On another forum, someone asked if Nokia’s upcoming interim report will tell us if Nokia’s strategy is working. The answer is: no. Seasonality is strong, and Nokia itself has guided for a larger than usual quarterly decline for the first quarter (Q1). This article focuses on Nokia’s current engine: optical networks.
Over the next few quarters, more crucial will be leading indicators: order intake, comments on hyperscaler demand, and any signs of Cloud RAN progress, which requires greater and more tightly synchronized fiber capacity. These are the signals that will indicate whether the strategy is truly working.
The market situation is already strong. For example, Ciena has built an order book of approximately $7 billion, with new deliveries extending into 2027. This indicates that optical demand, especially from data centers, already exceeds short-term supply. This alone supports Nokia’s commercial progress already in 2026.
At the same time, Nokia is putting important structural pieces in place. The San Jose factory is preparing for commercial production in late 2026, bringing with it a transition to 6-inch InP (Indium Phosphide) wafers. If yields stabilize, this should improve unit costs and support margin expansion over time. It also strengthens vertical integration by improving supply security, margin growth, and the integration between optical and IP networks.
Nokia is also preparing a significant product refresh. Expected in the second half of 2027, the new application-optimized optical platform will be built around several coherent building blocks tailored for different distances and use cases. This should enable significant total cost of ownership (TCO) improvements and strengthen competitiveness.
Progress therefore seems likely to be staggered:
- 2026: Demand-driven momentum and order growth, supported by a tight supply situation for optical components.
- 2027: Lower chip costs (San Jose ramp-up) + market entry of the new optical platform.
- 2028+: Financial impact as volumes grow and cost advantages translate into results.
It is therefore not about a single quarter proving the strategy’s effectiveness, but a series: first demand, then product refresh, and finally results.
The key risk for investors is not necessarily the strategy failing, but rather that progress is misread because results lag behind the actual drivers. If execution is strong, however, the market may reward progress long before the full financial impact is visible.
