Nokia Q2 2026 Earnings Analysis
Q2 2026 is best read as confirmation, not surprise. The AI-infrastructure pivot management has previewed since last November's Capital Markets Day is now showing up in hard numbers: AI & Cloud order intake of €2.8bn, nearly tripling Q1's already-strong €1.0bn; net sales to that customer group more than doubling; and a first commercial AI-RAN platform now built and launched with NVIDIA. The cost of getting there is visible too — a reported operating loss, free cash flow of –€732m, and a CFO who told analysts outright that full-year cash conversion is tracking to the low end of guidance. The market's verdict was a small premarket gain, not a rerating, after a stock that had already roughly doubled over the trailing year.
Nine things that mattered this quarter
In line, not a beat
Net sales €4,815m, +8% reported / +9% cc. Comparable net sales came in essentially in line with Street estimates (~€4.83bn) — a touch light on revenue even as profit metrics beat.
Now the story
Net sales €446m (+105% cc), order intake €2.8bn — nearly triple Q1's €1.0bn. Management says roughly half converts to revenue within 12 months.
Comparable metrics broadly up
Gross margin 46.0% (+70bps), operating margin 9.0% (+70bps), comparable op. profit €434m (+18%), comparable diluted EPS €0.07 (+75%).
A very different story
Operating loss of €50m (vs +€147m a year ago) on €390m of restructuring charges recognized this quarter; reported diluted EPS was €0.00.
Negative €732m in the quarter
Working capital absorbed ~€1.15bn. CFO Marco Wirén now expects to land at the low end of the 55–75% full-year FCF-conversion guidance.
First commercial platform, live
Launched 15 July with NVIDIA (which took a $1bn, 2.9% stake in Nokia in Oct 2025). Target: >100% spectral-efficiency gains by 2028, subscription model, T-Mobile US as lead pilot.
Simplification continues
Fixed Wireless Access CPE (sold to Inseego) and Enterprise Campus Edge moved to discontinued operations, trimming "Portfolio Businesses" to two small units.
Raised technically, not operationally
FY26 comparable operating profit range moved to €2.1–2.6bn (from €2.0–2.5bn) purely on the discontinued-ops reclass. Still guiding "somewhat above the midpoint."
Restructuring is accelerating
FY26 charges now guided to €800m, spanning the 2023–26 program (tracking to the top of its savings range), the China integration, and a new European efficiency program.
The quarter, at a glance
Every profitability line that excludes restructuring improved meaningfully; every line that includes it went the other way — a choice Nokia is making, not a demand problem.
The section that matters most
What's real today, versus what's still a target.
AI & Cloud net sales, by quarter (€m)
Order intake (€m, approx.)
CEO Justin Hotard was careful to frame this honestly: roughly half is expected to convert to revenue within 12 months, and the rest reflects an elongating order horizon in a supply-constrained market. His caution to analysts: "order patterns in this market can be lumpy."
Long-term backdrop
Nokia's own modeling pegs the AI & Cloud addressable market at a ~27% CAGR through 2028, against hyperscaler capex now expected to exceed $700bn in 2026.
The open question: is the order book as good as it looks?
Bernstein's Ulrich Rathe asked directly whether elongated, large orders in a supply-constrained market might be a false demand signal. Hotard's rebuttal: sophisticated hyperscaler customers have little incentive to pad orders against a constraint (leading-edge optical manufacturing capacity) they can inspect and verify directly, and Nokia is getting firmer reciprocal commitments on longer-dated volume.
Two engines, one shrinking tail
Network Infrastructure
| €m | Q2'26 | Q2'25 | YoY (cc) |
|---|---|---|---|
| Net sales | 2,037 | 1,825 | +12% |
| — Optical Networks | 868 | 730 | +20% |
| — IP Networks | 679 | 588 | +16% |
| — Fixed Networks | 490 | 507 | (2)% |
| Gross margin | 42.7% | 40.3% | +240bps |
| Operating margin | 8.1% | 6.4% | +170bps |
Optical (+20%) and IP (+16%) do the heavy lifting, both riding AI & Cloud demand for data-center interconnect and scale-out fabric.
Mobile Infrastructure
| €m | Q2'26 | Q2'25 | YoY (cc) |
|---|---|---|---|
| Net sales | 2,680 | 2,531 | +7% |
| — Core Software | 507 | 508 | +1% |
| — Radio Networks | 1,765 | 1,666 | +7% |
| — Technology Standards | 407 | 357 | +15% |
| Gross margin | 49.3% | 50.0% | (70)bps |
| Operating margin | 11.6% | 12.2% | (60)bps |
Radio Networks' 7% cc growth was, per Hotard's own answer, mostly a timing effect from software revenue recognition — not durable share capture versus Ericsson.
Portfolio Businesses & Group Common
Now just Site Implementation/Outside Plant and Microwave Radio. Net sales €94m (+6%), swung to breakeven from an €11m operating loss a year ago. Group Common and Other's operating loss narrowed to €42m from €49m.
