Nokia's stock held steady near €7.20 in Helsinki trading on Friday, consolidating after a significant advance the previous session. The stability follows a notable analyst revision that has injected fresh optimism into the Finnish telecommunications equipment maker's outlook.
Analyst Upgrade Contrasts Recent Caution
In a decisive move, Morgan Stanley increased its price target for Nokia to €8.50, a substantial rise from its previous estimate of €6.50. This upgrade provides additional momentum to the stock's recent rally and presents a contrasting view to other financial institutions. Both DNB Carnegie and Danske Bank had recently downgraded Nokia to a hold rating, with each setting a €6.50 price target. DNB made its call on March 10, while Danske Bank adjusted its stance in late February.
In the United States, Nokia's American Depositary Receipts (ADRs), which represent ownership in the Helsinki-listed shares, closed Thursday's session at $8.14, marking a gain of 3.04%. Trading activity was exceptionally vigorous, with volume reaching 88.7 million shares—more than double the stock's 50-day average volume.
AI Demand Drives Bullish Revision
The revised assessment from Morgan Stanley, attributed to analyst Terence Tsui, centers on robust demand for artificial intelligence infrastructure. The bank projects this trend will serve as a significant tailwind for Nokia's growth. Specifically, Morgan Stanley forecasts that revenue from Nokia's Optical and IP Networks division could climb approximately 13% in 2026, surpassing the company's own guidance of 10% to 12% growth. This optimistic view was partly informed by recent financial results from Ciena, a key competitor in the optical networking space.
Nokia's strategic business developments support this positive narrative. Following a contract win with Telefonica in Spain, the company has recently secured new AI-focused partnerships with major carriers TIM Brasil and Deutsche Telekom. These agreements underscore how artificial intelligence is beginning to generate meaningful incremental revenue for network infrastructure providers like Nokia and its rival Ericsson.
Management's Long-Term AI Vision
Company leadership has consistently emphasized the transformative potential of AI. In January, CEO Justin Hotard noted that order intake for Optical and IP Networks remained above parity, largely driven by demand from AI and cloud customers. He characterized AI as "a long-term structural shift" for the industry. Around the same time, Nokia provided a financial target, stating it expects to achieve a comparable operating profit between €2.0 billion and €2.5 billion in 2026. This adjusted figure excludes certain one-time items and was communicated after the company reported quarterly earnings in line with market forecasts.
The new brokerage call arrives shortly after Nokia filed its 2025 annual report and Form 20-F with the U.S. Securities and Exchange Commission. Investors are now looking ahead to the company's first-quarter 2026 results, scheduled for release on April 23.
Balanced Perspective on Growth Drivers
Despite the enthusiasm, analysts note that the immediate financial impact from AI remains a portion of Nokia's overall business. According to Morgan Stanley's analysis, AI and cloud-related revenue currently constitutes only about 6% of Nokia's total sales. The company itself has cautioned that first-quarter sales are expected to decline more than the typical seasonal pattern would suggest. Furthermore, management indicated that free cash flow could be volatile, influenced by the timing of customer payments, shifting regional demand, and an increase in capital expenditures for optical equipment.
Nokia's shares have been trading near their highest level in roughly a decade, buoyed by strategic factors including a $1 billion investment from Nvidia, which secured a 2.9% stake in the company, and the recent flurry of AI partnership announcements. The market appears to be betting that an expanded data-center infrastructure footprint will help offset softer demand in the 5G market and the impact of certain lost contracts.
