NOKIA: AI Demand And U.S. Expansion Will Shape Balanced Risk Ahead

Analysts have nudged their fair value estimate for Nokia Oyj modestly higher, lifting the implied price target by approximately EUR 0.04 per share. They are balancing improving AI driven growth prospects and supportive recent upgrades against tempered expectations for long term margins and network infrastructure multiples.

Analyst Commentary

Recent Street research paints a mixed but generally constructive picture for Nokia Oyj, with several upgrades and target hikes offset by selective downgrades and more conservative valuation work. The debate centers on how quickly AI driven demand, optical network strength and cloud partnerships can translate into sustained growth and margin delivery, relative to lingering concerns around telecom capex and execution in Network Infrastructure and Mobile Networks.

Bullish Takeaways

Bullish analysts highlight Nokia as a compelling AI linked equity, arguing that strength in optical networks and cloud oriented network services can support multi year top line growth and a higher structural earnings base.
Multiple target increases in both euros and U.S. dollars signal rising confidence that recent quarterly beats, particularly in Q3, are not purely cyclical, but instead reflect a more competitive positioning in high value segments.
Upgrades to Buy and Overweight, alongside higher fair value estimates from major global banks such as JPMorgan, support the view that risk reward has improved ahead of upcoming results and capital markets communication.
Supportive commentary around resilience in cloud provider demand is viewed as a partial offset to softer traditional carrier spending and underpins arguments for multiple expansion from current levels.

Bearish Takeaways

Bearish analysts remain cautious on valuation, trimming price targets where long term financial targets for Network Infrastructure growth and operating margins are seen as underwhelming relative to prior expectations.
Some research has reduced the implied multiples for Network Infrastructure and Mobile Networks in sum of the parts models, reflecting skepticism that these businesses can consistently earn mid teens margins through the cycle.
There is concern that telecom capex headwinds and a still challenging carrier spending environment could cap upside, even as AI and cloud demand trends remain favorable.
A number of downgrades to Neutral or Hold emphasize that high profile partnerships, including AI related collaborations, may not be transformational enough on their own to justify aggressive re rating without clearer evidence of execution and cash flow delivery.

What's in the News

Nokia plans to invest $4B over several years to expand U.S. R&D and manufacturing for AI ready mobile, fixed access, IP, optical and data center networking technologies, supplementing prior Infinera related spending (Bloomberg)
The European Commission is weighing a binding ban on high risk vendors like Huawei and ZTE from EU telecom networks, a potential structural tailwind for alternative suppliers including Nokia in Europe (Bloomberg)
Germany is moving closer to banning Huawei from 5G networks, which could redirect additional radio and core infrastructure demand toward Nokia and other European vendors (Light Reading)
VodafoneThree awarded a GBP 2B network expansion contract that splits radio access deployments between Ericsson and Nokia across tens of thousands of sites, reinforcing Nokia's UK RAN footprint (Bloomberg)
Danske Bank cut its rating on Nokia to Hold from Buy with a EUR 6.50 price target, highlighting valuation and execution concerns despite improving fundamentals in select businesses

Valuation Changes

The Fair Value Estimate has risen slightly, moving from €5.39 to €5.43 per share, implying a modest upward revision of around €0.04.
The Discount Rate has increased marginally, from 7.04 percent to about 7.10 percent, reflecting a slightly higher perceived risk profile or cost of capital.
The Revenue Growth assumption is essentially unchanged, ticking up fractionally from 3.42 percent to 3.42 percent, indicating stable top line expectations.
The Net Profit Margin projection remains effectively flat, edging from 9.48 percent to 9.48 percent, suggesting no meaningful change in long term profitability assumptions.
The future P/E multiple has risen slightly, from 17.69x to 17.85x, implying a modestly higher valuation multiple applied to expected earnings.

