Nokia Oyj (HEL:NOKIA) saw its shares slip 2.5% to €10.30 in Helsinki afternoon trading on Tuesday, as investor sentiment turned cautious following a cost warning from rival Ericsson (STO:ERIC-B). The decline underscores growing concerns about the impact of rising component prices on profitability across the telecom equipment sector.
According to Nokia's May consensus estimates, a staggering 72.4% of the company's forecasted comparable operating profit for 2026 is expected to be generated in the second half of the year. This implies that Nokia must deliver approximately €1.711 billion in operating profit during the final six months, more than double the anticipated €653 million for the first half. The first quarter delivered €281 million, while Q2 consensus stands at €372 million.
Ericsson's shares plummeted 11.1% to SEK100.25 after the company reported that surging demand for AI infrastructure is driving up prices for memory and custom chips. "The whole AI build-out is putting quite the pressure on the whole industry, including us," Ericsson CFO Lars Sandström told Reuters. Although Ericsson posted an adjusted operating profit of 6.52 billion Swedish crowns, slightly above consensus, quarterly sales fell 6% to 52.7 billion crowns, missing expectations. Networks revenue slid 8%, and management warned of further pressure on Networks profitability in the third quarter due to component inflation and a higher mix of lower-margin rollout projects.
Nokia's own guidance calls for Q2 operating profit to be between 12% and 16% of the full-year total, with the consensus at 15.7%. To meet the annual target, Nokia would need to generate roughly €856 million per quarter in the second half—a substantial leap from the expected Q2 figure. While seasonal factors may provide some tailwind, the margin for error is thin, especially if cost pressures persist.
Despite Tuesday's dip, Nokia's stock remains up approximately 85% year-to-date, though it is still 31% below its 52-week high of €15.00. The AI-driven rally that lifted the shares has cooled, with investors now scrutinizing the path to profitability. In the first quarter, Nokia's sales to AI and cloud customers jumped 49%, accounting for 8% of total revenue, and orders from these segments reached €1 billion. Optical Networks sales rose 20%, and CEO Justin Hotard raised the sales-growth target for Network Infrastructure to 12%–14%, citing a strong order book.
However, the comparison with Ericsson is not straightforward. Nokia's growth is heavily concentrated in optical and IP networking systems for data centers, whereas Ericsson remains more exposed to mobile-network demand. Differences in supplier contracts, product mix, and pricing could lead to divergent margin outcomes. Nokia has explicitly identified chip supply, component costs, and supply-chain disruptions as key risks.
Nokia is scheduled to report its second-quarter results on July 23. Investors are expected to shift their focus from top-line growth to gross margin, which the May consensus pegged at 44.5%. The market will also be watching whether management reaffirms its full-year operating profit target of €2.0 billion to €2.5 billion. With the second-half profit outlook now the central concern, any deviation from expectations could have outsized implications for the stock's valuation.