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Investing.com -- Nokia ’s (ST:NOKIA) role in the AI-driven data center boom is modest but growing, according to Morgan Stanley.
Hyperscalers, large cloud and data center operators, account for about 5% of Nokia’s group revenues, most of which come from its optical networks segment.
This segment is benefiting from rising data traffic between data centers, driven in part by AI workloads.
The Finnish telecom company reported 6% year-on-year growth in its optical segment in the latest quarter. The company said growth could have exceeded 10% without modest supply constraints.
By comparison, optical leader Ciena posted networking revenue growth above 30% year-on-year, benefiting from a more favourable customer mix, with about 50% of revenues from non-telco customers and 75% of sales in the Americas. Nokia’s comparable metrics are about 35% non-telco and around 40% Americas sales.
Morgan Stanley estimates that applying 30% growth to the hyperscaler-linked portion of Nokia’s revenue, 5% of group revenue, would add about €300 million to 2026 consensus revenue forecasts, equivalent to roughly a 1% uplift, and increase EBIT by 1-2%. While relatively small today, this could grow over time as AI demand expands.
Nokia is not a pure AI player. Its contribution is through network infrastructure connecting data centres.
In April, Nokia appointed a new CEO with previous leadership in Intel’s Data Center & AI Group. In September, it established a Technology and AI Organization unit. These moves signal strategic positioning in AI-related infrastructure.
Valuation comparisons show Nokia trades at 9x FY1/2 EV/EBITDA, versus Ciena’s 20-25x, reflecting Nokia’s smaller exposure to hyperscaler growth.
Nokia shares traded as low as 5x EV/EBIT in H2 2023 due to mobile network market share losses, and reached 11x EBIT in early 2025 during an AI-related momentum trade. An 11x EBIT multiple would imply a €4.8 share price, about 20% upside from current levels.
Beyond AI, Nokia faces broader challenges. Its legacy telecom and network infrastructure business remains exposed to foreign exchange movements, tariffs, and supply constraints, with limited scale advantages.
Its mobile networks division sees slow industry growth and budget pressures among customers. North America accounts for 55% of Nokia’s sales and 50% of costs, with market share declining after the loss of AT&T business.
The company expects market recovery later in 2025. The completed acquisition of Infinera enhances Nokia’s presence with webscale customers and in optical networks.
Nokia also secured new patent licence agreements, providing more predictable cash flows.
Morgan Stanley retains an “equal-weight” rating, citing near-term pressures and a downgrade of 2025 EBIT guidance by 14%.
A corporate management day (CMD) on November 19 could shift focus toward 2026 guidance and market recovery prospects.
Morgan Stanley outlines three scenarios for Nokia: a bull case with delivery ahead of guidance, further share gains, and a 15% EBIT margin, implying a 13x EV/EBIT 2026e; a base case with a 5G cycle recovery, aligning with management projections at 9x EV/EBIT; and a bear case with hardware issues and further share loss, resulting in a sub-10% EBIT margin and a 5x EV/EBIT 2026e.