Nokia's AI Engine Is Firing on All Cylinders — But the Fuel Tank Is Leaking

Nokia's Q2 profit surged 18% on AI orders, but a €732M cash burn and restructuring loss sent shares down 30%, as the market weighs growth against financial strain.

The numbers coming out of Nokia’s second-quarter report tell two completely different stories, and investors are struggling to decide which one to believe. On one hand, the Finnish telecom equipment maker just posted an 18% jump in comparable operating profit to €434 million, handily beating consensus estimates of €382 million. On the other, the company burned through €732 million in free cash flow and posted a statutory operating loss of €50 million, weighed down by €390 million in restructuring charges. The result: a stock that has lost nearly 30% in the past 30 days, trading at €7.97 as of Tuesday, down 2.09% on the day.

The disconnect between Nokia’s operational momentum and its market performance is stark. Revenue rose 8% to €4.815 billion in the second quarter, driven by a surge in artificial intelligence and cloud-related business. The company booked €2.8 billion in AI and cloud orders during the period — a staggering 6.3 times the segment’s quarterly revenue. AI and cloud sales themselves more than doubled, jumping 105% to €446 million. Management expects roughly half of that order backlog, or about €1.4 billion, to convert into revenue within the next twelve months.

But the market is looking past the headline growth and focusing on the cash drain. Nokia raised its full-year guidance for comparable operating profit to a range of €2.1 billion to €2.6 billion, though the adjustment is largely technical in nature. For the third quarter, the company forecasts revenue growth of 3% to 7% sequentially, with results due on October 22. Yet none of that has been enough to stop the selling pressure, which has pushed the stock 46.76% below its 52-week high of €14.97 and left it clinging to its 200-day moving average of €7.88 — just 1.19% above that critical technical level.

A Sector-Wide Contagion

Nokia isn’t suffering in isolation. A broad sell-off in Asian and US technology stocks has engulfed the sector, driven by growing concerns over the capital intensity of the AI boom and intensifying competition. Nokia’s annualized volatility stands at 66.5%, reflecting the extreme swings that have become characteristic of the space. The stock has decisively broken below its 50-day moving average of €11.49, and the relative strength index has dropped to 29.6 — deep into oversold territory that suggests selling pressure may be exhausted, though it offers no guarantee of a reversal.

The broader tech rout has been fueled by fears of oversupply in memory chips and rising competition from Chinese manufacturers like CXMT. For Nokia, this external pressure compounds an already complicated internal picture. The company is in the midst of a costly restructuring aimed at pivoting toward higher-margin, recurring revenue streams, but the transition is burning cash faster than the market is comfortable with.

The Bull Case: Orders That Could Change Everything

Optimists see the current price as an overreaction. The AI order book is real, and the growth trajectory is undeniable. Nokia’s partnership with Nvidia is central to this narrative: the company is considering using Nvidia graphics processors in the next generation of its Massive MIMO radio units instead of developing its own chips. CEO Justin Hotard has said that AI-powered radio access networks could more than double spectral efficiency by 2028. Early trials are already underway with T-Mobile US and Indonesian operator Indosat Ooredoo Hutchison.

The analyst community is deeply divided, reflecting the uncertainty. According to the Finnish business daily Kauppalehti, the range of price targets has rarely been wider: one analyst sees the stock falling 40%, while another expects it to more than double. The majority remain bullish. Craig-Hallum reiterated its buy rating with a $15 price target on Nokia’s US-listed shares, while Northland Securities is even more optimistic at $20, though it trimmed its third-quarter EPS estimate from $0.09 to $0.07. The average analyst target for the US listing sits at roughly $12.57, but the spread between the most bearish and most bullish calls underscores just how hard it is to gauge the pace of AI monetization.

The Bear Case: Backlogs Don’t Pay the Bills

Skeptics counter that a €2.8 billion order book is cold comfort when the company is bleeding cash. The restructuring charges of €390 million are weighing on the balance sheet and could keep cash flow negative for several quarters. Hotard has cited supply chain bottlenecks as the main constraint on converting orders into revenue — a problem that, if resolved, could accelerate the top line, but one that also introduces execution risk.

Technically, the stock is in a precarious position. If the 200-day moving average at €7.88 fails to hold, a further slide toward the 52-week low of €3.45 becomes a realistic scenario, particularly if the broader tech sell-off intensifies. The stock closed at €8.14 on Monday before Tuesday’s decline, meaning the support level is being tested in real time.

Insider Confidence Amid the Chaos

One bright spot: three insiders purchased a combined 165,293 Nokia shares on July 24, signaling confidence in the medium-term story even as the stock has continued to slide. Market watchers will be watching closely to see if more executives follow suit in the coming weeks. For now, the tug-of-war between a booming AI order book and a deteriorating cash position leaves Nokia in a holding pattern — waiting to see whether the orders translate into cash before the cash runs out.