Bank of America Global Research has issued a positive outlook for Nokia ahead of its second-quarter earnings report, forecasting that the Finnish telecom equipment maker will maintain its momentum in artificial intelligence and cloud-related orders.
The bank expects Nokia to report AI and cloud orders of at least €1 billion when it releases results on July 23, matching the strong intake recorded in the first quarter. This projection suggests that demand for Nokia's networking gear from data center operators and cloud service providers remains robust, even as the broader tech sector faces headwinds from higher interest rates and cautious corporate spending.
What's Driving Nokia's AI Orders
Nokia has been positioning itself as a key supplier of networking equipment for data centers that power AI workloads. The company's products, including routers, switches, and optical transport gear, are essential for moving the massive amounts of data required to train and run AI models. As more companies invest in AI infrastructure, demand for these components has surged.
The €1 billion order intake in Q1 represented a significant jump from previous quarters, driven by large contracts with cloud providers and enterprises building out their AI capabilities. BofA's expectation that Q2 orders will at least match that level indicates that this trend is continuing, not fading.
This is particularly important for Nokia because the broader telecom equipment market has been sluggish. Telecom operators, Nokia's traditional customer base, have been cutting spending as they digest previous investments and face economic uncertainty. The AI and cloud segment provides a growth engine that helps offset weakness in the carrier business.
What It Means for Investors
For everyday investors, Nokia's AI order strength is a signal that the company is successfully pivoting toward faster-growing markets. The company's stock has been volatile in recent years as it navigated the transition from 5G buildout to the AI era. Sustained AI orders could provide more stability and potentially boost revenue and profit margins.
Investors should watch the July 23 earnings report for details on the mix of orders—whether they are from large cloud providers or smaller enterprises—and for any guidance on future quarters. The profitability of these orders also matters; if Nokia can convert strong order intake into higher earnings, it could support the stock price.
It's worth noting that Nokia faces competition from established players like Cisco and Huawei, as well as from newer entrants. The company's ability to maintain or grow its market share in AI networking will be a key factor for long-term investors to monitor.
Broader Market Context
The AI infrastructure buildout has been a major theme in markets this year, with companies like Nvidia and AMD seeing huge demand for their chips. But the networking equipment that connects those chips is equally critical. Nokia's performance in this area offers a window into the health of the entire AI supply chain.
Other companies in the networking space have also reported strong demand. For example, Berenberg recently lowered its target on Kion after a 21% order slump, highlighting that not all industrial companies are benefiting from the AI boom. Nokia's situation appears to be the opposite, with AI providing a tailwind.
The broader economic backdrop remains mixed. While the US economy has shown resilience, Europe has struggled with slower growth and higher energy costs. Nokia, headquartered in Finland, is exposed to both regions. Its AI orders are largely from global customers, which helps insulate it from regional weakness.
What to Watch on July 23
Beyond the headline order number, investors will focus on several key metrics in Nokia's Q2 report:
- Revenue and profit margins – Are AI orders translating into higher earnings?
- Order backlog – How much future revenue is already secured?
- Guidance – Does management expect the AI momentum to continue into the second half of the year?
- Segment performance – How are Nokia's other businesses, like mobile networks and licensing, performing?
BofA's analysis suggests that the AI and cloud segment will be a bright spot in what could otherwise be a mixed quarter. For investors, the key question is whether this strength is sustainable or just a temporary surge.
As always, it's important to look beyond a single quarter's results. Nokia's long-term success will depend on its ability to compete in the rapidly evolving AI networking market, manage costs, and navigate geopolitical risks. The July 23 report will provide an important data point, but it's just one piece of the puzzle.
