Nokia’s Reincarnation: From Telecom Stalwart to AI and Defence Dual Play

Nokia transforms from legacy telecom to AI infrastructure and defense leader, with data center revenue surging 49% and analysts raising price targets as stock rallies 114% YTD.

The market’s perception of Nokia has shifted dramatically in recent months. No longer viewed as a legacy network equipment provider, the Finnish company is now being priced as a contender in artificial intelligence infrastructure and, increasingly, the defence sector. That repositioning — backed by billion-dollar partnerships and a sharp uptick in high-growth revenue — has powered a rally that defies a wobbly macro backdrop.

Analyst Targets Multiply as AI Narrative Gains Traction

Deutsche Bank became the latest institution to raise its sights on Nokia, lifting its price target from €7.50 to €8.50 on 15 May 2026 while maintaining a “Buy” rating. The upgrade hinges on Nokia’s strengthening foothold in AI-driven networking. JPMorgan is even more bullish with a €12.00 target, and Argus rates the US ADRs a “Buy” with a $15.00 objective.

All three analysts point to the same catalyst: surging demand from data centres. Nokia now sees its addressable market expanding at a compound annual growth rate of 27% through 2028, a projection management raised after a strong first quarter.

Stock Hits a 16-Year High Before Profit-Taking Hits

The share price touched €12.55 midweek — its highest level since April 2010 — before pulling back as traders locked in gains. The initial jump of around 10.5% was fuelled by optimism around AI radio access network (AI-RAN) solutions and the Nvidia collaboration. That tie-up, announced in October 2025 with a $1 billion investment from the US chip giant, is central to Nokia’s plan to embed computing power directly into mobile network infrastructure.

By Friday’s close, the stock stood at €11.96, a 4.13% drop on the day, but still up 10.08% for the week. The year-to-date advance is a staggering 114.80%, and the 12-month gain stands at 157.98%. Such numbers naturally invite profit-taking, especially after a day when hotter-than-expected US inflation — 3.8% — sent the Nasdaq lower.

Q1 Results Show the Transition Is Producing Real Numbers

Nokia delivered first-quarter 2026 revenue of €4.497 billion, up 2% year on year, with growth driven principally by network infrastructure. More telling is the performance inside the AI and cloud segment: revenue soared 49% to €1 billion. That is the engine management wants to supercharge, as hyperscalers race to add capacity for data traffic and AI workloads.

Bottom-line improvement is equally stark. The company posted net profit of €87 million, reversing a €60 million loss in the same quarter last year. Comparable operating profit rose 54% to €281 million, while diluted comparable earnings per share came in at €0.05.

Portfolio Rationalisation and a Push into Defence

Alongside the growth push, Nokia is pruning its portfolio. The company announced the sale of its fixed wireless access (FWA) unit to Inseego, a move that frees up capital and management bandwidth. Nokia will retain an 11% strategic stake in the business, allowing it to stay involved without the heavy hardware commitment.

At the same time, Nokia is opening a new front in defence. Together with US firm Anduril, it is developing specialised military communication systems that leverage Nokia’s expertise in secure networking. This diversification adds resilience to the business model and taps into rising defence budgets.

The Valuation Challenge

While the transformation narrative is compelling, the stock now trades more like an AI infrastructure name than a legacy telecom supplier. That creates a high bar: Nokia must back up the new status with a steady stream of data centre orders and expanding margins. Friday’s profit-taking was mild, but a sustained pullback could test the 11-euro support level. For now, the uptrend remains intact, and the market is betting the old Nokia is a thing of the past.