Nokia Oyj shares edged higher on Tuesday, trading around €8.01, a roughly 1% gain as the Helsinki market opened. Despite the uptick, the stock remains about 13% below its July 22 closing price of €9.166, a decline triggered by the company's second-quarter earnings release last Thursday.
Insider activity provided a modest vote of confidence. On July 24, three insiders reported purchases totaling 165,293 securities across Helsinki and New York. The European transactions, denominated in euros, amounted to approximately €872,612. In New York, Pallavi Mahajan bought 62,000 shares at $9.55 each, for a total of $592,100. Filings did not disclose the rationale behind the purchases, but insider buying often signals belief in the company's prospects.
AI Orders Surge, Conversion in Focus
The headline-grabbing figure from Nokia's Q2 report was €2.8 billion in AI and cloud orders, representing 6.3 times the segment's quarterly revenue of €446 million. However, investors are zeroing in on the conversion rate. Management expects roughly half of these orders—about €1.4 billion—to materialize as revenue over the next 12 months, depending on delivery timelines. This anticipated conversion is equivalent to more than three-quarters of the company's current AI and cloud revenue.
Mixed Earnings Picture
Nokia's overall group net sales rose 8% year-over-year to €4.815 billion, with AI and cloud sales doubling to €446 million, now accounting for 9.3% of total revenue. Comparable operating profit increased 18% to €434 million, beating the LSEG consensus estimate of €382 million by nearly 14%. However, reported operations posted a €50 million loss, weighed down by €390 million in restructuring costs. In the same period last year, Nokia had reported a €147 million operating profit.
Free cash flow remained a concern, coming in at negative €732 million, even as comparable profit improved. Nokia attributed the outflow to working capital demands, restructuring charges, and capital expenditures.
Outlook and Risks
Nokia raised its full-year comparable operating profit forecast to a range of €2.1 billion to €2.6 billion, but the adjustment was largely due to technical reclassification of two units as discontinued operations rather than underlying performance. The company expects third-quarter sales to increase 3%-7% sequentially, with comparable operating profit staying roughly flat, before a more substantial growth in the fourth quarter.
CEO Justin Hotard noted, "Demand remains strong, while supply continues to be the main industry constraint." Key risks include component shortages, rising input costs, potential delays in converting the order backlog, and the possibility of a slowdown in customer investment in AI infrastructure. Nokia forecasts restructuring cash outflows of €700 million to €800 million in 2026.
Nokia is scheduled to report third-quarter results on October 22. Market attention will likely focus on backlog delivery and cash flow generation. A strong order intake alone may not be enough to satisfy investors this time around.