How Nokia's Strategic Pivot Could Reshape Its Investment Profile in 2026

The Game-Changing Alliance with Nvidia Explained

For decades, Nokia has been synonymous with decline. Since Apple’s iPhone revolution decimated its mobile phone business, the company has struggled to regain relevance despite shifting toward telecom infrastructure. That narrative may finally be changing. On October 28, the company announced a groundbreaking collaboration with Nvidia—a move that immediately captured market attention and sent the stock surging, though subsequent volatility has tempered early enthusiasm.

This partnership centers on co-developing AI-native networking infrastructure that integrates Nokia’s 5G and 6G solutions with Nvidia’s computational capabilities. The practical outcome: accelerated development of next-generation mobile networks capable of handling massive AI workloads, edge computing optimization, and cloud virtualization. With 6G expected to unlock applications in smart cities and autonomous systems by late 2028, this collaboration positions both entities at the intersection of telecom and artificial intelligence—perhaps the most critical convergence point in tech over the next decade.

Financial Reality: Early Momentum Amid Structural Challenges

The stock’s 42% gain year-to-date reflects growing confidence, yet the immediate post-announcement decline reveals investor caution about near-term catalysts. Understanding why requires examining the numbers closely.

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. Q3 painted a more encouraging picture, with revenue jumping 12% due to robust demand in AI and cloud-driven optical networking solutions. However, profitability tells a different story: net income plummeted to 116 million euros ($136 million) for the nine-month period, down sharply from 471 million euros in the comparable 2024 period. The culprit? Rising cost of sales eroding margins—a troubling sign amid accelerating topline growth.

These dynamics have inflated Nokia’s current P/E ratio to 36, significantly above the S&P 500 average of 31. Yet the forward-looking valuation metric—a forward P/E of 21—suggests the market anticipates meaningful profit recovery, providing some counterbalance to present valuation concerns.

Why the Timeline Matters for Long-Term Investors

A critical constraint lies in execution timing. While 5G infrastructure improvements could deliver revenue uplift relatively soon, meaningful 6G deployment remains years away. The technical specifications for 6G won’t be finalized until late 2028, implying that the most transformative aspects of this partnership have an extended runway before translating into material financial performance.

This timeline explains the “sell the news” reaction: initial enthusiasm gave way to recognition that Nokia’s financial statements won’t meaningfully reflect this partnership’s benefits for several quarters, possibly years. Current results still reflect ongoing operational challenges despite modest revenue growth.

The Contrarian Investment Case

Nevertheless, investors who can tolerate near-term uncertainty may find merit in the situation. Nokia and Nvidia possess complementary strengths—Nokia’s deep telecom infrastructure expertise combined with Nvidia’s unmatched AI acceleration capabilities creates genuine competitive advantages. As enterprises globally mobilize trillions in AI infrastructure investments, telecom equipment manufacturers positioned at this nexus become strategically valuable.

The partnership suggests institutional confidence that Nokia will play a pivotal role in supporting Nvidia’s AI ecosystem expansion through 5G-enabled deployments. If execution proceeds on schedule, subsequent quarters could reveal accelerating momentum once these collaborative projects enter commercial deployment phases.

Final Consideration: What Investors Should Know

This situation exemplifies the tension between current valuation and future optionality. Nokia stock trades at a premium to historical norms, yet forward valuations suggest growth justifies these levels—assuming the Nvidia partnership delivers as envisioned. The agreement is genuine, the strategic logic is sound, but results remain speculative until visible in financial results and operational metrics.

Investors considering entry should recognize that 2026 will likely serve as a transition year—neither confirming nor invalidating the bull case, but potentially providing initial evidence of whether this revived partnership can genuinely reset Nokia’s long-term trajectory within the AI infrastructure ecosystem.