EUR 600 million in free cash flow during the period, while net liquidity stood at a comfortable EUR 3.8 billion. For the full year, management is targeting comparable operating profit between EUR 2.0 billion and EUR 2.5 billion, and current trends place the company slightly above the midpoint of that range.

Adding further fuel to the fire, Nokia has unveiled a strategic partnership with US defense contractor Lockheed Martin to develop a mobile 5G network for the US military. The system, built on an open architecture mandated by the Pentagon, will enable secure communications in the field, allowing military vehicles to tap into commercial 5G networks in crisis zones. The plug-and-play design reduces technical complexity and allows for rapid software updates without disrupting existing platforms.

The market greeted the news with enthusiasm. Nokia shares jumped nearly 4% on Tuesday to EUR 11.62, hitting a fresh 52-week high. Over the past 12 months, the stock has gained a staggering 163%. The Lockheed Martin deal extends Nokia’s reach into the growing market for military infrastructure, complementing its push into AI and cloud services. At the same time, management is streamlining the core business, planning to sell its fixed wireless access unit to Inseego while retaining a minority stake, sharpening its focus on higher-margin areas.

Not everyone is convinced the rally is sustainable. Analysts at UBS rate the stock a “hold” with a price target of just EUR 5.40, while Morningstar sees shares trading at a 128% premium to fair value. With a price-to-earnings ratio of roughly 80, there is little room for error. If the big tech companies that are driving AI investment pull back even slightly, the downside could be severe. Nokia is banking on 27% annual growth in the AI and cloud market through 2028, a lofty target that leaves no margin for disappointment. Every quarterly report from here on will need to validate that bullish outlook, or the stock could face a steep correction.