Nokia’s Strategic Pivot Gathers Pace as FastMile Sale Clears Path for AI-Fueled Growth

Nokia's shares double in 2026 amid AI boom, optical network surge, and strategic divestiture of FastMile to Inseego, with operating profit target raised to €2.5B.

The Finnish telecom equipment maker has undergone a remarkable transformation in 2026, with its shares more than doubling in value as investors reward a sharp strategic reorientation. Having long been dismissed as a laggard in the telecommunications hardware space, Nokia is now positioning itself as a key beneficiary of the artificial intelligence infrastructure boom.

The stock closed at €10.87 on Friday, just shy of its recent annual high, after a year-to-date surge of roughly 95%. Brief profit-taking midweek did little to dent the broader momentum, though the rally has pushed valuations into territory that leaves little room for operational missteps.

A Calculated Divestiture

In a move that underscores its commitment to focusing on higher-margin businesses, Nokia has agreed to sell its FastMile fixed wireless access (FWA) division to US-based Inseego. The transaction, expected to close in the fourth quarter, is structured as an equity deal rather than a straightforward cash sale. Nokia will receive an approximately 11% stake in Inseego, with a portion of the shares serving as direct consideration for the division and additional capital to be injected at closing.

For Inseego, the acquisition is transformative — the company expects to roughly double its revenue. The two firms also plan to collaborate on next-generation 6G technology development. While the financial impact on Nokia’s balance sheet is modest, the strategic signal is clear: management is doubling down on its most promising growth engine.

Optical Networks Drive the Rally

The centerpiece of Nokia’s resurgence is its optical networking business, which received a massive boost from the acquisition of Infinera. Integration has progressed faster than anticipated, delivering measurable synergies ahead of schedule. In the first quarter of 2026, revenue from optical networks jumped 20%, with an order backlog comfortably exceeding current sales levels.

The company’s order books are swelling with contracts tied to cloud computing and AI infrastructure, running into the billions of euros. Management now expects the combined AI and cloud market to grow at an annual rate of 27% through 2028, prompting a significant upward revision of its operating profit target for the current year to as much as €2.5 billion.

Capacity Expansion and Geopolitical Tailwinds

To meet surging demand, Nokia is embarking on a major investment program, allocating between €900 million and €1 billion to expand production capacity. The spending spree reflects confidence that the current growth trajectory is sustainable rather than cyclical.

Geopolitical factors are also working in Nokia’s favor. European governments are increasingly excluding Chinese vendors such as Huawei and ZTE from critical network infrastructure on security grounds. As a homegrown European supplier, Nokia is well-positioned to capture market share in the resulting replacement cycle.

This combination of factors has prompted a wave of analyst upgrades. JPMorgan and Morgan Stanley have both raised their ratings, though Barclays remains cautious with an underweight stance, lifting its price target only to €8.

The Valuation Question

For all the optimism, the stock’s meteoric rise has stretched its valuation. With a price-to-sales ratio above three, investors are pricing in substantial future growth. Any operational disappointment could trigger a sharp correction. The company’s relative strength index stands at roughly 62, suggesting the stock is neither overbought nor oversold but leaving limited margin for error.

Management itself has cautioned about volatility in telecom capital expenditure and demand patterns in North America. Competition with Ericsson remains intense, and fluctuating investment budgets from telecom operators present ongoing risks.

All eyes will be on July 23, when Nokia reports its second-quarter results. The company has guided for revenue growth of up to 9% compared with the previous quarter, and the market will be watching closely to see whether the promised acceleration in network infrastructure sales materializes. For now, the narrative is firmly in Nokia’s favor — but the next earnings report will test whether the stock’s lofty valuation can be justified by the numbers.