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Nokia Corporation (NOK - Free Report) shares have gained 18.4% year to date compared with the industry’s growth of 10%. The stock has outperformed the Zacks Computer & Technology sector and the S&P 500 during the same time frame.
Image Source: Zacks Investment Research
The company has underperformed its peers like Arista Networks, Inc. (ANET - Free Report) but outperformed Ericsson (ERIC - Free Report) . Shares of Ericsson have gained 6.3%, and shares of Arista have jumped 30.4%.
NOK Benefits From Accelerating AI & Cloud Demand
Nokia is increasingly benefiting from growing investments in AI infrastructure and cloud computing. The rapid expansion of AI data centers is increasing the need for high-speed optical connectivity, advanced IP routing and reliable data center interconnect solutions. Nokia is well-positioned to capitalize on these requirements through its Network Infrastructure portfolio.
During the third quarter of 2026, Nokia's net sales from AI & Cloud customers surged 123% year over year on a constant currency basis. Order intake from these customers increased 118%, reaching 1.5 billion euros during the quarter. The strong order momentum reflects growing demand for NOK's optical and IP networking solutions as hyperscalers expand their AI infrastructure. Management expects the combined Optical and IP Networks businesses to grow 25-30% in 2027, supported by a strong order backlog.
The company's 800G coherent pluggable shipments increased 2.4 times sequentially in the third quarter. It also secured design wins for its 800G ZR/ZR+ pluggable products with 29 customers and reported a major hyperscaler line-system win. In addition, its multi-rail technology secured three design wins, with initial customer deliveries underway.
Its IP Networks business is also gaining traction, securing two additional hyperscaler design wins, including one for a next-generation data center gateway. Nokia is also working with telecom operators and emerging cloud infrastructure providers on advanced networking architectures.
Nokia is also positioning itself for the next phase of telecommunications infrastructure through its AI-RAN platform. The technology aims to integrate AI capabilities with radio access networks, enabling operators to improve network performance, spectral efficiency and operational flexibility. During the third quarter, Nokia, together with T-Mobile and NVIDIA, completed an AI-RAN call in a live operator network.
Major Challenges for Nokia
Nokia remains exposed to the cyclical nature of telecommunications infrastructure spending, which can create uneven revenue and profitability across investment cycles. While AI and cloud demand is supporting Optical Networks and IP Networks, carrier spending remains mixed across regions and business lines. In the AI networking space, it faces strong competition from companies like Arista and HPE. In the legacy telecom space, Ericsson remains a major competitor.
Nokia's ongoing restructuring initiatives and organizational simplification efforts are weighing on reported financial performance. Although management is targeting improved operational efficiency and long-term cost savings, the associated expenses continue to affect near-term earnings.
Cash flow generation remains another area of concern. Nokia reported negative free cash flow of €99 million in the third quarter, despite generating comparable operating profit of €605 million. Cash generation was affected by working capital requirements, restructuring-related payments and capital expenditure.
Estimate Revision Trend
Earnings estimates for the company for 2026 have remained unchanged, while for 2027, they have decreased over the past 60 days.
Image Source: Zacks Investment Research
Key Valuation Metric of NOK
From a valuation standpoint, NOK is currently trading at a discount compared to the industry. Going by the price/earnings ratio, the company’s shares currently trade at 16.61 forward earnings, lower than 27.68 for the industry and its mean of 21.35.
Image Source: Zacks Investment Research
End Note
Nokia is increasingly benefiting from the expansion of AI infrastructure, with accelerating demand for optical and IP networking solutions providing an important growth opportunity. Strong third-quarter order intake, hyperscaler design wins and progress in AI-RAN strengthen its long-term positioning.
However, the company still faces several challenges. Weakness in traditional telecommunications spending, declining Fixed Networks and Core Software revenues, restructuring-related expenses and subdued free cash flow conversion continue to cloud its near-term financial outlook. With a Zacks Rank #3 (Hold), Nokia appears to be treading in the middle of the road, and new investors could be better off if they trade with caution. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
View the Zacks #1 Rank List
Image: Bigstock
Nokia Stock Rises 18.4% Year to Date: Is There More Upside Ahead?
