NOK Benefits From Strong Growth in AI Revenues: More Upside Ahead?
Nokia CorporationNOK is increasingly emerging as an AI infrastructure beneficiary rather than a traditional telecom-equipment vendor. The company's AI & Cloud revenues jumped 49% in the first quarter of 2026. The growth is primarily supported by growing hyperscalers’ investment in AI infrastructure.
AI-driven spending is primarily driving growth in Nokia’s Network Infrastructure segment. The segment’s Optical Networks business revenues grew 20% year over year on a constant-currency basis, driven by rapid AI data center buildouts. In this vertical, Nokia reported strong order intake backed by solid demand for optical pluggables, line systems and data-center interconnect solutions.
Backed by such solid momentum, the company also increased its forecast for Network Infrastructure market growth to 14% CAGR from the previously expected 9%. It has also been stated that projected capital expenditures by the largest hyperscalers for 2026 have risen from roughly $540 billion to more than $700 billion as companies expand their AI computing capacity. To capitalize on this opportunity, Nokia is aggressively investing in AI-related innovation.
The company introduced four new digital signal processors that power 13 application-optimized optical networking solutions. These products are designed to improve network performance while reducing the customer's total cost of ownership by up to 70%. Nokia also unveiled a next-generation hyperscale optical platform. It increases fiber capacity without expanding physical infrastructure, helping customers scale AI workloads more efficiently.
How are Competitors Faring?
In the Optical Networks business, Nokia faces competition from Arista Networks, Inc.ANET and Ciena CorporationCIEN. Ciena is witnessing encouraging signs in the market that include improvements in customer spending owing to the rapid proliferation of AI applications. It continues to benefit from higher network traffic and demand for bandwidth, which are mainly attributed to increasing AI technology use cases. Ciena’s Cloud and Service Provider customers are prioritizing network investments to support AI-driven traffic growth, highlighting long-term opportunities for its Systems and Interconnects businesses.
The Arista 2.0 strategy continues to resonate with customers as modern networking platforms become increasingly important for AI-driven data center architectures. Arista continues to benefit from the expanding cloud networking market, which is driven by rising demand for scalable infrastructure and AI networking solutions. The company offers a broad portfolio of data center and campus Ethernet switches and routers spanning 1/2.5/5/10/25/40/50/100/400 and emerging 800-gig platforms.
NOK’s Price Performance, Valuation & Estimates
Nokia shares have soared 168.7% over the past year compared with the industry’s 56.5% growth.
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From a valuation standpoint, Nokia trades at a forward price-to-sales ratio of 3.35, below the industry tally of 5.41.
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Earnings estimates for 2026 and 2027 have remained unchanged over the past 60 days.
Image Source: Zacks Investment Research
Nokia currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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