Nokia (HEL:NOKIA) experienced a sharp decline last week, with shares dropping 10.3% over Thursday and Friday to close at €8.222. The stock began Thursday at €9.762 and ended the week down 7.1%, despite reporting second-quarter earnings that surpassed analyst expectations.
The Finnish telecommunications equipment maker posted a comparable operating profit of €434 million for the second quarter, an 18% year-over-year increase and 13.6% above the consensus forecast of €382 million. This beat was driven by strong performance in its Network Infrastructure segment, where sales rose 12% and operating profit jumped 42%, with margin expanding to 8.1% from 6.4%.
AI and cloud orders totaled €2.8 billion during the quarter, representing 6.3 times the segment's revenue. AI and cloud sales reached €446 million, growing 105% year-over-year and accounting for 9.3% of total revenues. Chief Executive Justin Hotard commented, “Demand remains strong, while supply continues to be the main industry constraint.” Extended lead times are prompting customers to place longer-term orders, according to Reuters.
Nokia raised its full-year profit outlook by €100 million, though the company described the adjustment as technical with no impact on business operations. The revision followed the reclassification of two business units as discontinued operations; without this change, Q2 sales would have been €66 million higher and comparable operating profit €13 million lower.
The company maintains its full-year operating profit guidance of €2.1 billion to €2.6 billion. With comparable operating profit of €735 million in the first half and management expecting third-quarter profit to be “largely flat” compared to Q2, Nokia must generate between €931 million and €1.43 billion in the fourth quarter to meet its target. The midpoint of the outlook implies Q4 profit of €1.18 billion, nearly 2.7 times the Q2 figure.
Orders provide some balance. Nokia anticipates that roughly half of the €2.8 billion in AI and cloud orders will convert to revenue within 12 months, suggesting approximately €1.4 billion in near-term revenue—78% of the annualized Q2 sales run-rate.
Key risks include component supply constraints, fluctuations in memory prices, and project execution. Nokia expects restructuring charges of €800 million and corresponding cash outflows of €700 million to €800 million this year. Competitor Ericsson (STO:ERIC-B) has highlighted concerns about rising memory costs, and Hotard noted that Nokia will pass on any increased expenses it cannot absorb through design modifications.
Nokia stock trades ex-dividend on Monday, with a payout of €0.04 per share, representing 0.49% of Friday’s closing value. Any drop at the open could partly reflect this technical adjustment. The record date is July 28, with payment scheduled for August 6. The next official earnings report is set for October 22.