Nokia Oyj

In Q2 2026, Nokia reported 9% net sales growth, gross profit of EUR 2.2 billion, gross margin of 46% (up 70 bps year on year), and operating margin of 9% (up 70 bps year on year). Operating profit was USD 434 million, free cash flow was negative EUR 732 million, and Nokia ended the quarter with net cash of EUR 2.8 billion. AI and cloud net sales more than doubled year on year to EUR 446 million, with order intake of EUR 2.8 billion; about half of those orders are expected to convert to revenue in the next 12 months. For Q3, management expects net sales to rise 3% to 7% sequentially, operating profit to be broadly similar to Q2, and then a meaningful improvement in Q4. Full-year comparable operating profit guidance was left unchanged aside from the technical discontinued-operations adjustment, and management continues to track somewhat above the midpoint.

Justin Hotard said Q2 showed continued execution against the Capital Markets Day strategy, with early results from Nokia’s push into the AI super cycle. He emphasized broad-based growth in optical and IP, strong AI/cloud momentum, and new design wins, while also stressing that order intake will be lumpy and that the company is focused on building longer-term supply visibility with customers. He framed the AI RAN launch and investments in optical manufacturing capacity as key strategic moves to position Nokia for 2027-2029 opportunities.

Marco Wiren highlighted that Q2 net sales grew 9%, gross margin improved to 46%, and operating margin reached 9%, with optical networks and Infinera synergies helping margins. He said operating profit benefited from some software revenue recognition shifting into Q2, while higher stock-based compensation created a 150 bps year-on-year operating margin headwind. Free cash flow was negative EUR 732 million due to the seasonally weak second quarter, annual employee incentive payments, and working capital buildup; Nokia ended with EUR 2.8 billion in net cash and expects to track toward the low end of its 55% to 75% free cash flow conversion assumption. He also said restructuring charges for 2026 are expected to total about EUR 800 million.

Analysts focused on AI/cloud order sustainability, supply constraints, optical capacity, AI RAN timing, and whether Nokia was seeing pricing or mix-driven margin pressure as it scales new businesses. Management said roughly half of Q2 AI/cloud orders should convert within 12 months, rejected the idea that the quarter necessarily implies a new run rate, and said supply constraints remain significant, especially in memory and leading-edge optical components. On AI RAN, Nokia reiterated pilots at the end of 2026, commercial availability in 2027, and more meaningful volume in 2028; on optical manufacturing, it said San Jose remains on track for volume production by year-end and the new Arizona site is more about incremental capacity that likely ramps later. Management also said the strong AI/cloud order book was weighted toward optical, IP is still early in its ramp, and the order mix and software phasing explain some of the quarterly margin dynamics.