Nokia: AI & Cloud Soars by 49%, But Fixed Networks Falter
Nokia reports a solid first quarter in 2026 with a net growth of 4% and improved margins, driven by an extremely strong demand in the AI & Cloud sector, which surged by 49%. However, the fixed network segment declined by 13%, revealing a strategic shift within the company and raising questions about the balance of its portfolio.
Strong Overall Growth Led by AI & Cloud
The company recorded a net revenue increase of 4% (comparable data, constant exchange rate) in the first quarter of 2026, with gross margin widening by 320 basis points and operating margin improving by 200 basis points. The surge was largely driven by the AI & Cloud segment, where sales jumped by 49% and now account for 8% of the group's total revenue. During the quarter, Nokia recorded 1 billion euros in orders from AI & Cloud customers. The Optical Networks business grew by 20%, supported by a robust order book and a net order to billing ratio well above one. IP Networks grew by 3%, a momentum that the group expects to improve in the second quarter and throughout the year.
Fixed Networks Experience a Decline
Alongside this upward trend, fixed networks recorded a 13% decline in net sales. According to the release, this decline reflects a strategic choice by Nokia: a deliberate refocusing towards higher-margin products. The group's core historical business, the OLT fiber activity, remains essentially stable but accumulates a growing order book in key markets. This bifurcation reveals a company in transition: while abandoning low-profitability segments, it focuses its investments and energy on more lucrative growth areas, particularly around AI infrastructure. The Mobile Infrastructure segment displayed solid performance with a growth of 3% and an operating margin of 8.9%, while Nokia progresses on the launch of AI-RAN with ten publicly committed clients, including Orange, who have declared their intention to collaborate.
Nokia Raises Growth Assumptions for Optical and IP Networks
Nokia has raised its growth assumptions for optical and IP networks, noting that demand has accelerated significantly since its investor presentation in November 2025. The addressable AI & Cloud market is expected to grow at a compounded annual rate of 27% between 2025 and 2028, compared to an estimate of 16% in November. For the fiscal year 2026, the group now expects infrastructure network growth between 12% and 14%, with combined optical and IP networks progressing between 18% and 20%. Concurrently, Nokia is increasing its investments in optical networks to maximize its market opportunity. This capitalization effort includes a new indium phosphide manufacturing site in San Jose, California, expected to begin ramping up later in the year. Innovative optical products were unveiled at the OFC conference in March, with a sampling launch planned for mid-2027 and volume production in the second half of the year. The group currently anticipates a comparable operating result above the midpoint of its annual range of 2.0 to 2.5 billion euros.