Where the growth is coming from
By region (cc growth)
By customer type (cc growth)
Comparable to reported: the €484m gap
A year ago the equivalent gap was €220m — this year's swing is almost entirely the restructuring acceleration.
Stock comp: a 150bps headwind
Driven by Nokia's own share-price appreciation over the past year, a larger program, and earlier-in-year grant issuance.
Financial income: +€121m swing
Swung from –€13m a year ago, helped by a €176m net gain on venture-fund/Level 3 asset revaluation for H1'26.
The cost of admission for the AI story
Free cash flow bridge
| Adjusted profit | +€673m |
| Receivables | –€280m |
| Inventories | –€372m |
| Payables / other liabilities | –€498m |
| Restructuring cash outflow | ~–€170m |
| Cash tax | ~–€140m |
| Net capex | ~–€112m |
| Free cash flow, Q2'26 | –€732m |
Q2 is seasonally Nokia's weakest cash quarter, compounded by a deliberate inventory build and front-loaded restructuring cash costs. CFO Wirén: FY conversion now tracking to the low end of 55–75%, versus 72% delivered in FY2025.
Balance sheet
Nokia redeemed its €630m 2.00% notes in March 2026 and issued €500m of new 3.625% senior notes due 2032 in June.
Debt maturity schedule (30 Jun 2026)
| Issuer | Instrument | Ccy | Nominal (m) | Maturity | Carrying (€m) |
|---|---|---|---|---|---|
| Nokia Corporation | 4.375% Senior Notes | USD | 500 | 6/2027 | 431 |
| Nokia of America | 6.50% Senior Notes | USD | 74 | 1/2028 | 65 |
| Nokia of America | 6.45% Senior Notes | USD | 206 | 3/2029 | 181 |
| Nokia Corporation | 4.375% Sustainability-linked | EUR | 500 | 8/2031 | 499 |
| Nokia Corporation | 3.625% Senior Notes | EUR | 500 | 6/2032 | 495 |
| Nokia Corporation | NIB R&D Loan | EUR | 250 | 10/2032 | 250 |
| Nokia Corporation | 6.625% Senior Notes | USD | 500 | 5/2039 | 422 |
| Various | Other liabilities | — | — | — | 57 |
| Total | 2,400 |
Also undrawn: a €1.5bn revolving credit facility (to 2031) and €870m of EIB facilities.
Capital returns
Board declared a €0.04/share dividend (23 Jul), the second of up to four installments. Buybacks paused entirely in 2026 — €0m in H1'26 vs. €78m / €624m in prior-year periods.
Pension — a quiet positive
Funded status of Nokia's defined-benefit plans improved to 136% (a €4,893m surplus) from 135% at Q1'26.
Five moves, one common thread
Portfolio simplification
FWA CPE (sold to Inseego, ~7% equity plus warrants) and Enterprise Campus Edge both moved to discontinued operations. Combined: €66m net sales, €19m operating loss, €8m impairment this quarter.
Restructuring acceleration
FY26 charges now guided to €800m across the 2023–26 program (tracking to the high end of savings), China integration (~€350m of charges, ~€200m run-rate savings), and a new European efficiency program.
US optical manufacturing build-out
San Jose (Fab 2) on track for volume production late 2026; Pennsylvania scaling 10x from Q3'26; NXP's Chandler, Arizona fab — leasing from early 2027, full acquisition closing Q1 2029.
AI-RAN and the NVIDIA partnership
Built on Nokia's anyRAN software running on NVIDIA's Aerial platform — commercializing a partnership dating to October 2025, when NVIDIA took a $1bn (2.9%) equity stake in Nokia. Three hardware paths, one software stack, all Open RAN-compliant. Staged spectral-efficiency targets: ~20% already, 50% by 2027, >100% by 2028. T-Mobile US is the named lead pilot. Asked point-blank about the shift away from proprietary baseband silicon, Hotard didn't hedge: the industry "has to transition."
Co-innovation partnerships
Google Cloud (Gemini-powered AI agents), Vodafone Albania (agentic AI slicing), expanded Indosat Ooredoo Hutchison, and a first US hyperscaler trial for Aurelis, Nokia's new data-center management product.
FY2026, line by line
| Comparable operating profit | €2.1bn – €2.6bn |
| Q3 net sales | +3% to +7% q-o-q (cc) |
| Q3 comparable operating profit | Roughly flat vs. Q2 |
| Q4 | "Meaningful" improvement |
| Network Infrastructure sales growth | 12–14% (cc + portfolio) |
| Capital expenditure | €800m–900m |
| FCF conversion | 55–75% (tracking low end) |
| Restructuring charges / cash | €800m / €700–800m |
| FX assumption | EUR:USD 1.14 for remainder of 2026 |
Unpacking "somewhat above the midpoint"
*If Q3 lands flat with Q2's €434m. CFO Wirén added three concrete Q4 drivers: the 2023–26 program concluding with its full €1.2bn of savings, China integration synergies, and the European program completing — a coherent bridge, but one that concentrates essentially all execution risk in Q4.
