Nokia’s stock took another battering on Friday, sliding 5.78 percent to €8.12, extending a sell-off that has now erased 8.46 percent over seven trading sessions. The latest leg lower came despite a second-quarter earnings beat that saw comparable operating profit jump 18 percent to €434 million, well above the consensus estimate of roughly €382 million. The disconnect between the numbers and the market’s reaction tells a more complicated story.
The Finnish network equipment maker reported net sales up 9 percent on a currency-adjusted basis, with comparable gross margin improving to 46.0 percent and comparable operating margin rising to 9.0 percent — both up 70 basis points year-on-year. Yet investors zeroed in on the free cash flow, which swung to negative €732 million in the quarter, and the roughly €800 million in restructuring costs that Nokia expects to incur this year. The reported operating profit landed in negative territory as a result, overshadowing the operational improvements.
The Order-to-Revenue Gap That Has the Market Nervous
Nokia’s AI and cloud business posted a staggering €2.8 billion in order intake during the quarter, but actual revenue from the segment came in at just €446 million — meaning orders outstripped recognized revenue by
CEO Justin Hotard described the company’s strategy as “delivering” and pointed to an ongoing AI super-cycle, but he also warned that memory chip shortages could persist into 2027. “Demand is strong, supply is limited,” Hotard said, echoing a warning that rival Ericsson recently issued about rising costs for AI-related memory chips. Those supply constraints directly feed into concerns about Nokia’s margin trajectory, even as the order book continues to swell.
A Tale of Two Businesses
Beyond the AI frenzy, Nokia’s results painted a mixed picture. Network infrastructure grew 12 percent, driven by optical networks up 20 percent and IP networks up 16 percent. But the fixed networks division saw revenue slip 3 percent to €490 million, which Nokia attributed to weaker sales of fiber-to-the-home products as the company deliberately shifts its portfolio toward higher-margin offerings.
The traditional telecom equipment market remains under pressure, and Nokia is grappling with shrinking demand in its legacy businesses even as its AI-related operations boom. That tension — between the promise of a new growth engine and the drag from the old one — is at the heart of the current debate about the stock.
Should investors sell immediately? Or is it worth buying Nokia?
Analysts Split on What Comes Next
The analyst community is sharply divided on Nokia’s prospects. Bernstein Research, which rates the stock “Market-Perform” with a price target of just €5.54, described the quarter as merely “average” and sees no evidence of the breakthrough that bulls have been hoping for. That target implies massive downside from current levels.
UBS trimmed its price target from €11 to €9.65 while maintaining a Neutral rating, arguing that the good news from the AI business is already priced in and that pressure on telecom customers’ capital spending budgets will persist. Bank of America, by contrast, reiterated its Buy recommendation and raised its target to €16, forecasting that the pace of AI order intake could double to roughly €2 billion per quarter by 2027, with revenue doubling over the same period.
Ålandsbanken upgraded Nokia from Negative to Neutral, noting that the adjusted operating profit beat consensus despite being helped by one-off items. The Finnish bank also pointed out that Nokia’s guidance for the third quarter comes in roughly 20 percent below market expectations. After a decline of more than 40 percent from the peak, the bank sees the valuation as reasonable but says meaningful upside depends on stronger AI and cloud revenue growth.
Chart Position and Outlook
The stock now trades 45.78 percent below its 52-week high of €14.97, reached on June 3, and the 14-day relative strength index has fallen to around 30 — a level that typically signals oversold conditions. Despite the recent rout, Nokia is still up 45.19 percent year-to-date, a reminder of just how far the stock had run on AI optimism before the current correction.
Nokia reaffirmed its full-year 2026 guidance for comparable operating profit between €2.1 billion and €2.6 billion. The company expects sequential revenue growth of 3 to 7 percent in the third quarter, with the next set of results due on October 22. The question hanging over the stock is no longer whether the AI and cloud story is real — it’s whether the quality of earnings can sustain the valuation, and how quickly those €2.8 billion in orders will finally show up on the income statement.
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