Nokia Earnings Review: AI Network Story Just Got Real

$Nokia Oyj (NOK.US)$ 's first quarter was better than the market had feared. The company delivered a clean profit beat, held full year group guidance unchanged, and raised its growth assumptions for Network Infrastructure. On the surface, this was the kind of report bulls wanted to see from a company trying to reposition itself from a legacy telecom equipment story into an AI networking beneficiary.

Key financial highlights

Revenue was fine, not spectacular. Reported net sales came in at €4.497 billion versus €4.390 billion a year ago, while comparable net sales were €4.500 billion, up 3% year over year and up 4% on a constant currency and portfolio basis.

Margins were the more impressive part of the release. Comparable gross margin expanded 320 basis points year over year to 45.5%, well above the 43.5% consensus in Nokia's April 16 estimate sheet. Comparable operating margin rose to 6.2% from 4.2% a year earlier, also ahead of the 5.5% consensus. That tells you this was not just a top line story. Mix and execution improved meaningfully.

Comparable diluted EPS came in at €0.05 versus €0.03 a year ago and ahead of the €0.04 consensus. Reuters noted that the company booked €1 billion of orders from AI and cloud customers, which helps explain why profit leverage was stronger than many investors expected.

Revenue breakdown by platform

Network Infrastructure remained the centerpiece. Segment net sales were €1.829 billion versus €1.639 billion a year ago, up 12% reported and up 6% on a constant currency and portfolio basis. Inside that segment, Optical Networks grew 20%, IP Networks grew 3%, and Fixed Networks declined 13%. Management said Optical order intake stayed “well above one” on a book to bill basis, while IP pipeline growth was driven by new design wins and deeper AI and Cloud penetration inside the data center.

Mobile Infrastructure was steadier than faster. Segment net sales were €2.495 billion versus €2.573 billion a year ago, down 3% reported but up 3% on a constant currency basis. Within the segment, Core Software grew 5%, Radio Networks was flat, and Technology Standards grew 10% with new deals in consumer electronics and multimedia. Operating margin improved to 8.9% from 5.1%, though management also pointed out that the comparison benefited from a one time charge in the prior year.

Portfolio Businesses remained small and loss making, with net sales of €173 million and an operating loss of €20 million. This segment is not the reason investors own Nokia today. The reason is still the AI and Cloud driven acceleration inside Network Infrastructure, especially Optical and increasingly IP.

Three things to watch

Optical still drives the story

This quarter confirmed that Optical is still $Nokia Oyj (NOK.US)$ 's cleanest AI lever. Management said demand "continued to be strong" in AI and Cloud, where net sales rose 49% and now account for 8% of group sales. It also said Nokia won important AI and Cloud design wins for both pluggables and line systems. That matters because it shows Nokia is not just riding a one quarter backlog release. It is still winning sockets in the parts of the network that hyperscalers are spending on most aggressively.

IP may become the second leg of the AI story

Optical got the headlines, but IP may be the more durable follow through. Management said it is seeing good traction, with pipeline growth driven by new design wins and deeper penetration into AI and Cloud use cases inside the data center, and it expects IP growth to improve in Q2 and for the full year. If that happens, Nokia's AI narrative broadens from pure optical transport into switching, gateway, and data center network fabric. That is important because it makes the AI story less dependent on one product bucket.

Mobile Infrastructure improved, but the quality of that improvement still matters

Mobile Infrastructure had a solid quarter, but investors should be careful not to over extrapolate it. The operating margin improved sharply, yet management itself said the expansion reflected a one time charge in the prior year. Radio Networks was only flat, which is fine but not exciting, and the better growth came from Core Software and Technology Standards. The real question is whether this segment can deliver a cleaner multi quarter margin rebuild once the easy compare effect fades.

Guidance

The group level outlook was unchanged. $Nokia Oyj (NOK.US)$ still targets full year 2026 comparable operating profit of €2.0 billion to €2.5 billion. But under the surface, the outlook actually improved.

Management now expects Network Infrastructure net sales to grow 12% to 14% in 2026, up from the 6% to 8% framework it had set earlier in the year, and it now expects Optical Networks and IP Networks combined to grow 18% to 20%. It also said the company is currently tracking somewhat above the mid point of its full year operating profit range.

For Q2, Nokia assumes a 5% to 9% sequential increase in net sales, with Q2 operating profit accounting for 12% to 16% of the full year total.

Options strategy

Nokia's options market is overwhelmingly skewed toward calls with a put/call ratio of just 0.22 on total open interest of 1.28M contracts, while implied volatility sits at 74.66%, well above the 56.25% historical volatility and landing at the 93rd IV Percentile, indicating that premiums are near their richest levels of the past year as traders aggressively position for outsized upside moves in the Finnish telecom giant.

For bullish traders, the cleaner setup is a bull call spread rather than chasing outright calls after the number. The bull case is that Optical demand stays hot, IP accelerates, and the raised NI growth assumptions pull the stock back higher.

For bearish traders, a bear put spread is more sensible than buying naked puts. The bear case is that the beat was good, but not good enough for a stock already trading on a rich multiple and already carrying a lot of AI optimism.

Summary

Nokia delivered a good quarter. Profit beat, margin beat, AI and Cloud demand stayed strong, and the company raised its Network Infrastructure growth assumptions for the year.

The problem is that this is no longer a cheap turnaround stock. The market already knows Optical is strong. What investors need next is proof that IP can become a real second growth leg and that Mobile Infrastructure can improve on more than just easy comparisons. If that happens, the AI network rerating can continue. If not, this remains a good quarter inside a stock that may already be priced for a lot of good news.

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