Nokia Oyj reported better-than-expected first-quarter earnings, indicating that its strategic pivot toward artificial intelligence (AI) and cloud infrastructure is yielding positive results. First-quarter net sales increased by 3% year-over-year to 4.5 billion euros, slightly below the analyst consensus estimate of 4.6 billion euros. On the profitability side, adjusted operating profit for the quarter surged 54% to 281 million euros, surpassing the average analyst forecast of 244 million euros. Quarterly profit soared 93% to 295 million euros, while adjusted earnings per share grew 67% to 0.05 euros. Following a business streamlining and restructuring effort in the fourth quarter of last year, which emphasized a shift toward data center interconnect, Nokia is betting that the global surge in AI investment will drive its sales growth. The Q1 report marks the first financial release under Nokia's new business structure. The Network Infrastructure division, which includes AI data center connectivity, saw its sales increase by 12% to 1.829 billion euros. Within this division, optical networking sales jumped 56% to 821 million euros. In contrast, the Mobile Networks unit, which handles traditional mobile equipment, experienced a 3% decline in sales to 2.495 billion euros. CEO Jürgen Hottass stated that the company is "off to a good start for the year." Nokia expects full-year 2026 adjusted operating profit to be in the range of 2.0 to 2.5 billion euros. Hottass noted that while the mobile infrastructure segment still contributes the majority of sales, the primary growth drivers are now AI and cloud customers. Nokia's resurgence is largely attributed to capitalizing on the booming optical communications industry. As the world enters the AI era, technologies such as large AI models, autonomous driving, and embodied intelligence place higher demands on data transmission speed, capacity, and reliability. Traditional electrical signal transmission has reached its physical limits, whereas optical communication, which uses light signals, enables high-bandwidth, low-latency transmission and reduces energy consumption over long distances and large capacities, making it the essential "highway" for AI computing power. Over a decade after exiting the mobile phone business, the former handset market leader is staging a comeback as a key player in communications and AI infrastructure. Nokia has transformed into the world's second-largest telecommunications equipment provider, holding a central position in 5G patents, optical communications, and computing power networks. The company possesses a significant portfolio of core 5G patents, ranks among the global leaders in optical communication equipment market share, and provides network infrastructure in over 130 countries, with most major North American cloud service providers adopting its optical transmission solutions. Nokia's transition into the AI and cloud infrastructure domain has been supported by a series of strategic acquisitions. In 2016, the acquisition of Alcatel-Lucent for 15.6 billion euros brought key patents from Bell Labs, establishing Nokia as the world's second-largest optical networking equipment supplier. In 2024, the company acquired optical networking manufacturer Infinera for approximately $2.3 billion, creating a comprehensive portfolio spanning from Data Center Networking (DCN) to Data Center Interconnect (DCI) and optical transport. Furthermore, in October of last year, Nokia secured a $1 billion strategic investment from NVIDIA, with the two companies collaborating on AI-RAN smart base stations to upgrade communication networks into edge computing scheduling nodes, directly expanding Nokia's growth potential in the AI era. Through its focus on optical modules, data center interconnect, and 5G-Advanced/6G technologies, Nokia is positioning itself as a critical builder of the AI-era computing power "highway." This strategic direction has contributed to a year-to-date stock price increase of over 53%, with the company's market capitalization briefly exceeding $60 billion.
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