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Investing.com -- Jefferies has upgraded Nokia Oyj (ST:NOKIA) to “buy” from “hold” and lifted its price target to €6.60 from €4.50, pointing to rising exposure to artificial intelligence-driven data center demand.
The brokerage said the Finnish telecom equipment maker is moving “from a predominantly Radio Access-centric business struggling for growth, to one where rising AI data centre exposure … is expected to drive steady growth.”
The brokerage said Nokia’s valuation could “re-rate to the high-teens on the back of a consistent growth outlook in Network Infrastructure,” with gross margins forecast to rise to 45% in 2026 and 46% in 2027.
Jefferies projects total revenue of €19.86 billion in 2025, climbing to €20.90 billion in 2026 and €22.20 billion in 2027, while earnings per share are expected to increase from €0.28 in 2025 to €0.36 in 2026 and €0.40 in 2027.
The upgrade follows stronger performance in Nokia’s Optical Networking business, which expanded 19% year over year in the third quarter of 2025 on a constant-currency basis, with a book-to-bill ratio above one.
Jefferies said the company’s merger with Infinera Corp. has come “at a time when AI data centre demand for optical networking solutions is rising sharply,” positioning the combined entity to “provide stronger competition to market leader Ciena.”
The brokerage added that Nokia now benefits from Infinera’s hyperscaler relationships and vertical integration in indium phosphide chip fabrication in the U.S., a key enabler for scaling AI data center bandwidth.
According to the report, 29% of Optical Networking revenue in the third quarter came from data center clients. Nokia has started shipping its 800G ZR/ZR+ coherent pluggable transceivers to a U.S. hyperscaler in the second half of 2025 and was chosen as a preferred partner by Nscale for advanced networking technologies across both its Optical and IP Networks segments.
Nokia’s Cloud & Network Services division contributed to a stronger margin profile, with gross margin climbing to 49% in the third quarter, compared with 43% in the second quarter and 41% a year earlier.
Jefferies said the improvement was driven by “traction in 5G Core implementations, as well as cost reduction efforts,” and expects margins to remain “in the high forties” over the medium term.
Meanwhile, Nokia’s Mobile Networks unit is stabilizing after years of decline. Sales fell 8% in 2023 and 21% in 2024, but rose 4% year over year in the third quarter of 2025 on a constant-currency basis.
The brokerage noted that Nokia’s market share is now expected “to remain broadly stable in a flattish Radio Access Network market,” though profitability will likely stay at low single digits through 2027.
Growth in Network Infrastructure, which includes IP, Optical and Fixed Networks, is forecast to remain strong, led by 26% growth in Optical Networks and 8% in IP Networks in 2026.
Jefferies expects overall company revenue to grow 5.3% in 2026 and 6.2% in 2027, supported by AI-related investment.
Jefferies flagged Nokia’s upcoming Capital Markets Day on Nov. 19 as a “potential catalyst,” with new chief executive Justin Hotard expected to outline strategies to expand data center presence and improve profitability in Mobile Networks.