Key Takeaways
Nokia Corporation (NOK - Free Report) shares have gained 18.4% year to date compared with the industry’s growth of 10%. The stock has outperformed the Zacks Computer & Technology sector and the S&P 500 during the same time frame.
Image Source: Zacks Investment Research
The company has underperformed its peers like Arista Networks, Inc. (ANET - Free Report) but outperformed Ericsson (ERIC - Free Report) . Shares of Ericsson have gained 6.3%, and shares of Arista have jumped 30.4%.
NOK Benefits From Accelerating AI & Cloud Demand
Nokia is increasingly benefiting from growing investments in AI infrastructure and cloud computing. The rapid expansion of AI data centers is increasing the need for high-speed optical connectivity, advanced IP routing and reliable data center interconnect solutions. Nokia is well-positioned to capitalize on these requirements through its Network Infrastructure portfolio.
During the third quarter of 2026, Nokia's net sales from AI & Cloud customers surged 123% year over year on a constant currency basis. Order intake from these customers increased 118%, reaching 1.5 billion euros during the quarter. The strong order momentum reflects growing demand for NOK's optical and IP networking solutions as hyperscalers expand their AI infrastructure. Management expects the combined Optical and IP Networks businesses to grow 25-30% in 2027, supported by a strong order backlog.
The company's 800G coherent pluggable shipments increased 2.4 times sequentially in the third quarter. It also secured design wins for its 800G ZR/ZR+ pluggable products with 29 customers and reported a major hyperscaler line-system win. In addition, its multi-rail technology secured three design wins, with initial customer deliveries underway.
Its IP Networks business is also gaining traction, securing two additional hyperscaler design wins, including one for a next-generation data center gateway. Nokia is also working with telecom operators and emerging cloud infrastructure providers on advanced networking architectures.
Nokia is also positioning itself for the next phase of telecommunications infrastructure through its AI-RAN platform. The technology aims to integrate AI capabilities with radio access networks, enabling operators to improve network performance, spectral efficiency and operational flexibility. During the third quarter, Nokia, together with T-Mobile and NVIDIA, completed an AI-RAN call in a live operator network.
Major Challenges for Nokia
Nokia remains exposed to the cyclical nature of telecommunications infrastructure spending, which can create uneven revenue and profitability across investment cycles. While AI and cloud demand is supporting Optical Networks and IP Networks, carrier spending remains mixed across regions and business lines. In the AI networking space, it faces strong competition from companies like Arista and HPE. In the legacy telecom space, Ericsson remains a major competitor.
Nokia's ongoing restructuring initiatives and organizational simplification efforts are weighing on reported financial performance. Although management is targeting improved operational efficiency and long-term cost savings, the associated expenses continue to affect near-term earnings.
Cash flow generation remains another area of concern. Nokia reported negative free cash flow of €99 million in the third quarter, despite generating comparable operating profit of €605 million. Cash generation was affected by working capital requirements, restructuring-related payments and capital expenditure.
Estimate Revision Trend
Earnings estimates for the company for 2026 have remained unchanged, while for 2027, they have decreased over the past 60 days.
Image Source: Zacks Investment Research
Key Valuation Metric of NOK
From a valuation standpoint, NOK is currently trading at a discount compared to the industry. Going by the price/earnings ratio, the company’s shares currently trade at 16.61 forward earnings, lower than 27.68 for the industry and its mean of 21.35.
Image Source: Zacks Investment Research
End Note
Nokia is increasingly benefiting from the expansion of AI infrastructure, with accelerating demand for optical and IP networking solutions providing an important growth opportunity. Strong third-quarter order intake, hyperscaler design wins and progress in AI-RAN strengthen its long-term positioning.
However, the company still faces several challenges. Weakness in traditional telecommunications spending, declining Fixed Networks and Core Software revenues, restructuring-related expenses and subdued free cash flow conversion continue to cloud its near-term financial outlook. With a Zacks Rank #3 (Hold), Nokia appears to be treading in the middle of the road, and new investors could be better off if they trade with caution. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.