Robust network infrastructure demand and regulatory support are fueling multi-year growth in high-margin product and service revenues, especially in Fixed and Optical Networks.
Strategic innovation, disciplined operations, and IP monetization are boosting recurring revenues, expanding net margins, and supporting long-term profitability.
Ongoing currency, competitive, and operational challenges threaten Nokia's revenue growth, market share, and long-term profitability across key network and cloud segments.

Catalysts

About Nokia Oyj

Provides mobile, fixed, and cloud network solutions in North and Latin America, Greater China, India, rest of the Asia Pacific, Europe, the Middle East, and Africa.What are the underlying business or industry changes driving this perspective?

Strong demand from hyperscalers (cloud/AI data centers) and U.S./European infrastructure stimulus is expanding Nokia's addressable market for high-capacity network equipment, supporting future top-line growth.
Ongoing global build-out of fiber and advanced 5G/6G networks-accelerated by regulatory programs and large CSP capex-provides a multi-year runway for increased product and service revenues, particularly in Fixed and Optical Networks.
Acceleration of private wireless networks and digital transformation across industrial verticals is driving sustained double-digit growth in Cloud and Network Services, improving both recurring revenues and operating margins.
Scalable operational improvements, ongoing cost discipline, and rapid integration of recent acquisitions (e.g., Infinera) are positioned to enhance operating leverage and expand net margins over time as revenue mix shifts towards higher-margin portfolios.
Investments in innovation (such as cybersecurity, AI network solutions, and next-gen optical technology) plus expanding monetization of IP and patents should increase Nokia's high-margin revenue streams, supporting overall earnings growth.

Nokia Oyj Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Nokia Oyj's revenue will grow by 3.0% annually over the next 3 years.
Analysts assume that profit margins will increase from 4.7% today to 8.3% in 3 years time.
Analysts expect earnings to reach €1.7 billion (and earnings per share of €0.31) by about September 2028, up from €909.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €2.0 billion in earnings, and the most bearish expecting €1.5 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 16.3x on those 2028 earnings, down from 22.4x today. This future PE is lower than the current PE for the US Communications industry at 22.4x.
Analysts expect the number of shares outstanding to decline by 1.35% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.06%, as per the Simply Wall St company report.

Nokia Oyj Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Nokia faces persistent headwinds from unfavorable currency movements and tariff impacts, which have already resulted in lower operating profit outlook and could continue to negatively affect revenue and earnings if macroeconomic volatility persists.
The Mobile Networks segment remains challenged with flat or declining revenue trends, intense competition, and limited addressable market growth; without a material market share recovery or significant 6G tailwind, this poses an ongoing risk to overall net margins and revenue stability.
Nokia's underpenetration in key growth markets such as hyperscalers and certain cloud/AI optical domains means that, despite some progress, they remain in a "challenger" position-lagging competitors could limit Nokia's ability to capture disproportionate growth and constrain long-term revenue and margin expansion.
Historic volatility and back-end loaded seasonality in earnings-including execution risk related to heavy Q4 reliance, possible delays in customer investments (notably in Mobile Networks and India), and dependency on large carrier capex cycles-may undermine predictable earnings performance and create downside risk to financial forecasts.
Ongoing industry trends toward commoditization, Open RAN, and increasing competition from Asian and new software-defined/cloud-native entrants threaten to erode pricing power, compress margins, and reduce Nokia's global market share in critical segments, all of which could adversely impact long-term profitability.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of €4.447 for Nokia Oyj based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €5.75, and the most bearish reporting a price target of just €3.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €21.0 billion, earnings will come to €1.7 billion, and it would be trading on a PE ratio of 16.3x, assuming you use a discount rate of 7.1%.
Given the current share price of €3.75, the analyst price target of €4.45 is 15.6% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Analyst Commentary Highlights Shifting Sentiment and Modest Price Target Increase for Nokia Oyj

NOKIA: AI Demand And U.S. Expansion Will Shape Balanced Risk Ahead