Helsinki-based telecommunications equipment maker Nokia Oyj (HEL:NOKIA) closed the trading week on a downbeat note, with its share price slipping 3.2% to €7.958 by Friday's close. The decline came despite a wave of positive news, including a hefty €2.8 billion in AI and cloud orders and an upgraded credit outlook from S&P Global Ratings. The broader OMX Helsinki 25 index, by contrast, managed a modest 0.3% gain over the same period.
The market's reaction underscores persistent concerns about Nokia's ability to convert its order backlog into actual cash. While the company's AI and cloud order intake for the second quarter reached €2.8 billion—representing 6.3 times the revenue generated from those clients during the period—investors remain wary. Management has guided that approximately half of these orders should translate into revenue within the next twelve months, implying an estimated €1.4 billion boost, which would be equivalent to roughly 29% of the group's quarterly net sales.
However, the gap between order intake and cash generation is stark. In the second quarter, Nokia reported negative free cash flow of €732 million, a figure that stands in sharp contrast to the company's full-year 2026 forecast of €1.1 billion in free operating cash flow after leases. This projection represents a 12% decline from the previous year's €1.25 billion. S&P Global Ratings, which recently revised its outlook on Nokia from stable to positive while affirming its BBB- long-term rating, notes that the company's cash flow would need to exceed €1.3 billion to support a potential upgrade, a threshold that appears out of reach under current projections.
Nokia's operational performance in the second quarter was solid on an underlying basis. Net sales rose 8% year-over-year to €4.815 billion, while comparable operating profit jumped 18% to €434 million, surpassing consensus estimates by 13.6%. The comparable operating margin expanded by 70 basis points to 9.0%. However, reported operating results swung to a loss of €50 million, versus a profit of €147 million in the same period last year, largely due to restructuring charges. The company anticipates restructuring-related cash outflows of between €700 million and €800 million for the full year.
Chief Executive Justin Hotard sought to reassure investors about the order pipeline, stating, "We expect approximately half of these orders will translate into revenue within the next twelve months." The company's full-year guidance for comparable operating profit remains in the range of €2.1 billion to €2.6 billion, with a €100 million upward revision described as technical rather than operational.
The stock's underperformance relative to its U.S. peers was notable. Nokia's American Depositary Receipts (ADRs) on the NYSE closed at $9.14, up 0.55% on Friday but essentially flat for the week. In contrast, rival Ericsson (NASDAQ:ERIC) rose 5.0% over the same period, while Ciena (NYSE:CIEN) fell 3.6%. Nokia's relative performance against the OMX Helsinki 25 lagged by 3.5 percentage points for the week.
Investors are also keeping an eye on upcoming corporate actions. Nokia is scheduled to pay a dividend of €0.04 per share on Thursday, August 6. The company will report its next quarterly earnings on October 22. Trading on the Helsinki exchange was halted on Saturday, with markets expected to reopen on Monday, August 3.
Key risks outlined by analysts include supply chain constraints, reduced customer spending, execution of restructuring plans, and potential currency and tariff fluctuations. Nokia has indicated that comparable operating profit in the third quarter is likely to remain largely unchanged from the second quarter.
While the AI order book provides a promising growth avenue, the market's focus remains on whether Nokia can translate these orders into sustainable cash flows. The positive outlook from S&P offers some credit support, but the path to an actual upgrade remains steep. As the company navigates its transformation, investors will be watching closely for signs of improved working capital management and a narrowing of the gap between order intake and cash generation.
