Nokia’s AI Boom Meets a Chip Crunch: A Stock Torn Between Record Orders and a Cash Squeeze
Published on 07/30/2026 at 12:24 | Redaktion boerse-global.de
The Finnish telecom equipment maker just posted one of its strongest quarters in years, with artificial intelligence revenue doubling and a €2.8 billion order pipeline that would make any tech CEO envious. Yet the stock is trading nearly 50% below its June peak, and the disconnect between operational momentum and market sentiment has rarely been wider.
Nokia’s comparable operating profit for the second quarter came in at €434 million, handily beating the analyst consensus of €382 million and representing an 18% year-on-year improvement. Revenue rose 8% to €4.82 billion. The standout performer was the AI and cloud division, where sales more than doubled to €446 million — now accounting for 9.3% of total group revenue. Management responded by lifting the full-year operating profit guidance to a range of €2.1 billion to €2.6 billion, up from the previous €2.0 billion to €2.5 billion target.
CEO Justin Hotard has also been busy building for the future. Nokia recently opened an AI Networking Innovation Lab in Sunnyvale, California, where it is collaborating with AMD, Keysight, Lenovo, and Nscale on high-performance networking technologies for AI training and inference. The facility doubles as a validation platform for Nokia’s so-called Validated Designs, testing network architectures under real-world AI workloads.
The Chip Warning That Spoiled the Party
Despite the strong numbers, Nokia shares have been under heavy pressure. The Nasdaq-listed stock closed Wednesday at $8.41, down 5.82% from the prior day’s close of $8.93. In European trading, the picture was more mixed: after closing at €7.36 on Wednesday, the stock rebounded 5.27% to €7.75 on Thursday. But that bounce comes from deeply oversold territory — the stock is now 50.84% below its 52-week high of €14.97, reached on June 3.
Should investors sell immediately? Or is it worth buying Nokia?
The sell-off was triggered not by the past quarter but by what management sees ahead. Hotard warned that memory chip shortages will persist through 2027, calling the component the single biggest bottleneck across the entire tech industry. That message landed like a lead weight on valuations. The warning was reinforced by rival Ericsson, whose shares tumbled nearly 12% on July 14 after it flagged the same cost inflation in memory chips, dragging the entire telecom equipment sector lower.
Northland Securities added to the gloom by cutting its third-quarter earnings estimate for Nokia from $0.09 to $0.07 per share, even as the full-year consensus remains at $0.41. The downgrade shifted market focus from the record order book to the margin headwinds ahead.
A Cash Drain That Demands Attention
The balance sheet tells a more troubling story than the income statement. Working capital consumed roughly €1.15 billion in the second quarter alone, with €370 million tied up in inventory. Free cash flow for the first half landed at negative €104 million — a stark reversal from the positive €809 million recorded in the same period last year.
Restructuring costs add another layer of complexity. Nokia has budgeted €800 million for restructuring in 2026, with expected cash outflows of €700 million to €800 million. Management insists the full-year cash flow target remains achievable, but that places enormous weight on the second half to prove that the AI order backlog can actually be converted into cash rather than sitting as a number in the pipeline.
Institutional Investors See Opportunity
While short-term traders have focused on the Q3 caution, longer-term institutional money has been moving in the opposite direction. The Public Employees Retirement System of Ohio increased its Nokia stake by a staggering 1,177.9% during the first quarter, now holding 663,654 shares worth approximately $5.34 million. Other asset managers have also built positions, pushing total institutional ownership to 5.28% of outstanding shares.
Nokia at a turning point? This analysis reveals what investors need to know now.
The analyst consensus remains a “Moderate Buy” with a price target of $12.57 — well above current levels. The 14-day Relative Strength Index sits at 26.1 in European trading, deep in oversold territory and historically a precursor to at least short-term bounces. The 30-day annualized volatility of 68.16% underscores just how violently sentiment has shifted.
The Fundamental Crossroads
Nokia’s situation defies easy categorization. On one hand, the company is riding a wave of AI-driven demand that has produced record orders and a guidance upgrade. On the other, it faces a multi-year chip supply constraint that management itself says will not ease before 2027, combined with negative free cash flow and a restructuring program that will consume hundreds of millions of euros.
The stock’s 103.65% gain over the past twelve months now looks increasingly like a rally that ran ahead of the fundamentals. Whether the current sell-off represents an overreaction or a belated repricing depends on one question above all others: Can Nokia turn its €2.8 billion AI order book into actual cash, or will those orders simply disappear into inventory and receivables? The second half of the year will provide the answer.
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