Nokia Oyj

Q2 net sales grew 9% year over year. Gross margin was 46%, up 70 basis points year over year, and operating margin was 9%, also up 70 basis points. Group operating profit was EUR 434 million. Free cash flow was negative EUR 732 million, and the company ended Q2 with net cash of EUR 2.8 billion. In AI and cloud, net sales more than doubled year over year to EUR 446 million and order intake was EUR 2.8 billion. In network infrastructure, sales grew 12%; optical networks grew 20%, IP Networks grew 16%, and fixed networks declined 2%. In mobile infrastructure, sales grew 7%; gross margin was 49.3%. For Q3, Nokia expects sequential net sales growth of 3% to 7% and operating profit broadly similar to Q2, with a meaningful improvement in Q4. Full-year comparable operating profit guidance is unchanged, and the company still expects to finish somewhat above the midpoint. Management also said mobile infrastructure gross margin in Q3 is expected to be closer to 44% to 46% because of software revenue phasing.

Justin Hotard framed the quarter as proof that Nokia is making early progress on its Capital Markets Day strategy and positioning for the AI super cycle. He highlighted broad strength in AI/cloud, optical, IP, and early AI RAN progress, while emphasizing disciplined capital allocation through the Inseego sale and targeted investment in U.S.-based optical manufacturing. His tone was constructive but measured: he repeatedly noted order lumpiness, supply constraints, and that some initiatives like AI RAN are still in pilot and early commercialization stages.

Marco Wiren walked through the financial bridge: Q2 net sales up 9%, gross margin at 46%, operating margin at 9%, and operating profit at EUR 434 million. He noted that higher stock-based compensation created a 150 bps operating margin headwind year over year, while software revenue recognition helped both gross margin and operating profit in the quarter. Cash was seasonally weak, with free cash flow of negative EUR 732 million, and he said Nokia ended with EUR 2.8 billion of net cash and remains financially flexible. He also said restructuring charges are now expected to be about EUR 800 million in 2026, gross cost savings from the 2023-2026 program are on track at EUR 1.2 billion, and free cash flow conversion is now expected toward the low end of the 55% to 75% assumption.

Analysts focused on the size and durability of AI/cloud orders, possible double ordering, supply-chain constraints, and how quickly AI RAN can translate into revenue. Management said about half of Q2 order intake is expected to convert within 12 months, but stressed that the quarter benefited from several long-term orders and should not be extrapolated as a normal run rate. On supply, Hotard said Nokia is broadly constrained, especially in leading-edge components and indium phosphide, and that the new Arizona fab is an additional long-term capacity option, with the San Jose fab expected to ramp later this year. On AI RAN, he reiterated pilot deployments at the end of this year, commercial availability in 2027, and more meaningful volume in 2028.