Helsinki-listed shares of Nokia (HEL:NOKIA) declined 1.3% to €9.26 during Wednesday's trading session, underperforming the broader OMXH25 index, which rose 1.05%. The move comes as initial consensus estimates project the company's second-quarter comparable operating profit at €376 million, representing 16.0% of the full-year forecast of €2.357 billion.
According to analyst projections compiled by Infront on July 16, Nokia's Q2 earnings are expected to reach the upper bound of the company's seasonal guidance, which indicates that the second quarter typically accounts for between 12% and 16% of annual comparable profit. The €376 million figure aligns with the top end of that range, underscoring the seasonal peak.
The projected earnings growth is driven by operating leverage, with net sales forecast to rise 6.1% to €4.822 billion, while comparable operating profit is expected to increase by 24.9%. The comparable operating margin is anticipated to expand by 120 basis points to 7.8%, while gross margin is projected to remain steady at 44.7%.
Network Infrastructure is the primary driver of sales growth, with its €218 million increase accounting for nearly 80% of the group's total revenue expansion. Mobile Infrastructure revenue is expected to rise by only 2.4%, shifting investor focus toward the performance of Nokia's Optical and IP networking segments.
Demand from AI and cloud customers remains robust, with sales in this area surging 49% in the first quarter, now representing 8% of total group revenue. Nokia has secured €1 billion in orders from these clients, and the focus now turns to converting these orders into profitable revenue. Chief Executive Justin Hotard stated that the company is "tracking somewhat above the mid-point" of its annual profit guidance of €2.0 billion to €2.5 billion.
At €9.26, Nokia trades at roughly 28 times projected 2026 comparable earnings per share of €0.33, based on analyst consensus. This valuation leaves a narrow margin for error, with little tolerance for missing margin targets. Revenue outperformance without corresponding margin gains is likely to provide minimal support for the stock.
Last week, competitor Ericsson (STO:ERIC-B) highlighted the risk from rising input costs, cautioning that inflation in AI-related memory chips could squeeze industry margins. Ericsson's chief financial officer Lars Sandström noted that the entire industry is experiencing stress, stating, "The whole AI build-out is putting quite the pressure on the whole industry, including us."
Key risks for Nokia include rising component expenses that may impact anticipated leverage, as well as potential margin pressure if projects are accepted late or if customers reduce spending. A consensus outcome would position the second quarter at Nokia's seasonal peak, while a shortfall would reveal the reliance on cost management anticipated by expectations.
Nokia is scheduled to release its results around 08:00 EEST on Thursday, with an analyst webcast set to begin at 15:00 EEST. The market will be watching closely to see if the company can deliver on the projected earnings and manage the cost pressures that could affect future performance.