Nokia Bets Big on Networking for AI and Cloud

Nokia’s focus on AI and cloud networking, boosted by a new CEO and reorganized priorities, is paying off. In the company’s first-quarter earnings, released this morning, profits beat analyst estimates, and shares rose higher than they’ve been since 2011.

Nokia’s CEO, Justin Hotard, characterized Q1 as “a solid start to the year” and stressed the performance of the company’s Networking Infrastructure division as well as parts of its Mobile Infrastructure group. Nokia reorganized its divisions last year to emphasize growth in datacenter products and shortly began to see its fortunes improve.

The trend continues. Nokia’s first-quarter 2026 profit was up 54% year-over-year to €281 million (about $329 million), significantly beating analyst estimates. The company now anticipates €2 billion to €2.5 billion ($2 billion to $3 billion) in comparable operating profit for the full year.

Nokia shares rose to a reported 16-year high in Helsinki on the news, and at this writing were trading up over 4% on the NYSE.

Networking Infrastructure Stands Out

Nokia still makes most of its sales from mobile equipment, though datacenter networking is catching up. For the quarter, net sales for Networking Infrastructure were €1.8 billion ($2.11 billion), up 12% or 6% in constant currency y/y; net sales for Mobile Infrastructure were €2.5 billion ($3 billion), down 3% but up 3% in constant currency.

CEO Hotard played up the advantages of the mobile division on today's earnings call, while looking ahead to AI RAN and software innovations to help perk up a flattening of the telco market. "The business continues to deliver stability, and we expect largely flat net sales for the full year with improved profit generation year-over-year," he said. He also pointed to a partnership with NVIDIA, which factors into new AI RAN radios in development.

While Nokia’s overall sales were up 4% y/y to €4.5 billion ($5.3 billion), sales of Networking Infrastructure products grew the most: Optical networking gear grew 20%, driven primarily by AI and cloud infrastructure products, which grew 49%. Nokia claimed €1 billion ($1.17 billion) of orders for those products in the quarter.

Nokia breaks out IP Networks and Fixed Networks separately within the Networking Infrastructure division. IP Networks, which includes routing and security products for telco and hyperscaler datacenters, grew 3%, thanks to AI and cloud demand. Interestingly, Nokia acknowledged that decline from sales to telecom providers weighed on the IP Networks segment.

Fixed Networks, which includes broadband access equipment, including PON gear, declined 13%. Nokia’s earnings release stated: “The decline was primarily due to a decline in sales of consumer premise fiber related products as we focus the business towards higher margin products.”

Nokia’s focus is now on AI and cloud infrastructure products, with optical technology prioritized. “We now expect the addressable market in AI & Cloud to grow at a 27% CAGR (2025–2028), compared to the 16% we estimated in November,” stated CEO Hotard in the press release. “Across the supply chain, demand is accelerating and lead times are extending, reflecting the scale of investment underway.” Nokia has accordingly increased its guidance. On the earnings call Hotard said, "For Optical and IP Networks combined, we expect growth of 18%-20%, up from 10%-12%."

Note: That lead times are extending could be read as an Achilles heel in Nokia’s plans, though thanks to its purchase of Infinera last year, Nokia has its own Indium Phosphide manufacturing facility in Sunnyvale, Calif., which gives it an advantage in sourcing optical components. The company is working to add a second factory in San Jose, Calif., expected to be operational in 2027.

The Optical Centerpiece

As noted, central to the new order at Nokia is optical networking, which has seen significant growth since Nokia bought Infinera. The need to improve the power profile and overall efficiency of AI networking has become urgent, so providing optical networking solutions will be key to success in the coming years.

Nokia has been aggressively addressing the clamor for optical solutions. At the recent OFC Conference in March, the company introduced a suite of coherent optical pluggable transceivers and transponder modules for campus, metro, and regional datacenter networks. These solutions are expected to sample in mid-2027 and become generally available later in that year. Nokia also introduced an amplifier to support hyperscaler datacenter interconnections that will become GA later this year. Taken together, Nokia says its optical solutions can reduce TCO by up to 70%.

Futuriom Take: Nokia’s latest earnings impressed the markets and highlight the company’s new focus on networking for cloud and AI, powered by optical innovations. This is a wise and practical direction that should lead to further success.