Nokia Oyj shares climbed 4.34% to €7.88 on the Helsinki stock exchange, partly recovering from a 5.82% drop in U.S. trading the previous day. The rally was driven by the company's disclosure of €2.8 billion in orders from artificial intelligence and cloud computing clients, representing 6.3 times the quarterly revenue generated from those sectors.
The Finnish telecom equipment maker reported a comparable operating profit of €434 million for the second quarter, exceeding the preliminary consensus estimate of €376 million by 15.4%. Adjusted diluted earnings per share came in at €0.07, beating expectations by 40%. However, reported operating profit remained negative at €50 million due to rapid restructuring charges, and diluted EPS was reported at zero.
Net sales for the quarter totaled €4,815 million, nearly matching the consensus of €4,822 million. The company highlighted that AI and cloud-related sales accounted for just €446 million, or 9.3% of total group revenue, underscoring the gap between order intake and actual revenue conversion.
Chief Executive Justin Hotard said, "Demand remains strong, while supply continues to be the main industry constraint." He noted that component availability now determines the speed at which orders can be converted into revenue. Nokia expects approximately 50% of the €2.8 billion AI and cloud order backlog to generate revenue over the next twelve months, equating to roughly €1.4 billion, or 29.1% of Q2 group sales.
JPMorgan analyst Sandeep Deshpande described the order intake as "dramatically higher than any number we have heard from investors in the past quarter," but raised concerns about the lack of changes to operational guidance. Nokia's annual guidance remains unchanged at €2.1 billion to €2.6 billion in adjusted operating profit, following a technical adjustment.
Segment performance showed mixed results: Network Infrastructure posted sales of €2,037 million, up 12% year-over-year, with an operating margin of 8.1% (versus 6.4% a year ago). Mobile Infrastructure generated €2,680 million in sales, up 6%, but its margin slipped to 11.6% from 12.2%. Together, these two core divisions accounted for the bulk of profits, with Mobile Infrastructure contributing 65.1% of the combined operating profit.
Nokia faces several risks, including potential delays in revenue conversion due to supply shortages, rising memory-chip costs, and currency fluctuations. The company anticipates restructuring cash outflows of €700 million to €800 million this year, with total restructuring charges expected to reach €800 million. Shares remain about 47% below their 52-week high of €15, suggesting that a sustained recovery will depend on actual revenue realization rather than order announcements.
In related trading, Ericsson shares fell 1.12% in Stockholm after the company warned that higher memory-chip expenses could pressure margins. Nokia is facing similar cost headwinds. The company forecasts third-quarter sales growth of 3% to 7% sequentially, with adjusted operating profit remaining roughly stable before a significant uptick in the fourth quarter.
