Nokia's Q1 Boost: Data Centre Growth and AI Workloads

Nokia has entered 2026 with results that show how closely its performance is tied to the expansion of AI, cloud and data centre infrastructure.

The company reports a stronger-than-expected rise in profit, with growth centred on technologies that support high-capacity data movement between sites and systems.

Comparable operating profit increased 54% to US$328m in the first quarter, ahead of the US$292m forecast by analysts.

Net sales reached US$5.2bn, in line with expectations, while overall growth stood at 4% year on year on a constant currency and portfolio basis.

Within that, net sales from AI and cloud customers climbed 49%, pointing to sustained investment in data centre capacity and connectivity.

Across the sector, hyperscalers are continuing to expand their infrastructure footprint to support AI workloads.

These workloads depend on rapid data exchange between servers, storage and processing clusters, which increases demand for high-performance interconnects inside and between data centres.

Optical infrastructure supports data centre scale

Nokia’s Network Infrastructure division reflects this trend. The business grew by 6%, with Optical Networks increasing by 20%.

Optical networking uses fibre optic systems to transmit data as light, enabling the high throughput and low latency required for modern data centre environments.

Justin Hotard, President and CEO of Nokia, says: "We delivered a solid start to the year, with net sales growing 4%, gross margin expanding 320bps and operating margin expanding 200bps in the first quarter.

"Demand continued to be strong, particularly in AI & Cloud, where net sales grew 49% and now account for 8% of group sales.

"We also booked €1bn of orders from AI & Cloud customers in the quarter."

This €1bn (US$1.1bn) in orders signals ongoing spending from hyperscalers and enterprise customers building out AI-ready data centre capacity.

Nokia’s optical transport portfolio, strengthened by its acquisition of US-based Infinera, places it within the supply chain that connects these facilities.

Margins also improved as demand shifted towards higher-value infrastructure. Comparable gross margin reached 45.5%, while comparable operating margin rose to 6.2%, supported by growth in optical and IP networking products used in data centre interconnect and backbone networks.

Justin says: "We won a number of important AI & Cloud design wins and orders for both pluggables and line systems in the quarter. IP Networks net sales grew 3% and we expect growth to improve in Q2 and for the full year."

AI workloads increase pressure on data centre networks

As AI adoption grows, the demands placed on data centre networks also continue to increase.

Training and running AI models requires continuous movement of large data sets, placing pressure on bandwidth, latency and energy efficiency. This makes optical transport and IP routing core to data centre design.

Justin says: "We now expect the addressable market in AI & Cloud to grow at a 27% CAGR (2025–2028), compared to the 16% we estimated in November.

"Across the supply chain, demand is accelerating and lead times are extending, reflecting the scale of investment underway."

In response, Nokia is developing technologies aimed at improving performance while reducing operational costs.

At the OFC optical conference, the company introduced four new digital signal processors. 

The processors support 13 new solutions, designed to enable new use cases while lowering total cost of ownership by up to 70% for customers operating large-scale data centre environments.

Wider portfolio aligns with infrastructure demand

While optical networking is focused on in the Q1 report, Nokia’s broader portfolio also supports data centre growth. Mobile Infrastructure recorded 3% growth, Core Software increased by 5% and Technology Standards rose by 10% through new agreements.

Justin says: "We are making progress on AI-RAN and are on track to launch customer trials later this year. With the addition of Orange, we now have 10 customers publicly committed to working with us."

Nokia also signals increased focus on areas tied directly to AI and data centre expansion. Justin says: "We are increasing our growth assumption for Optical and IP Networks and we are investing to capture accelerating demand from AI & Cloud customers."

The company kept its full-year outlook, targeting US$2.3bn to US$2.9bn in comparable operating profit, with performance tracking above the mid-point of that range as demand for data centre and AI infrastructure continues.