Inside Nokia's 140% Stock Surge: The AI and Defense Pivot Reshaping a 161-Year-Old Company

Q1 2026 Earnings Prove the AI Pivot Is Working

If Nvidia's investment was the spark, the Q1 2026 earnings report was the fuel that sustained the rally. On April 23, Nokia reported net sales of €4.5 billion, up 4% year-on-year, with comparable operating profit surging 54% to €281 million—roughly 11% ahead of analyst consensus .

Most critically, the AI & Cloud segment grew 49% year-on-year, reaching 8% of group sales, and the company booked €1 billion in AI & Cloud orders in the quarter alone . Optical Networks revenue grew 20%, and Network Infrastructure overall grew 6%. Gross margin expanded by 320 basis points, and operating margin expanded by 200 basis points . CEO Justin Hotard responded by raising full-year Network Infrastructure growth guidance to 12–14% .

Sunnyvale Lab Signals Long-Term AI Ambitions

On May 21, Nokia opened its AI Networking Innovation Lab in Sunnyvale, California—a purpose-built hub for co-innovation with AI and cloud partners . The facility, developed alongside AMD, Keysight, Lenovo, and Supermicro under an open-standards approach, is designed to test and validate next-generation data center networking architectures for large-scale AI training and real-time inference .

The lab serves as a testing ground for Nokia Validated Designs, where the company invites a global ecosystem of partners to integrate their solutions and validate performance under realistic AI conditions . The launch reinforced the narrative that Nokia intends to be a long-term player in AI data center networking, not just a short-term beneficiary of infrastructure spending.

A Quiet Defense Pivot Widens the Story

Alongside the AI transformation, Nokia has been building a parallel narrative in defense. Nokia Belgium joined a consortium with COBBS BELUX and Anduril Industries to develop a sovereign counter-unmanned aerial system (C-UAS) program for Belgium, aimed at protecting military sites and critical infrastructure nationwide .

The consortium combines deep operational expertise, autonomous defense technology from Anduril, and Nokia's advanced secure communications infrastructure to deliver a locally developed and operated counter-drone capability . This defense pivot, combined with Nokia's existing work on tactical 5G networks for military forces and a memorandum of understanding with Kongsberg Defence & Aerospace, gave investors a dual-pronged growth narrative spanning hyperscale data centers and military-grade secure networks .

Executives Back the Strategy with Their Own Money

Nokia's top brass demonstrated internal confidence by purchasing shares at €12.09, signaling strong belief in the AI pivot and defense expansion strategy . Such insider buying, occurring while the stock was already up substantially, reinforced the message that leadership sees the transformation as sustainable rather than a short-term boost.

What the Market Is Actually Pricing In

The re-rating has been dramatic. Nokia's forward price-to-earnings ratio more than doubled from approximately 17 at the start of the year to approximately 36 by late May . Yet the AI and cloud business that is driving most of the excitement accounted for just 8% of total sales in Q1 2026 .

The market is essentially valuing Nokia as an AI infrastructure company in the making, with the traditional telecom business treated as a legacy cash-flow engine . This valuation implies high expectations for continued AI revenue growth, successful execution of the defense strategy, and the optical networking supercycle sustaining its momentum. With optical networking lead times around 12–18 months and management raising its AI and cloud addressable-market forecast to a 27% compound annual growth rate for 2025–2028, Nokia has given investors concrete reasons to believe the transformation is real .