- Machine-to-machine AI traffic will overtake human use and drive a multi-year leap in network volume, Nokia CEO Justin Hotard said on the company's quarterly earnings call Thursday
- Hyperscaler capex past $700 billion is pulling carrier transport networks along, with U.S. Tier 1 operators still driving fiber demand
- Nokia is betting on AI-RAN with Nvidia to decouple network performance from hardware refresh
Nokia is betting that machine-to-machine network traffic will explode and dominate infrastructure demand in the long term, CEO Justin Hotard said on the vendor's Q1 2026 earnings call Thursday.
AI-driven traffic makes up only about 20% of total network traffic today — roughly 80 exabytes per month — and is still primarily human-to-machine, Hotard said. As agentic, and eventually physical AI deployments, take hold, machine-to-machine traffic will become the dominant driver, producing a leap in network volume that continues for many years, he said. The transition is already visible inside and between AI factories and increasingly driving transport demand across metro and long-haul.
Nokia sees "a structural shift in the market, which will sustain for multiple years," Hotard said, with AI traffic moving out of hyperscaler data centers and onto carrier long-haul and metro networks.
The company now sees its AI and cloud addressable market growing at a 27% compound annual growth rate (CAGR) through 2028, with the broader network infrastructure addressable market tracking to 14% CAGR. Hyperscaler capex for 2026 looks to run past $700 billion.
Sales rose 4% to $5.26 billion (€4.5 billion) in the quarter, with operating profit of $329 million (€281 million). AI and cloud customers drove the performance, with that segment growing 49% and accounting for €1 billion in new orders — most of them in Optical Networks, where net sales rose 20%.
Telco customer sales slipped 2% over the same period.
Nokia raised its 2026 Network Infrastructure guidance to 12-14% growth, up from 6-8% in January, and its combined Optical and IP Networks target to 18-20%, up from 10-12%.
A different shape for the carrier business
Carrier transport networks are feeling the same AI traffic pressure, and Nokia reported growth in the telco segment where operators are upgrading transport infrastructure, with U.S. Tier 1 carriers continuing to drive fiber demand.
On the mobile side, Nokia is neither expecting nor chasing growth. Strategically, the mobile market is one where the company has to find new sources of value — either by enabling monetizable services for carriers or by shifting to less capex-intensive models, Hotard said. Core software grew 5% in the quarter, and Nokia landed six "competitive swaps" — where customers replace a competitor's gear with Nokia's — as customers modernized to cloud-native platforms and pursue opex reductions.
The vendor also signed a major new 5G RAN deal with Virgin Media O2 in the quarter, with its new Doksuri remote radio heads delivering a 30% power efficiency improvement and a 25% weight reduction.
The longer-term bet is AI-RAN. Field trials with Nvidia are on track to begin by the end of 2026. Hotard framed AI-RAN as the foundation of a software-driven architecture in which performance gains accrue independently of hardware refreshes — the same way AI model performance continues to improve on the same underlying GPU. The $1 billion Nvidia-Nokia strategic partnership announced in October has T-Mobile as the anchor AI-RAN customer.
A different answer to the same trend
The positioning stands in sharp contrast to Ericsson's Q1 report last week, where revenue fell 10% on a reported basis and CEO Börje Ekholm flagged AI-driven semiconductor cost pressure as a margin headwind rather than a top-line tailwind. Both vendors agree the RAN market itself will stay flat in 2026.
But Nokia's $2.3 billion acquisition of Infinera last year has it participating in the AI infrastructure buildout on a scale Ericsson hasn't pursued.