Will Nokia's Underrated AI Push Finally Deliver Results in 2026?

From Irrelevance to Opportunity

For nearly two decades, Nokia (NYSE: NOK) has been dismissed as a tech relic—a once-dominant handset maker that couldn’t adapt when Apple’s iPhone revolutionized the industry. While the Finnish company successfully transitioned to telecom infrastructure, its performance remained lackluster. Yet recent market movements suggest this narrative may be shifting. Following an October 28 announcement of a strategic collaboration with Nvidia, Nokia’s shares surged, signaling renewed investor confidence in what many consider an underrated player in the AI infrastructure race.

The Numbers Tell a Mixed Story

The financial picture reveals both progress and caution. In the first nine months of 2025, Nokia generated 13.7 billion euros ($16.0 billion) in revenue—a modest 4% increase year-over-year. However, Q3 showed stronger momentum, with sales climbing 12% due to robust demand in AI-driven optical networks. This divergence hints at accelerating growth in the company’s most strategically important segments.

Profitability remains the weak point. Net income for the first three quarters dropped sharply to 116 million euros ($136 million) from 471 million euros in the prior year, primarily due to rising cost pressures. Interestingly, the company earned 80 million euros in Q3 alone, suggesting margin expansion later in the year. This dynamic pushed the current P/E ratio to 36, above the S&P 500’s 31 average. However, the forward P/E of 21 implies anticipated earnings growth, positioning the stock as potentially undervalued relative to future performance.

What the Nvidia Partnership Actually Means

This collaboration goes beyond typical vendor relationships. Nokia will integrate its expanding 5G and next-generation 6G infrastructure with Nvidia’s AI-native technologies, jointly architecting systems designed to handle the explosive growth in AI workloads. The two companies will focus on edge computing optimization and cloud virtualization, creating networking solutions purpose-built for AI applications.

The significance lies in timing. While 5G revenue can accelerate in the near term, 6G specifications won’t finalize until late 2028, meaning the full financial impact remains years away. This creates a window where Nokia’s underrated positioning could attract early-mover investors before the technology inflection becomes obvious to the broader market.

The Case for a Genuine Breakout

Nokia’s 42% year-to-date gain already reflects some optimism, yet the post-announcement pullback suggests skepticism remains. This skepticism may be misplaced. The company isn’t betting on a comeback through consumer products or niche markets—it’s aligning itself with Nvidia’s AI infrastructure dominance, one of the most powerful secular trends in technology.

By becoming a critical enabler of AI-ready networks, Nokia transitions from struggling legacy player to essential infrastructure provider. The partnership simultaneously addresses Nvidia’s need for robust networking partners and gives Nokia a catalyst for growth in its highest-potential segment. Smart city development, autonomous systems, and enterprise AI deployment all depend on the 6G ecosystem Nokia will help build.

The Investment Thesis Going Forward

An underrated company + infrastructure demand tailwind + strategic partnership = potential outsized returns. While the October collaboration is too recent to meaningfully impact 2025 financials, early signals of operational momentum are visible in Q3 results.

The realistic scenario: Nokia experiences gradual revenue acceleration through 2026 as 5G solutions generate recurring revenue and enterprise adoption deepens. By late 2026 or 2027, as 6G specifications solidify and network upgrades begin, investors will have far greater clarity on the partnership’s commercial viability. At that point, the underrated tag may finally disappear.

For patient investors willing to accumulate before the AI infrastructure narrative fully matures, Nokia represents an underrated bet on a company finally positioned correctly for the next technology cycle.