Eleven analysts, five themes
None asked whether AI & Cloud demand is real — the questions were almost entirely about execution, durability, and cost.
1. Is the order book as good as it looks?
Double-ordering risk in a supply-constrained market?
AI & Cloud is newer and supply-constrained vs. the usual 12-month telecom cycle.
2. Supply chain, ranked
Rank memory, PCBs, InP wafers as constraints.
Memory is the most acute issue industry-wide; optical is constrained but manageable.
3. AI-RAN economics & silicon transition
What does a GPU shift mean for Nokia's ~€3bn mobile R&D?
A candid acknowledgment of a transition Nokia is choosing to lead via NVIDIA.
4. When does AI & Cloud show up in margins?
Is IP/data-center growth dilutive to gross margin?
Yes, confirmed — a scale issue; leverage "back-end loaded." Concentration: "fairly concentrated today."
5. Is the cash and cost picture under control?
How does flat Q3 become "somewhat above the midpoint"?
Normal Q4 seasonality plus restructuring completion.
A dated newsflow timeline
Just outside the window: NVIDIA announces a $1bn (2.9%) equity investment in Nokia alongside the AI-RAN partnership — the catalyst for Nokia's subsequent share-price re-rating.
- 29 Jan 2026
FY2025 / Q4 results
Comparable operating profit €2.0bn; initial FY26 guidance came in ~5% below consensus. Shares fell 6–10%.
- 1 Mar 2026
MWC26: AI-RAN progress update
Functional GPU-accelerated tests with T-Mobile, Indosat, SoftBank.
- 23 Apr 2026
Q1 2026 results
Comparable operating profit €281m, +54% y-o-y. NI FY26 growth guidance raised 6–8% → 12–14%. Shares rose ~7% to a 16-year high.
- 30 Apr 2026
Agreement to sell FWA CPE to Inseego
- 5 Jun 2026
€500m senior notes issued
3.625%, due 2032, refinancing 2028 notes.
- Jul 2026
Multiple partnership announcements
Nokia Defense/NestAI, Orange Belgium exclusive supplier, AWS Autonomous Network Fabric expansion, Databricks PoC.
- 15 Jul 2026
Industry's first commercial AI-RAN platform launched
Built with NVIDIA.
- 23 Jul 2026
Q2 2026 results
Board declares €0.04/share dividend.
Three quarters in context
Disappointment
A solid quarter, but initial FY26 guidance disappointed a Street pricing in more. Shares fell.
Beat & raise
NI growth guidance raised from 6–8% to 12–14% on real order momentum. Shares hit a 16-year high.
Acceleration, at a cost
Order momentum nearly tripled again, NI guidance held — but FCF and reported profitability both weakened.
Nokia vs. Ericsson, same quarter
Nokia
- Net sales growth+8% / +9% cc
- Gross margin46.0% comparable
- Free cash flow–€732m
- Capital returnsBuybacks paused
- Stock reactionSmall premarket gain
Ericsson
- Net sales growth(6)% / (1)% organic*
- Gross margin48.4% adjusted†
- Free cash flowFell sharply (ex-M&A)
- Capital returnsSEK 8.2bn returned
- Stock reactionShares fell sharply
*Mostly a tough comp against a one-off IPR settlement a year earlier. †The two companies define "adjusted"/"comparable" differently.
The AI-RAN fork — the real industry story
Nokia + NVIDIA
Not yet shipping commercially — a multi-year roadmap targeting >100% spectral-efficiency gain by 2028.
Ericsson AI-in-RAN
Shipping commercially since June 2026 across 15+ deployments (SoftBank, Bell, SK Telecom, Rogers) — ~10% spectral efficiency gains today, no GPUs.
A coherent, if timing-dependent, strategy
2028 Ambition
Set at November 2025's Capital Markets Day — looks more achievable than it did in January.
The tension underneath
The AI & Cloud engine is real but still small (€446m of a €4.8bn quarter), while the cost of scaling into it — restructuring cash, capex, working capital, a silicon transition — is being paid now, in full.
What to watch
Free cash flow under quantified pressure
FCF conversion guided to the low end of 55–75%.
Reported profitability diverged sharply
A reported operating loss and €0.00 EPS will keep inviting scrutiny.
Order quality is still management's word
Roughly half of the €2.8bn order intake extends beyond the normal 12-month window.
Customer concentration
Management's own characterization: "fairly concentrated today."
A large, un-derisked silicon bet
A strategic call on a ~€3bn R&D franchise, with Ericsson's approach already shipping.
Margin dilution during the ramp
IP/data-center mix is a disclosed near-term drag on gross margin.
Restructuring execution risk
An accelerated China integration layered on concluding global programs, all in 12 months.
Capital-return program largely paused
Zero buybacks in H1 2026 vs. active repurchases a year earlier.
Valuation has already moved
The stock roughly doubled over the trailing year, driven substantially by the Oct 2025 NVIDIA news.