Key insights
- BofA upgraded Nokia to Buy, citing growth in optical networking and hyperscaler demand, particularly from AI data center buildout. They forecast strong growth in Nokia's Optical Networks segment, driven by demand for optical systems and coherent pluggable revenues. The upgrade reflects Nokia's transformation into an optical powerhouse with a European advantage, and its partnership with Nvidia is seen as a long-term positive. While not a direct US equity driver, it signals continued investment in AI infrastructure.
Investing.com -- Bank of America analysts on Monday upgraded Nokia to Buy from Neutral and raised their price objective to €10.70 ($12.40) from €6.87 ($7.96), citing the Finnish telecom equipment maker’s growing exposure to optical networking and hyperscaler demand driven by AI data center buildout.
The company’s shares rose nearly 2% in Helsinki by 11:46 GMT.
The bank’s analysts, led by Oliver Wong, moved to a sum-of-the-parts valuation from an EV/EBITDA methodology, applying a 30x multiple on 2027 estimated EBIT for Nokia’s Optical and IP Networks business and a 10x multiple on the rest of the company.
BofA’s bullish case centers on Nokia’s transformation following its acquisition of Infinera in 2025, which meaningfully expanded the company’s exposure to U.S. cloud customers.
The analysts forecast Nokia’s Optical Networks segment to grow at a 17% compound annual rate (CAGR) through 2028, driven by continued optical systems demand and an expected inflection in coherent pluggable revenues as the industry shifts from 400G to 800G speeds.
"Nokia is now transforming into an optical powerhouse with a European advantage," the analysts wrote, adding that they see the company’s 10-12% Optical and IP Networks growth guidance as conservative and expect Nokia to beat and raise it.
On IP Networks, BofA sees Nokia capturing a significant share in European data center switches, particularly through its partnership with NScale, a neocloud operator focused on the continent. The bank estimates Nokia could generate €226 million in data center switching revenue in 2026, rising to €407 million by 2028.
For Mobile Infrastructure, which remains Nokia’s largest segment by revenue, BofA expects operating margins to expand from 13.4% in 2025 to 17.8% by 2028 through portfolio pruning and a greater software focus.
The analysts also view Nokia’s partnership with Nvidia, which invested $1 billion in Nokia in October 2025, as a potential longer-term positive for AI-RAN, though it does not model significant near-term revenue from the collaboration.
BofA said its 2026-2028 EPS estimates are 13-15% above Street consensus. Potential Huawei and ZTE replacement in Europe represents additional upside not currently included in the bank’s base case estimates.