UBS: Nokia Q1 2026 Results — Strength in Optical Shines Through
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UBS published a rapid review of Nokia's Q1 2026 results, highlighting robust momentum in optical networks. Q1 revenue rose 4% year-over-year at constant currency to EUR 4.497 billion, missing market expectations by roughly 1.6%. However, adjusted operating profit reached EUR 281 million, beating the consensus of EUR 267 million by 5.2%, driven by an improved gross margin of 45.5%.
The optical networks division was the standout performer, surging 20% at constant currency, with AI and cloud customer revenue soaring 49%. Order momentum remained exceptionally strong, with the book-to-bill ratio significantly above one and EUR 1 billion in orders from AI and cloud customers.
Encouraged by this demand, management raised the 2026 growth guidance for the network infrastructure segment to 12-14% (previously 6-8%). Combined growth guidance for IP and optical networks was lifted to 18-20% (previously 10-12%), and the AI/cloud addressable market CAGR through 2028 was increased from 16% to 27%.
Looking ahead, Q2 revenue is projected to grow 5-9% sequentially. However, the midpoint of the Q2 operating profit guidance sits approximately 6% below current market estimates. For the full year, if operating profit reaches the upper bound of the EUR 2.0 to 2.5 billion range, it would exceed market expectations by 8%. UBS maintains a Neutral rating with a target price of EUR 5.50. With the stock currently trading at EUR 8.51, much of the positive momentum appears priced in following an 80% surge over the past six months.