Nokia Beats Q1 Estimates as AI Fuels Network Growth

Nokia has opened the 2026 fiscal year with results that reflect how deeply AI, cloud and data centre buildouts are feeding into telco networks.

The company posted a stronger-than-expected rise in profit, as growth continues to concentrate in the parts of its portfolio tied to high-capacity connectivity.

Comparable operating profit increased 54% to US$328m in the first quarter, ahead of the US$292m forecast by analysts.

Net sales also reached US$5.2bn, in line with expectations, with overall growth of 4% year on year on a constant currency and portfolio basis.

Within that, net sales from AI and cloud customers climbed 49%, highlighting where exactly spending is accelerating.

The dynamic is familiar across the sector as hyperscalers, which depend on fast, high-capacity links between servers and sites, are expanding infrastructure to support its AI workloads. This pushes the demand for fibre and transport networks.

Optical networks take centre stage

Nokia’s Network Infrastructure business sits closest to that demand. The unit recorded a 6% growth, with Optical Networks increasing by 20%. 

Justin Hotard, President and CEO of Nokia, says: "We delivered a solid start to the year, with net sales growing 4%, gross margin expanding 320bps and operating margin expanding 200bps in the first quarter.

"Demand continued to be strong, particularly in AI & Cloud, where net sales grew 49% and now account for 8% of group sales.

"We also booked €1 billion of orders from AI & Cloud customers in the quarter."

That €1bn (US$1.1bn) points to sustained investment cycles among hyperscalers. Nokia’s expansion in optical transport, strengthened by its acquisition of US-based Infinera, positions it to capture more of this spending as operators and cloud providers scale its networks.

Margins have also moved higher as the comparable gross margin reached 45.5%, while the comparable operating margin rose to 6.2%.

The mix of higher-value optical and IP products contributes to that improvement.

Justin says: "We won a number of important AI & Cloud design wins and orders for both pluggables and line systems in the quarter. IP Networks net sales grew 3% and we expect growth to improve in Q2 and for the full year."

Data centre demand reshapes telco priorities

As data centre capacity expands, telco networks are adapting alongside it. AI workloads require constant movement of large data sets, placing pressure on bandwidth, latency and efficiency.

This is where optical transport and IP routing become core to both cloud and telco strategies.

Justin says: "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.

"Across the supply chain, demand is accelerating and lead times are extending, reflecting the scale of investment underway."

Nokia is aligning its product roadmap with these requirements. At the OFC optical conference, the company announced new technologies which are designed to increase performance and reduce cost in optical networks.

This included four new digital signal processors, which manage how data is encoded and transmitted over fibre to improve efficiency. Nokia's CEO said that the processors power 13 new solutions, which reduce total cost of ownership by up to 70% for customers.

Broader network portfolio supports growth

Outside of optical, Nokia’s wider telco portfolio recorded steady progress. Mobile Infrastructure grew by 3%, Core Software by 5% and Radio Networks flat and Technology Standards increased 10% through new agreements.

The company is also continuing its development of AI-RAN, as Justin says: "We are making progress on AI-RAN and are on track to launch customer trials later this year. With the addition of Orange, we now have 10 customers publicly committed to working with us."

Across its business, Nokia signals are heightening focus on segments linked to AI and data centre growth. Justin says: "We are increasing our growth assumption for Optical and IP Networks and we are investing to capture accelerating demand from AI & Cloud customers."

The company is keeping its full-year outlook unchanged, targeting US$2.3bn to US$2.9bn in comparable operating profit, while indicating that performance is tracking above the mid-point of that range.