Bank of America on Monday re-rated Nokia, moving the Finnish telecom equipment supplier from Neutral to Buy and increasing its price objective to €10.70 from €6.87. The analysts cited expanding exposure to optical networking and rising demand from hyperscalers tied to AI data center buildouts as the drivers behind the upgrade. Nokia shares were up roughly 2% in Helsinki as of 11:46 GMT.
The research team, led by Oliver Wong, shifted valuation methodology from an EV/EBITDA framework to a sum-of-the-parts analysis. In that framework they applied a 30x multiple to 2027 estimated EBIT for Nokia's Optical and IP Networks unit and a 10x multiple to the remainder of the company.
BofA's positive stance rests heavily on the transformational effect of Nokia's acquisition of Infinera in 2025, which the analysts say materially increased Nokia's exposure to U.S. cloud customers. The bank models robust growth in Nokia's optical business, forecasting the Optical Networks segment to expand at a 17% compound annual growth rate through 2028. That outlook is supported by continued demand for optical systems and an anticipated inflection in coherent pluggable revenue as the market transitions from 400G to 800G speeds.
In their notes the analysts described Nokia as "transforming into an optical powerhouse with a European advantage," characterizing Nokia's own 10-12% growth guidance for Optical and IP Networks as conservative. BofA expects the company to exceed and then raise that guidance.
On the IP Networks side, the bank expects Nokia to capture meaningful share in European data center switching, pointing to the company's partnership with NScale, a neocloud operator focused on Europe. BofA estimates Nokia could generate €226 million in data center switching revenue in 2026, growing to €407 million by 2028.
Mobile Infrastructure remains Nokia's largest revenue segment. BofA projects operating margins in that business to expand from 13.4% in 2025 to 17.8% by 2028, a gain it attributes to portfolio pruning and a stronger emphasis on software.
The analysts also referenced Nokia's partnership with Nvidia, noting Nvidia's $1 billion investment in Nokia in October 2025. While BofA views that collaboration as a longer-term positive for AI-RAN, the bank does not model significant near-term revenue stemming from the partnership.
Overall, BofA said its 2026-2028 EPS forecasts run 13-15% above Street consensus. The bank also flagged potential incremental upside from Huawei and ZTE replacement opportunities in Europe, which are not included in its base-case estimates.
Market reaction: Shares of Nokia rose nearly 2% in Helsinki by 11:46 GMT after the BofA upgrade and price-target increase.