Nokia Oyj (HEL:NOKIA) closed the trading week at €8.156 on Friday, marking a 2.5% gain, but the weekly advance masks a sharp reversal from Tuesday's intraday spike. After surging 6.5% on Tuesday to a high of €8.626, the stock retreated over the subsequent three sessions, ending the week 5.4% below that peak. The pullback highlights a shift in investor focus from headline order announcements to the tangible conversion of AI-related contracts into revenue.
The catalyst for the initial surge was the launch of Zankore, a Southeast Asian AI platform developed in collaboration with Indosat Ooredoo Hutchison (IDX:ISAT), Ooredoo (QSE:ORDS), and NVIDIA (NASDAQ:NVDA). The platform aims to achieve one gigawatt of total computing capacity, with an initial phase targeting 200 megawatts operational by the first half of 2027. Nokia is set to provide AI-native networking infrastructure for the platform, which CEO Justin Hotard described as "the trusted connectivity fabric that underpins this new generation of AI infrastructure." However, financial terms of the contract were not disclosed.
Investors are now scrutinizing Nokia's ability to convert its substantial order backlog into revenue. During the second quarter, Nokia secured €2.8 billion in AI and cloud contracts. Management has guided that approximately 50% of these orders are expected to contribute to revenue within the next 12 months. This implies an estimated €1.4 billion in revenue, representing 29.1% of Q2 sales and 7.3% of annualized sales for the period. This is an inferred estimate, not an additional revenue guidance figure, but it underscores the significance of AI-related deals to Nokia's near-term financial performance.
The market's reaction to Nokia's stock has been mixed compared to its peers. While Nokia gained 2.5% for the week, Ericsson (STO:ERIC-B) rose 3.1%, and Ciena (NYSE:CIEN) surged 9.4%. The outperformance of Ciena, a pure-play optical networking company, suggests investors continue to favor more focused exposure to the AI infrastructure buildout. Nokia's shares experienced heightened volatility, climbing to €8.626 before dropping to an intraday low of €8.060 on Friday.
Recent operating data highlights the divergence in performance. Nokia reported 8.0% revenue growth in the second quarter, with comparable operating margin at 9.0%. AI and cloud sales surged 105%, contributing to the €2.8 billion in orders. In contrast, Ericsson saw a 6.0% decline in reported revenue, though organic revenue was down only 1.0%, with an adjusted EBIT margin of 12.4%. Ciena, reporting for its fiscal Q2 ended May 2, posted a 39.5% revenue increase and a 19.5% adjusted operating margin, with optical networking accounting for 70% of total revenue.
Nokia's comparable operating profit rose 18% to €434 million, with a comparable operating margin of 9.0%. However, the reported operating margin was negative 1.0% due to accelerated restructuring efforts. This discrepancy is significant: while infrastructure sales are rising on stronger AI and cloud demand, reported profitability remains under pressure from restructuring charges. Network Infrastructure sales climbed 12%, while Mobile Infrastructure gained 6%.
Analyst sentiment is mixed, despite a broadly positive consensus. Deutsche Bank (ETR:DBK) has a Buy rating with a price target of €11.50, while Barclays (LON:BARC) holds an Underweight rating with a target of €8.00. UBS (SWX:UBSG) is Neutral at €9.65, and SEB (STO:SEB-A) is Buy at €12.00. The consensus from 23 analysts is an "Outperform" rating, with an average price target of €10.32, implying a 26.6% upside from Friday's close. However, individual targets range from €4.65 to €18, reflecting wide divergence in opinions on execution and valuation.
In other corporate news, Nokia disclosed on Friday that it granted 957,142 treasury shares to participants in its employee incentive program, representing approximately 0.017% of the company's 5.74 billion total shares outstanding. No investor events are scheduled for the upcoming week, but investors will be watching for further order announcements and supply chain developments.
Looking ahead, Nokia forecasts third-quarter sales to rise 3% to 7% sequentially, with comparable operating profit expected to be largely unchanged. A notable increase is projected in the fourth quarter. Risks include the undisclosed financial contribution from Zankore, supply constraints, currency fluctuations, and timing of customer payments and deliveries, which could delay revenue conversion.
As the AI infrastructure race intensifies, Nokia's ability to execute on its order book and convert it into sustainable revenue will be critical. The market's focus has clearly shifted from order announcements to the tangible realization of those orders, and the coming quarters will test Nokia's operational discipline and strategic execution.
