Nokia Corporation (HEL:NOKIA) heads into its second-quarter earnings report on Thursday after enduring a punishing 18.8% share price decline last week. The stock closed at €8.85 on Friday, marking its fifth consecutive daily drop. The sell-off has sharply raised the stakes for the company's upcoming results, with gross margin emerging as the key metric for investors.
The consensus estimate for Q2 comparable net sales stands at €4.822 billion, implying 7.2% sequential growth from the first quarter's €4.500 billion. This falls within management's guided 5%-9% range. However, the same consensus projects a comparable gross margin of 44.7%, down 80 basis points from the first quarter's 45.5%. Any deviation from this margin figure could significantly sway market sentiment.
Nokia will release its Q2 results on Thursday at 08:00 EEST, two hours before Helsinki trading begins. The analyst webcast follows at 15:00 EEST. The profit mix adds to the tension: the Q2 consensus operating profit of €376 million represents 16.0% of the full-year estimate, at the top end of Nokia's typical 12%-16% seasonal range. A shortfall would leave a heavier profit burden for the second half of the year, making sales growth alone insufficient to reassure investors.
Currency provides little buffer. The EUR/USD exchange rate stood at 1.1439 on Friday, just 0.5% below Nokia's planning rate. This places greater emphasis on component costs and product mix to achieve margin targets.
Nokia's first-quarter AI and cloud sales surged 49%, reaching 8% of group revenue, with orders from these customers totaling €1 billion. CEO Justin Hotard noted in April, "We are increasing our growth assumption for Optical and IP Networks." Yet the broader sector faces headwinds. Ericsson's recent cost warning, which flagged pressure from AI infrastructure investments, has been interpreted by investors as industry-wide. Nokia trailed Ericsson by 5.2 percentage points last week and lagged the OMX Helsinki 25 index by 18.7 points.
The market comparison underscores the challenge. While Ericsson reported Q2 sales of SEK52.7 billion (down 6% year-over-year) and an adjusted operating profit of SEK6.52 billion (beating consensus by SEK0.1 billion), its CFO Lars Sandström told Reuters, "The whole AI build-out is putting quite the pressure on the whole industry, including us." This sentiment appears to have weighed heavily on Nokia's stock.
Key risks for Nokia include sharper-than-expected component inflation or slower orders for AI network equipment, which could pressure margins and full-year profit. A gross margin near the consensus 44.7% would meet current expectations, but a clear miss would reinforce sector cost concerns and likely trigger further selling. Conversely, a beat could restore some confidence and reverse last week's steep losses.
Nasdaq Helsinki was closed Sunday at publication time. Regular equity trading resumes Monday at 10:00 EEST. Nokia's performance this week will be closely watched as a bellwether for the broader telecom equipment sector.