Morgan Stanley has lifted its price target on Nokia to €8.50 from €6.50 and assigned an Overweight rating, arguing that a step-up in investment for artificial intelligence and cloud data center infrastructure improves the company’s growth prospects.
The firm said the new target essentially maps to what it had previously considered a bull-case outcome, reflecting expectations that capital deployment by cloud providers and AI-focused data centers is moving faster than earlier anticipated.
In supporting that view, Morgan Stanley flagged recent results from optical networking peer Ciena as reinforcing a trend of sharply rising demand tied to data center connectivity. Ciena’s reported strength in cloud-related revenue, the brokerage noted, bolsters the case that Nokia’s own guidance for its Optical and IP division could be conservative.
On guidance, Nokia has indicated revenue growth of 10% to 12% in the Optical and IP segment. Morgan Stanley’s model, however, projects roughly 13% revenue growth in 2026 and foresees optical networking revenue rising by more than 20%, driven primarily by hyperscale data center operators.
Although AI and cloud-related business represents only about 6% of Nokia’s total revenue today, Morgan Stanley emphasized that this portion is expanding quickly and helping offset slower spending from traditional telecommunications operators.
The brokerage also pointed to a number of near-term potential catalysts investors should monitor. One is the Optical Fiber Communication Conference scheduled for March 15 to 19, where Morgan Stanley suggests updates could surface regarding Nokia’s optical networking strategy and possible partnerships with hyperscale cloud companies.
Existing commercial relationships were highlighted as context for the shift toward cloud and AI networking work. Nokia already has an agreement to provide networking equipment to Microsoft’s Azure data centers and is collaborating with NVIDIA on AI networking technologies, according to Morgan Stanley.
Alongside raising its revenue outlook, Morgan Stanley increased its valuation assumptions by applying a 14× target multiple to expected operating profit, up from a prior 10× multiple. The brokerage said the higher multiple reflects Nokia’s growing exposure to faster-growing data center connectivity markets.
Implications
For investors and market participants, Morgan Stanley’s revision underscores a repositioning of Nokia toward segments tied to AI and hyperscale cloud deployments. The firm’s analysis suggests a re-rating could be warranted if the anticipated growth and partnerships materialize.